Low earners losing out in pensions

A woman reading her fuel bill

Blog written by Christopher Brooks, Senior Policy Manager, Age UK

Since 2012, employees have been automatically enrolled into their employer’s pension scheme, which has meant that nearly 10 million people are now saving for their later life than before. The individual, employer and government all make a contribution, and this co-funding arrangement will in most cases benefit the employee, who can still opt out of the scheme if they wish.

At present, the saving contribution is 5 per cent of someone’s relevant salary (earnings between lower and upper earnings limits), but this will rise to 8 per cent in April 2019.

Auto-enrolment’s success is good news – in years to come it will help many older people have a higher income that they would have otherwise enjoyed, and Age UK continues to support it.

‘Net pay’ can mean ‘not paid’

But one anomaly in how the government contributions are administered has become even more significant with the increasing numbers of lower-income pension savers, and according to the Low Incomes Tax Reform Group this is leaving 1.2 million savers worse off. All of these people are lower earners, who find that they are paying themselves for the Government contribution – hugely unfair and in breach of the promise for the Government to help people save.

The explanation is fairly technical, but it goes something like this:

1) Employers use two types of payroll system for making their pension contributions, known as ‘Net Pay Arrangements’ and ‘Relief at Source’ (RAS). Under RAS arrangements, the Government contribution is automatically claimed on your behalf, by the pension company and added to your pension plan and everyone gets this regardless of their salary.

2) Under Net Pay Arrangements, the tax relief that pension saving attracts is administered by the employer, who takes the pension payments from your gross (total) pay, reducing your taxable income and therefore the tax you pay. But this means that if you don’t pay income tax, you don’t get tax relief. In effect, you yourself would be paying the Government’s contribution – nice for the Treasury, not so good for you.

This problem only affects savers in ‘Net Pay Arrangements’ who earn under the income tax personal allowance (currently £11,850) – i.e. they don’t pay income tax.

At the moment it means low earners are missing out on £35 a year, but increases in pension contribution rates and the income tax personal allowance will mean it rises to £58 in April 2019. For someone on a low income, this can be a significant amount of money.

Putting an end to it

Age UK has recently joined forces with other organisations and senior figures from the pensions industry to campaign against this. The open letter sent to the Chancellor, Philip Hammond MP, earlier this month received widespread media coverage, and there are already signs that the Treasury is looking to resolve the issue.

Alongside the other organisations involved, we will remain active on this until we get a satisfactory resolution.

Hopefully, we can help get some fairness for lower earners, enable them to stay in the pensions system, and enjoy the fruits of their savings when they reach retirement.

The importance of eating well in later life

hero-fruit-and-veg-buyersBlog written by Alice Roe, Health Influencing Officer, Age UK

This week is the first UK Malnutrition Awareness Week, a joint project from the Malnutrition Task Force and BAPEN, to raise awareness of the importance of keeping to a healthy weight and eating well in later life.

Continue reading “The importance of eating well in later life”

Say no to ageism on International Day of Older Persons

An older woman reading her fuel billBlog written by Emily McCarron, Policy Manager for Equality and Human Rights, Age UK

Birthday cards that mock ageing; negative comments about ‘looking old’ we make about ourselves and others; stereotypical depictions of older people in popular culture and in the media. If we were to make similar comments about gender or race, this would be (rightly) seen as unacceptable and offensive. However, negativity about ageing and older people is pervasive in our society. This is ageism and what might seem like just a joke in a birthday card, can seriously undermine the human rights of older people.

Continue reading “Say no to ageism on International Day of Older Persons”

Social housing green paper – good news for older people?

6288745178_5dea300396_zBlog written by Joe Oldman, Housing and Transport Policy Manager, Age UK.

Reaction to the new social housing green paper has been lukewarm. This is because it seems to dash hopes for a significant increase in the supply of new council and housing association homes for people on low incomes. Despite the recent Government announcement of an additional £2bn over 10 years for social housing, the green paper fails to suggest lifting restrictions on local authority borrowing which would make a real difference to increasing the supply of social housing.

Continue reading “Social housing green paper – good news for older people?”

Technology in care – the future is here, now!

WCS New photography, Four Ways House, Warwick 25 April 2016Blog written by Ed Russell, Director of Innovation and Delivery, at WCS Care.

I still remember how my career in care started over 26 years ago – my first shift was on New Year’s Day in 1992, a few months before WCS Care officially began life and took over the homes from the local authority.

Continue reading “Technology in care – the future is here, now!”

Grasping the nettle: lessons for the social care green paper

JLau-RasilaMehta-4057

Blog written by Mike Birtwistle, Founding Partner, Incisive Health

By 2068 there will be an extra 8.6 million people aged 65 or over living in the UK, with over-65s making up 26% of the population. With more of us living longer and many people having one or more long-term conditions, more people will need access to long-term care. How will a social care system that is in crisis, respond?

Continue reading “Grasping the nettle: lessons for the social care green paper”

Who cares for those without carers?

John, who lives in a cold home

Blog written by Kirsty Woodard, Founder of Ageing Without Children.

Last month, the Social Market Foundation and Age UK published “Caring for Carers” examining the demographics and experiences of people providing unpaid care. Contained within it is one of the most challenging but still strangely unheralded problems facing social care now and in the future, namely – who will care for the growing numbers of older people who lack family to support them? By 2030, 2 million people will be aged over 65 without ever having been parents while still more will be unable to look to their family to support them for a variety of other reasons including estrangement or distance. The number of older people with disabilities who live alone and have no child is projected to increase rapidly, rising by nearly 80 per cent between 2007 and 2032 to 370,000. This represents a significant challenge to health and social care services that rely extensively on spousal and adult child care.

Continue reading “Who cares for those without carers?”