Squeezing the rich pensioners

When Andrew Dilnot published his proposals on funding social care, he envisaged that a better, fairer system would require extra funding from public expenditure, and observed that since older people would be the principal beneficiaries, it would be preferable if this was raised by taxes which older people contribute to so that not all the cost would fall on the younger population.

Since then, a variety of ideas have been floated from a range of different quarters.   But the discussion has also become conflated with views about intergenerational fairness as the Government tries to bear down on public spending, and comments about the ‘generosity’ of some universal benefits received by pensioners.   There has long been a rumble of complaint that rich pensioners receive the Winter Fuel Payment.   Frank Field waded in, arguing that before we find more money for older people, we should be looking at the poverty and the shortage of opportunities for children.   The Lib Dem think tank CentreForum published a paper looking at the tax reliefs available to older people and their exemption from National Insurance if they are working over State Pension Age.   Now, in the margins of the Lib Dem and Labour Conferences, the appropriateness of pensioners’ benefits has again bubbled up, though the Coalition Agreement specifically protects these till 2015.

A worrying dimension of the present efflorescence is that the Olympian authority of the Institute for Fiscal Studies has been rolled into the debate.   The headline which is particularly incendiary is the IFS calculation that £1.4bn could be saved by means-testing the Winter Fuel Payments and free TV licence, which nearly meets Dilnot’s estimated requirement of £1.7bn.   It is worth remembering what the IFS actually published.

Total spending on the Winter Fuel Payment in 2011/12 will be £2.2bn:  on the free TV licence, it will be £586m.   If these were restricted to every eligible claimant of Pension Credit, there would be a saving of £1.4bn.   But the IFS were also pointing out that only about 65% of eligible pensioners actually claim Pension Credit, so there would be genuinely needy households who would also forego their benefits.   More means-testing also brings more administrative cost.   The ‘cliff edge’ between those who qualify for benefits and those who just miss out becomes higher.   And means-testing is demonstrably an inefficient way of getting help to the people who clearly need it.

Some commentators have steered clear of means-testing, and proposed instead that these benefits should be taxed.   The IFS points out that this would save £250m.   Sadly, barely half our older population have incomes which attract basic rate tax, and under 4% are higher rate tax payers.

As ever, the IFS drew attention to the clustering of the older population around the poverty line:  not a great deal of cash income separates those on one side or another.   The least we can provide to our retired population, as a civilised society, is health and the opportunity of social engagement.   Small sums and benefits can be crucial.   The link between cold homes and ill-health (with consequential costs to public services, as well as personal misery and excess winter deaths) is well documented, and loneliness connects with self-neglect , depression and mental illness.   The costs to society of not sustaining our older population could far outweigh the costs of the benefits under fire.

One has to conclude that scything away these pensioner benefits will take us little closer to finding the pot at the end of the rainbow.

Too many people in later life are being badly let down by poor quality care and support. We are calling on the Government to urgently reform the care system.  Find out more about Age UK’s Care in Crisis campaign. 

Read another  blog by Mervyn Kohler about social care reform

5 responses to “Squeezing the rich pensioners

  1. Take away a free bus pass and TV licence from the majority who benefit and the fuel allowance then wewill find a bigger bill as those who can manage,just,find it impossible and become incarcerated in hospital wards ( shades of the poor house) or just die from malnutrition and lack of social intercourse.I agree with the better offnot receiving such benefits.
    This could be sorted out by everyhousehokd having to apply for the benefits as with tax returns for example, It shoud not be difficult to work out who does really need these benefits

  2. It sounded a bit too good to be true when they said they supported Dilnot.
    They do their sums about how much they can save and then they mention means testing. It costs money to do the means testing so that they don’t get in the amount they want so the next stage will inevitably be to change the level of how much you have to have before you become elligible and so words like the well of should not receive them end up as only the very poorest will as they are taken away from most.

    Truth is if the government appears to be offering you something with one hand be careful and watch that they are not taking twice as much back with the other.

  3. It is quite sad the we are not doing more to look after our elderly population.We have many elderly living near the poverty line or under it, Anything that does not address this will, in the end, cost us more, I might also like to point out that we will be there one day , How would we like the younger population in charge to be looking after us

  4. Patricia Young Al-Salih

    Too bad they don’t take a look at how many of these “rich” pensioners spend their money – not on winter cruises and golf club memberships but on paying for care for their own very old parents, coming up with the mortgage money for offspring who have lost their jobs, buying groceries for these same offspring, paying school fees for grandchildren and on and on, not to mention the services provided caring for grandchildren so that mum and or dad can work. I have been working now for 58 years. I have earned my bus pass and my tv license and my winter fuel allowance. HANDS OFF!!

  5. stop overseas aid and give it back to the people who need here.stop giving our money to the eu.who are living off the fat ofthe land.

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