Forum Topic

Pensioners suffer from the BUDGET

Pensioners scuppered yet again, and no my State Pension has not gone up by a fiver, it's only £4.31The announced scrapping  of the age-related personal allowance for the over-65s will mean that pensioners are big Budget losers.Today’s pensioners will fail to see their tax-free allowance rise; instead it stays frozen. Worse off still is anyone aged 62 or 63 and fast-approaching retirement. When they retire they will be taxed at the same rate as any other taxpayer. What this means is that pensioners will pay more tax on a greater proportion of their income.3 pence on a litre of petrol from August.  As the price stands at the BP garage on Horn Lane, that will be £1.48 a litre, providing there are no more price hypes.All I can say is SCREWED AGAIN! The only winners are the rich Tory b*******. It's now a vote lost.

Nicola Howard ● 5292d33 Comments

Classic case of heart over head Nicola. The evidence from HMRC and OBR released today (see below) confirmed that the high rate of tax actually brought in less than Labour promised it would - just as the Tories said at the time. Then again, this isn't exactly a revelation as the same pattern was seen in the 70s.Until the electorate understand that we actually need the rich to stay in Britain (the top 1% pay 25% of all tax, and 1/3 of households pay for the other 2/3) we're simply likely to drive them further away, thus making our financial position worse not better. You can accuse the Chancellor of all you like, but maybe it's a good thing this government is run with heads not hearts - the former Chancellor Alistair Darling stated the 50p rate would have to be temporary - and Postman Pat lookalike Ed Millipede didn't have the balls to say he would re-instate it, so where's his integrity while he lectures the Tories - not least given his own tax arrangements(see story of his £1.6m house in the Guardian).+++++OBR:    As discussed further in Box 4.2, a key driver of this shortfall is lower-than-expected revenue from the 50 per cent additional rate of income tax introduced in April 2010.     Estimating the size of such behavioural responses is very difficult, especially for high- income individuals who are likely to be more willing and able to alter their working lives and financial arrangements in response to tax changes than the bulk of the population. The overall size of the behavioural response can be captured by estimating the Taxable Income Elasticity (TIE), the overall responsiveness of total taxable incomes to changes in marginal tax rates. The March 2010 costing used a TIE of 0.35, implying that the introduction of the 50 per cent rate would cut the total taxable income of the affected taxpayers by 5.9 per cent.    HMRC have now undertaken the first ex post analysis of the 50 per cent yield, based on 2010-11 self-assessment tax returns. One striking finding is that high-income individuals appear to have shifted at least £16 billion of income that would have been taxed in future years into 2009-10 so that it would be taxed at 40 per cent rather than 50 per cent. This has a one-off cost to the Exchequer of around £1 billion. The scale of forestalling, which was not factored into the March 2010 Budget costing at all, illustrates how willing and able high-income individuals are to adjust their behaviour in response to changes in tax rates.    Using a methodology broadly consistent with that of Brewer et al, and adjusting for forestalling, the HMRC study also suggests that the underlying behavioural response to the 50 per cent rate has been more powerful than the March 2010 Budget costing suggested. It points to a TIE around or above the Brewer et al level and significantly higher than 0.35. In its costing of the move to a 45 per cent rate, the Government has assumed a TIE of 0.45 – broadly in line with the Brewer et al estimate. We believe that this is a reasonable and central estimate, both for the costing and for our underlying forecast. Taken at face value the HMRC study might suggest an even higher TIE, but this would risk placing put too much weight on a single year’s outturn evidence – especially given the complications from disentangling the forestalling effect. There is also reason to believe that the behavioural response to the cut in the tax rate may be smaller than to the increase, because of the costs involved in swiftly reversing expensive decisions on retirement, migration, tax planning and evasion. But it is very important to emphasise the significant uncertainties around all such estimates.

Chris Martin ● 5292d

'When they retire they will be taxed at the same rate as any other taxpayer.'Is there actually any reason why a 65-year-old on £10,000 a year should pay less tax than a 25-year-old on the same income, who is also liable for National Insurance?There seems to have been an outbreak of mass hysteria in the media who would have us believe that Cameron and Osborne are out mugging our grannies in the street every day, probably with some inappropriate touching.In fact, we are all getting much more generous tax allowances, pensioners and workers. So long as we are basic-rate taxpayers, anyway.

