Category Archives: taxation

Threats to pensioners from increased taxation

Numerous birds are coming home to roost from George Osborne’s cuts of a few years ago. e.g

  • Spending on the military now considered too low
  • Funding for the NHS not sufficient to meet the needs of an increase in the numbers of elderly people, and advances in technology.
  • Local government bodies getting into difficulty

(on the last item I note from our local borough council rates leaflet that goverment grants to the council have declined steadily from £130 millions in 2013/14 to approx £20 millions in the current financial year, and will reach zero by 2020/21, whilst demands for social care change in the opposite direction.)

No wonder bus routes are being cut to a stage where older or disabled people need to look to other forms of transport, and is likely to cause increased numbers of cars on the road.

Proposals to hit the elderly include a proposal that pensioners should continue to pay national insurance into old age:

The tax that pensioners should pay to fund care

Tens of thousands of pensioners face cuts to income after huge HMRC trawl identifies decades of errors

A huge trawl of records comparing HMRC’s official files with those held by pension schemes has identified errors dating back as long as 40 years ago.

Retired workers with both public and private sector pensions face reductions to their future pension payments, which in some cases will see their retirement income halve.

In some cases pensioners have been paid too little and will receive back payments in addition to future increases. However they will not receive any interest on the payments or compensation.

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Our comment: Is this intended to make pensioners panic that some minor omission might crop up ?

The State Pension is taxed, why not The Winter Fuel Allowance?

We are surprised that subjecting pensioners to new means tests is being suggested for the Winter Fuel Allowance which may require an army of means testers. It would also subject many pensioners to a process that they feel very uncomfortable with. Our suggestion for a long time has been to make WFA subject to taxation in the same way as the State Pension is. We’ve never heard anyone complaining that the very wealthy enjoy the State Pension, so what is the problem with taxing Winter Fuel Allowance? The answer that many may give is that a lot of people will be affected by this, without necessarily being on a massive income. But at least the most needy would get the pension in full, and it would stop the continual bleating about this allowance being paid tax free.

An army of means testers needed ?

An army of means testers needed ?

Some constructive alternatives for funding care of the elderly

There are a lot of comfortably off pensioners. And lots of poor ones. And there are a lot better ways of finding money for elderly care than Theresa May’s manifesto commitment to whipping the houses off people who need care at home.

Under the Conservative’s plan, people needing either domiciliary (aka at-home) or residential care will have to pay for everything until the value of their assets, including their home, is down to £100,000. The Tories promise that no one will be forced to sell their home in their lifetime to pay for care, with the cost instead deferred and taken from their estate after death.
Care of the Elderly Costs
The plan is superficially seductive. The older generation have benefitted from spectacular – and largely unearned – increases in the value of their property. Why should younger working people, through income tax, pay for the galloping costs of elderly care when they can’t even dream of affording to buy a home themselves? Doesn’t it make more sense to instead take the money out of the congealed wealth sitting in property? And, indeed, there can be no justification for the state protecting the inheritances of the well off by taxing hard-pressed working people.

But there are two major drawbacks. Firstly, there is the risk that the elderly will delay seeking support at home because they won’t want to enter into a domiciliary care plan involving a charge on their property. They won’t get early treatment and will fall on the NHS.

The second drawback is more serious. No one chooses Parkinson’s or Alzheimer’s – they choose you. Health inevitably deteriorates in old age, but the conditions that will result in intensive care costs, whether domiciliary or residential, are largely random. A quarter of the over-85s are likely to develop dementia and a third will need constant care. But that leaves large numbers not in need of intensive care. Indeed, only one in eight over-85s are in care homes.

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We don’t for a moment think that someone in their 50s with breast cancer should have a lien put upon their home to pay for their care. We share the risk by paying through our taxes for the NHS and community care services. Why, then, should we think that a random third of the over-85s should have charges added to their homes but the other two-thirds not?

But that doesn’t take away from the fact that the increasing cost of care for the elderly needs to be found somewhere, and it would be unfair for the young to shoulder all the burden.

One of the oddities of the tax system is that we stop paying 12% national insurance on our earnings once we reach state pension age. The idea is that NI is basically a savings system that pays for our pensions, so once we’re in receipt of a pension we stop paying in. But NI, when first set up, was a system of insurance against illness and unemployment. If NI is supposed to help fund the NHS and care services, there is no reason why pensioners – the better off at least – shouldn’t be paying it, albeit at a reduced rate.
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taxed winter fuel cash to help social care crisis says Baroness

Baroness Altmann has claimed its “ridiculous” that affluent pensioners receive the benefit without a tax penalty – which could help fund social care

AN ex-Pensions Minister is calling for rich pensioners to be taxed on the winter fuel allowance.

Baroness Altmann says it is “ridiculous” they are not — and that the tax penalty could help fund social care.

The Sun on Sunday can reveal just 518 OAPs have declined the payment, which ranges from £100 to £300 and used to help pay heating bills in the winter months, since 2011.

Total government expenditure on it is around £2billion and it is paid to more than 12million pensioners.

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meanstesting-pensioners-benefits-v2

Our comment: this has been a recurring hot chestnut over recent years, but so far governments have not responded. Many people forget that the State Pension is taxed for those with sufficient income. We advocate an increase of 25% in the allowance which is then paid with state pension payments, which will be taxable. That way those that need it will get the full amount, and those on higher incomes will be taxed on it.

Government drops plans to allow pension annuities to be sold for cash

The Treasury has ripped up plans to let millions of pensioners sell their annuities for cash lump sums, over fears it could lead to them being ripped-off twice by insurers.

The scheme was announced last year as a lifeline to rescue elderly savers from being locked into lifetime annuity deals which pay them derisory annual incomes.

Doubts had been cast over the scheme in recent months following revelations by this newspaper that a number of pension firms had refused to take part.

Regulators had also warned that pensioners could face “rip-off” charges of up to 20 per cent when they tried to cash in their pension.

Last night experts said that although pensioners locked into poor annuity deals would be disappointed by the about-turn, the policy was flawed from the start and the Government was therefore right to scrap it.
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