Pensioners should not feel guilty about their entitlements
Yorkshire Post – 1st May 2013
Ros Altmann: Pensioners have worked hard and saved hard… why should they pay even more?
Published on 01/05/2013 11:08
THE call by Iain Duncan Smith for pensioners to pay back their winter fuel payments and other benefits is well-intentioned, but is likely to prove rather unpopular with senior citizens.
We have a system of universal pensioner payments which was introduced to make up for the fact that we have such a low state pension.
Most pensioners really need the money and will resent being asked to send it back to the Government. Will they be asked to send back their state pension too?
Most pensioners are not on high incomes, despite the false impression created by some politicians. The average income for a single pensioner is around £12,000 a year and for pensioner couples it is around £15,000 a year.
Only two per cent of pensioners pay higher rate tax. The current undertones of inter-generational strife are deeply worrying, since the impression being given to younger generations is that all pensioners are extremely well-off and somehow “undeserving” of state help.
Older people should not be singled out as lucky to have money. They worked hard to provide for themselves and, of course, whatever money pensioners now have, has to last them for many years into the future.
They also have no chance to increase their incomes in future and, indeed, they have already suffered significantly from the effects of monetary policy.
The interest paid on their savings has all but disappeared, the amounts they receive from annuities on retirement have fallen sharply in recent years and inflation for pensioners has been far higher than for other groups of society.
Therefore, pensioner spending power has been squeezed sharply already.
Rather than asking them for the money back, the more sensible approach would be to make these payments taxable and recover some of the cost via the normal fiscal policy mechanisms.
More means-testing would be a huge mistake, since that would mean only those who never bothered saving would receive the money, while others who tried to look after themselves would be denied the payments. Means-testing millions of pensioners would be costly to administer and very inefficient as a policy mechanism, since many people who really need the money will not receive it.
Either they are too proud to claim, or mistakes are made in the administration. And wherever the line is drawn, many people will lose out, especially if they have put a little money aside as they wanted to be self-reliant in future.
That would undermine incentives to save for middle or lower earners in particular – just the groups who pension auto-enrolment is aimed at.
As such, we need a proper national debate about the level of pensioner support that society will pay.
Our whole welfare state is based on the premise of universal entitlements, that are paid out to those who pay their national insurance.
Of course that means some people who do not really need their entitlements will receive the money, but that is how the system works. Should wealthy parents be asked to pay for their children’s education in state schools, after all they can afford it?
Should millionaires who end up in A&E be asked to pay the thousands of pounds that the NHS spends on their treatment?
Why are pensioners being singled out like this? Obviously, the spending on older people is rising, because there are more of them.
That is the demographic reality, but all of them paid into a system which promised universal benefits, that was the deal all their working life. Coming along just when they need the benefits and trying to take them away seems wholly unfair.
That is not to say that no changes can be made, of course policies need to be adjusted over time. But any change should be made in a considered way, looking at the whole picture rather than placing too much emphasis on mistaken stereotypes.
The current system of myriad benefits has grown up over the years and is designed to ensure older people can live with dignity and decency after a lifetime of work.
Yes, it might be better to roll all the different payments into one, but taking away winter fuel payments, for example, would be much like cutting the state pension. Most pensioners have worked hard and saved hard all their lives, the payments they receive are not huge sums and millions of older people rely on them to have a chance of a decent lifestyle.
Increasing state pension age helps to control costs and taxing pensions and benefits also raises revenue, pensioners should not be made to feel guilty for receiving state pensions.