Susan Kelly ● 5292d

I suspect there is a reason.Oldies are unemployable generally and so are in a much harder suituation to improve their lot.Despite hikes in energy bills the winter fuel allowance was reduced, although people have forgotten.I can't remember the average pension recived by pensioners which I noticed a few weeks ago, but it is remarkably low and insufficient on its own for people to survive on.The state pension needs to be increased in real terms until it provides sufficient for people to live on.I don't mind the supertax coming down to 45p unless they raid the a part of society which is unable in general to find other ways, like getting work, of making good its loss.I also think that anyone on £150K has more than enough unless they cannot manage their affairs. So as compensation for the reduction, they should only have it if they pay 2.5% into a charity which collects money for distribution to front line charities.

George Knox ● 5292d

George, no one is expected to live on the state pension alone. That's what the Minimum Income Guarantee is for and that's about £140 per week.

Susan Kelly ● 5292d

Is there actually any reason why a 65-year-old on £10,000 a year should pay less tax than a 25-year-old on the same income, who is also liable for National Insurance?------------------------------------------------------------------Well the 65 year old has paid tax and national insurance for 45 years whereas a 25 year old has only paid them for 5 years.

Bob Crossley ● 5291d

It's now Pension Credit and using your figure it is £33 more than the State pension. If the State thinks you should have £140 per week then gradually they should raise the State pension so that millions no longer have to waste State time nor dabble in occasional fraud by applying for Pension Credit.I noticed on the BBC site that some 40% of pensioners are likely to be hit by Osborne's new restriction.

George Knox ● 5291d

Raising the state pension to a universal £140 a week, during the current parliament, and to be increased in line with annual CPI, is included in IDS's welfare reform plans.

Peter Millman ● 5291d

Agree in principle Bob but you have to take it case by case.Some pensioners,albeit a small 5, have been on one benefit or another for years and the last job they had might have been making cannonballs for the navy.I also can't understand why those of us who have been at work and in constant employment for years,me for instance for 36 yrs since I left school,are bracketed with those who have a patchy employment record.I do not want to work beyond 65 thankyou very much and this increase in the retirement age should be for those who have not put the years in.

Keith Iddon ● 5291d

That should say 'small %' not small 5! Apologies.

Keith Iddon ● 5291d

If at present I get State Pension combined with Pension Credit of £183.11, to only get £140 is a rip-off.  Definitely stealing from us grannies.  Look out, there could be a blue rinse revolt LOL.  Pay all you working life only to get taken for a muggings.  I think this country does not look after it's pensioners.  Also us oldies are paying for the tax cuts for the rich, yet another rip-off. Aa for IDS he failed as a leader of the Tory Party and, could not even get elected as PM.  Never trust a politician who is follicle challenged.

Nicola Howard ● 5291d

'Is there actually any reason why a 65-year-old on £10,000 a year should pay less tax than a 25-year-old on the same income, who is also liable for National Insurance?'Well the 65 year old has paid tax and national insurance for 45 years whereas a 25 year old has only paid them for 5 years.'Bob, you seem very confused. Your NI payments entitle you to a state pension. They don't entitle you to special tax breaks.The 25-year-old not only pays more tax on her income: she also has to pay her train/bus fares to work every day, and for her prescriptions and she doesn't get £200 or £300 a year to warm her house in the winter.

Susan Kelly ● 5291d

Keith, probably quite a large percentage in fact.

George Knox ● 5291d

Nicola. I am certainly not suggesting that the extras above the standard rate of PC should be reduced to £140.There are quite a few extras such as a premium for someone on Attendance Allowance or DLA,  also for mortgage interest and service charges, and a bonus for Pension Credit applicants with some savings. There are a few other benefits as well for somone on PC. I would be shocked if these were removed.I don't remember when the Tories made real increases to the lot of pensioners, although some one may wish to correct me. But Gordon Brown in one of his only good contributions did make significant improvements to the circumstances of pensioners.

George Knox ● 5291d

IMHO Duncan-Smith is one of the more intelligent and thoughtful members of the current govt. Clearly not suited to the limelight of the top job, but making a very sensible and timely attempt at reforming an out-of-control welfare state in an inclusive and sensitive way. The status quo is unsustainable. And the "country" i.e. "hard-working families" and other taxpayers do a sterling job, in challenging circumstances, in supporting through the tax system those pensioners who did not think, or could not afford, to make their own adequate provision for their retirement. This is not a party political issue: Frank Field tried to do something similarly radical under the Labour administration and was kicked into the long grass for his trouble (and now advises IDS, incidentally).The current generation of pensioners, who are likely to be spending the best part of 30 years taking money out of the system are in a much better place than today's working population who will have to work longer; provide for themselves in retirement to a much greater extent; struggle to afford to buy their own homes etc. etc.Good luck with the blue rinse revolution. Politicians are terrified of activist pensioners - "flocking immigrants" and the Gillian Duffy effect. Dissing IDS for being bald seems a bit un-PC and wholly without logic. Follically challenged men (WH, IDS) appear to be much more trustworthy and credible than their bouffant-haired political peacock colleagues - e.g. MT, JM, TB, GB, DC. Boris being the exception that proves this rule.

