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. Continue reading “Squeezing the rich pensioners”

Missed opportunity to address social care funding

The Institute of Fiscal Studies has delivered a fairly scathing analysis of the Budget and have cast doubts on the sums. There was an unexpected shock for pensioners who will see a freeze of the cash value of their tax allowance until it aligns with the personal allowance for the working age population – the so called ‘granny tax’.

Rather than being announced in the Budget speech, this was presented as an aside and a note from HMRC that detailed the implications for pensioners. The note says that in 2013-14, 4.41 million people will be worse off in real terms with an average loss of £83. Within the total, 360,000 individuals aged 65 will lose an average of £285, reflecting the changes in entitlement to age related allowances. It also means 230,000 people will be brought into income tax.

It is an unpalatable but imperative reality that we all have to pay more in the coming years, and those older people who can afford it must also be prepared to contribute.

However, it seems extraordinary that this budget offered a tax break of at least £10 000 to the very wealthy while penalising many pensioners on fairly modest incomes, who are already being squeezed by perpetually low interest rates and inflation that has been running well above the Government’s 2% target. Continue reading “Missed opportunity to address social care funding”