Families: Pensioners get a little money to burn for winter warmth

Family finances won't be measurably better off as a result of the changes announced yesterday. But there was some positive news for pensioners after the Chancellor pledged to keep the Winter Fuel Allowance at the higher level introduced last year – £250 for over 60s and £400 for over-80s – for another 12 months.

Alistair Darling also promised that the basic state pension will be increased by at least 2.5 per cent, regardless of inflation, while the means-tested savings limit will rise by £4,000. The latter move will mean that about 540,000 Pension Credit claimants will benefit by about £4 per week, according to the Chancellor. The savings level allowed for those claiming Pension Credit will climb to £10,000 from £6,000 from the end of the year.

Dean Mirfin, from Key Retirement Solutions said: "On the face of it the announcements by the Chancellor may appear to be generous towards pensioners, but those who will really benefit will be a distinct minority. The limit increase for those claiming Pension Credit will only benefit one in 20 of the retired population, for instance."

The National Pensioners Convention (NPC) said the guarantee that the state pension would increase next year by 2.5 per cent was "virtually worthless". The proposed increase will give pensioners an extra £2.40 a week from next April, with millions of older women getting just £1.45, the NPC said.

"Mr Darling's proposed 2.5 per cent rise in the state pension next year fails to address the pressures older people face now from the economic crisis," said Dot Gibson, the NPC general secretary.

"One in four pensioners still lives in poverty and rising costs of food and fuel, combined with record lows in savings returns and underperforming pensions, mean that pensioners are suffering a disproportionate increase in the cost of living. In light of all this, the Chancellor's promise to raise the state pension next year by just £2.40 a week sounds more like an insult."

A move to recognise the contributions of grandparents of working age who care for their grandchildren was more welcome. From April 2011 they will see that work count towards their entitlement for the basic state pension.

The new system of National Insurance credits will apply to those looking after children under the age of 12 for 20 hours or more a week.

The move is most likely to benefit women in their 50s, said Ian Naismith, from Scottish Widows: "On average women between 50 and state pension age pay only £87 a month into their pensions compare with £160 a month for men. With such a big gap in their ability to provide for themselves, this change will mean that more women are at least entitled to the full basic state pension."

Families with children will also benefit with the child element of child tax credit rising by £20 next year.

And children who receive disability living allowance will qualify for additional annual payments of £100 or £200 into their Child Trust Funds. This means that next year about 100,000 children will benefit from the additional annual payments, of which 40,000 will qualify for the higher £200 allowance.