Peter Millman ● 5291d

Not confused Susan. You said the 25 year old  was liable to National Insurance contributions. I was pointing out that the 65 year old also paid them for his whole working life.In addition the 65 year old has all his or her working life paid bus train fares to work and paid for prescriptions. By the time the the 25 year old gets to 65 he/she will be able to do the same. Providing of course the goalposts aren't moved.

Bob Crossley ● 5291d

As one ages, they need more care and, having paid in all my working life since the age of 16, I consider that I have accrued the right to a decent retirement.As for the winter fuel payment, that has been reduced under this administration, while energy prices have risen, no compensation in that. Also the elderly feel the cold more than a young person.  Has the government got a hidden agenda, bump off the pensioners!

Nicola Howard ● 5291d

My wife used to say that a bald man was more virile. I am not certain that Beveridge was particularly bald. But please leave out the PC stuff.IDS is generally called right wing and so I don’t think I can trust him too far. Any way I don’t know how much he will have had to do with freezing of the personal allowance because State Pension is not actually a benefit.Working people should be glad that pensioners are being looked better after because their children generally do not have time to look after their parents. When I was much younger I was disgusted with the way pensioners were treated by governments and I did not complain that I was paying part of my taxes to pay their pension. To take a slice out of 4M pensioners to fund a very small number of top rate tax payers is just disgusting. If it had been to fund an extra rise in say Jobseekers or charitable functions or home care it would have been more palatable. And to say that pensioners will not lose cash is a cynical lie.When you are a pensioner you also will be glad to be looked after whether you could not afford to save or whether you did not think to provide for yourself. Many more will be living to 100 then. You would also be disgusted if the State will have taken down your standard of living.

George Knox ● 5291d

George, the income tax cut for higher earners is being funded by the new level of stamp duty and a clamp down on the avoidance of stamp duty, rather than by this rationalisation of allowances across all age groups. The two things aren't connected.The present generation of pensioners (and my husband is one of them)have had a very good deal. They got tax relief on their mortgages and raging inflation in the 70s meant that their mortgage payments were cut drastically in real terms. They didn't have to pay to go to university and many of them have retired on final salary schemes. Just compare this with what their grandchildren can expect out of life! A lot of them will be lucky to retire at all.

Susan Kelly ● 5291d

Well Susan this is one of those issues where probably only the Treasury has the all the figures on the 40% of pensioners who will be affected. I did not read the raging papers yesterday and so I don’t know how many are on good pensions and have nothing to worry about, but I certainly have read in the past that the average income for a pensioner who gets a state pension plus a small superannuation from their old employer is very low. Yes some people had all those things you mention, but it worthwhile noting that less than 20% of the elders went to University. It is worth noting that many working people today are far better off than was the case in the 1950’s and sixties. People like Andrew Marr say the middle classes, by which I think he means in this context people who have better incomes, have increased significantly.Then there all those widows who get a small overall pension partly from their deceased husbands but they generally get a very small income.I don’t begrudge individuals who earn more than £150K. But they are a very small number. And on that income compared to the rest of us they are very well off, thank you. I don’t know the tax calculations but I think a ball park saving for a supertax person is about £5K minimum. That is way more than a person on Jobseekers, who is very vulnerable.The supertax people are not vulnerable in the same way that people near the bottom of the pile are. Oldies cannot easily fight back against the loss without getting work. How would they do that?The argument will go on and on. However no elder will forget when Brown shamefully increased the basic pension by 75p. No elder will forget this attack on their higher personal allowance which has been there for about 90 years. As and we all know the grey heads do a lot of voting. It certainly gives the Labour party considerable ammunition. It was a stupid political move when so starkly set against the 5% supertax reduction. It will not be forgotten for quite a long time.

George Knox ● 5291d

Don't forget that Gordon Brown sold our gold reserves for next to nothing, something else us oldies have not forgotten.Whatever has happened to the Robin Hood syndrome, take from the rich and, give to the poor.  Not the other way round.

