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Alistair Darling's smoke and mirrors pension trick

Alistair Darling today stands accused of using smoke and mirrors to give the impression that the overall UK state pension would rise by 2.5% this year and 4% in real terms, due to the impact of negative inflation. However, it has now been revealed that the 2.5% increase in the state pension does not apply to all elements of the pension with the vital State Earnings Related Pension element (Serps) not subject to the 2.5% increase.

As a consequence, despite the fact that the overall state pension will still rise, it is believed that some pensioners could be around £40 a year worse off than they had assumed after the pre-budget report. While the fact remains that the state pension will rise at a rate which is significantly above inflation, the very fact that the UK government would appear to be using "smoke and mirrors" to save the Treasury around £350 million a year may lose more votes for the government than it actually gains.

Sceptics who believe that the pre-budget report was nothing more than a politically motivated give away to certain areas of the UK population will have their fears fuelled by the revelation about the state pension. What other surprises are set to unravel from the UK government's pre-budget report?

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