Nicola Howard ● 5291d

The really stupid thing the government did was to leak all the good news and not the bad. Leaving all the papers  to pick on the one item about pensioners. It bothers me how little common sense this coalition has.

Bob Crossley ● 5291d

George, you seem hopelessly confused on this so let me point out a few relevant facts:1. Jobseekers typically don't earn anything so none of their income is subject to tax.2. The budget increased the personal allowance for millions of low paid workers by over £1,000 - the biggest such increase in recent years, and a change that means people working on minimum wage pay half the amount in tax now than they did under the last government.3. Further up the chain, plenty of people are currently paying an effective 60% tax on incomes over £100K. That's twice the level that Warren Buffett says the "rich" should be paying in the U.S. (he's been applauded for calling for tax rises).4. It's not the rich who don't pay enough tax, but the majority in the UK. The breakdown of tax is as follows:- The top 10% of households (with incomes of £70K or over) pay 5 times more tax than they receive back in benefits from the state.- Any household with an income of below £30K is a net recipient of benefit i.e contributes less than it receives- The top 1% pay 27% of all tax and 1/3 working households subsidise the other 2/3 working households AND everyone on welfare / not working / receiving a pension.This is the real issue. We all want someone else to pay more but the majority already receive far more back than they put in.

Chris Martin ● 5291d

Well said, Chris. A recent survey showed that a staggeringly high percentage of people in this country believe that they pay far more in tax than they get back in benefits/services, when the reverse is true for most of them. The plan to issue each taxpayer with a breakdown of where their taxes go may go some way towards alleviating this mindset.I bet that hardly anyone, when working out what's in it for them, takes account of the police, fire services, armed forces etc.

Susan Kelly ● 5291d

3. Further up the chain, plenty of people are currently paying an effective 60% tax on incomes over £100K. That's twice the level that Warren Buffett says the "rich" should be paying in the U.S. (he's been applauded for calling for tax rises).What has the U.S. got to do with a British budget?Who is Warren Buffett?How do you work this one out:Pension up £5 (for which it's not, it's less) Pension Credit reduced by the same amount.  Rise in pension £0.It's a stealth tax etc through the back door.  Were all in it together, except the rich and, the bloody BANKERS and a former chancellor who screwed this country's economy.  Remember there was nothing left in the pot, not even to p*** in.Time to vote for The Monster Raving Looney's, or are they already in power, called a coalition?

Nicola Howard ● 5290d

"How do you work this one out:Pension up £5 (for which it's not, it's less) Pension Credit reduced by the same amount.  Rise in pension £0.It's a stealth tax etc through the back door.  Were all in it together, except the rich and, the bloody BANKERS and a former chancellor who screwed this country's economy.  Remember there was nothing left in the pot, not even to p*** in.Time to vote for The Monster Raving Looney's, or are they already in power, called a coalition?"I don't need to "work it out" - it's fact:http://www.ft.com/cms/s/2/03725d1c-30fb-11de-8196-00144feabdc0.htmlFactor in these people will also be paying 20% VAT on anything they buy, 32% tax on the returns from anything they invest, plus council tax etc and the tax take is probably quite close to 75% for those in the £100K to £120K range.Then again, we should all be worried about the pensioners who haven't actually lost anything if they bothered to check the facts and can continue slagging off the working "rich" who now work from January to September every year just to pay the tax man to dish out dosh to everyone else.

Chris Martin ● 5290d

Then again, we should all be worried about the pensioners who haven't actually lost anything if they bothered to check the facts and can continue slagging off the working "rich" who now work from January to September every year just to pay the tax man to dish out dosh to everyone else.It's always been the way, work half a year to pay the tax man.  You sound as if you are hard done by, but, you sound as if you are one of those rich-kids that just wants and wants!

Nicola Howard ● 5290d

"It's always been the way, work half a year to pay the tax man.  You sound as if you are hard done by, but, you sound as if you are one of those rich-kids that just wants and wants!"I'm not in that category (or even close to it!) but if I was I certainly wouldn't be sticking round in the UK - and this sentiment doesn't appear to be unique judging by the substantial shift in behaviour amongst people in the 50p tax bracket - there's a good risk we'll kill the goose that's laying our golden egg - this sums it up nicely:Every night, 10 men met at a restaurant for dinner. At the end of the meal, the bill would arrive. They owed £100 for the food that they shared. Every night they lined up in the same order at the till.The first four men paid nothing at all.The fifth, grumbling about unfairness of the situation, paid only £1.The sixth man, feeling very generous, paid £3.The next three men paid £7, £12 and £18, respectively.The last man was required to pay the remaining balance, £59. He realized that he was forced to pay for not only his own meal but the unpaid balance left by the first five men, but did not protest.However, the 10 men were quite settled into their routine when the restaurant threw them into chaos by announcing that it was cutting its prices. Now dinner for the 10 men would only cost £80.This clearly would not affect the first four men. They still ate for free. The fifth and sixth men both claimed their piece of the £20 right away.The fifth decided to forgo his £1 contribution.The sixth pitched in £2.The seventh man deducted £2 from his usual payment and paid £5.The eighth man paid £9.The ninth man paid £12,leaving the last man with a bill of £52.Outside of the restaurant, the men began to compare their individual savings from the £20 reduction,and angry outbursts began to erupt.The sixth man yelled, "I only got £1 back out of the £20, and he got £7," pointing at the last man.The fifth man joined in. "Yeah! I only got £1 too. It is unfair that he got seven times more than me."The seventh man cried, "Why should he get £7 back when I only got £2?"The nine men formed an outraged mob, surrounding the 10th man. The first four men followed the lead of the others: "We didn't get any of the £20. Where is our share?" The nine angry men carried the 10th man up to the top of a hill and lynched him.

Chris Martin ● 5290d

Are you suggesting that we take this coalition to the top of a hill and lynch them?  The point still remains,  the Chancellor has gone granny bashing.  The only person getting rich while us pensioners are getting poorer is our Darling Chancellor.

Nicola Howard ● 5290d

ChrisNot confused but you miss perhaps the underlying point.Of course people on JSA do not pay income tax.Increasing the PA is seriously long overdue. The more who come out of tax the greater the saving to HMRC running costs. Am all for that as well.Plenty of people paying 60%. What’s plenty assuming 30M in work?15% of workers are now predicted to pay 40% under this budget. That’s quite a few. Shan’t dispute all your figures but trust you have reliable evidence. Recipients of £30K or less get more in benefits. Not quite clear on this. Are you saying someone on £29k gets benefits of more than £29K? That does take some explaining.The really big earners use tax avoidance probably quite extensively. They would be fools not to.Anyway you gave some facts and then said what you think. I happen to disagree with you but I am not going to write a 100 page tome.Put yourself in the position of someone on JSA seeing a £150K earner getting a raise of a lot more than what the JSA earner receives for living expenses in a year. I think the decision is highly divisive.  I gave that example simply then for you to go on to consider the next group of people who are in receipt of a low income but just out of the support net and who will never work again because they are pensioners. They also will be aggrieved to see some one getting a raise of say £5K which would transform their lives. Of course they don’t expect £5K but they don’t expect to be worse off by virtue of inflation eating into their income at a faster rate than they bargained for in all their time leading to retirement. So for, I would say, a lot of pensioners the decision will be divisive. And to an extent the Tories will be punished for it, because pensioners do not forget.Despite my own view there is a great deal of huff about this change. I am not out on a limb.

George Knox ● 5290d

George, no one is saying that someone on 29k income gets more than 29k in BENEFITS. Our taxes pay for a hell of lot in addition to benefits. Do you really not see that you need to pay your share of policing, in case you get mugged, and the fire brigade, in case your house catches fire? Then there's your health care which averages, I believe, over £2,000 per person per year. Schools, Defence, Parliament, the EU ... the list of things that are provided by the state and which we all take for granted but have to pay for goes on and on.

Susan Kelly ● 5290d

Do you really not see that you need to pay your share of policing, in case you get mugged, and the fire brigade, in case your house catches fire?I think you will find that a considerable portion of council tax is used for this.We still have the problem of child benefit.  One person earning £40K loses out, while two people earning £80+K between them are laughing all the way to the bank.What ever happened to the days when a mother/wife stayed at home to look after the kids while the father went to work.  No such thing as child minders or child benefit, just tax relief on the man's wages.  And still we could go on holiday for two weeks.

Nicola Howard ● 5290d

The child benefit thing is going to be so massively complicated that it'll probably cost more to administer than it saves; it makes a nonsense of Osborne's claim that he's trying to simplify the tax system. It also necessitates an unwelcome degree of government snooping into people's private lives. I can see no logic, either, behind the idea that a man has to pay extra tax because his partner has children from a former relationship. That seems grossly unfair.

Susan Kelly ● 5290d

In the news today I read that there is an e-petition tabled by NPC member Arthur Streatfield and it has already attracted over 6,000 signatures.It is posted under the heading: 'restoration of age-related tax allowances' for those who are interested.

Jean F Fernandez ● 5290d