Pensioners should pay more tax?
No-one likes the idea of paying more tax, and pensioners are generally considered to be a ‘vulnerable’ group who should be protected from punitive tax rises owing to the fact that they are on fixed incomes and need to pay their heating bills. However, a new report by the Fabian Society (who dress to the left) suggests that actually, some pensioners are getting away with murder.
The reasoning behind the report is not, however, a vendetta against the grey and wrinkly, but rather a championing of the ‘squeezed middle’ rest of us. They argue that, although there are pensioners in poverty and there are filthy rich pensioners, most of them are somewhere in the middle, just like the rest of the population. However, unlike everyone else, all pensioners benefit from special treatment, particularly where tax is concerned.
A major point of their argument is that 80% of pensioners own their own home and that most of these are no longer paying off their mortgage. Compare that with the 50%+ of 25-45 year olds who do not own a home. Also, pensioner incomes have been rising, while earnings have been stagnant or effectively falling, resulting in a narrowing of the income gap between the two groups. This means that the median (one in the middle) pensioner couple is actually in the wealthiest half of the UK population.
Of course, the biggest argument for protecting pensioners is that they can’t just go out and earn more money to make up the shortfall. But according to Fabian figures, they aren’t even spending their money- they calculate that most pensioners get 99% of their income 'refunded' through the benefits system, state pensions and access to public services like the NHS. And the free bus pass.
All this means is that they leave their pots and pots of money to their younger relatives. Which becomes a perpetuating circle as the inheritance is the only way many younger people can buy their home. So if you don’t have a wealthy older relative, you’re stuffed.
The Fabian society applauds George Osborne’s decision to freeze or remove age-related additional personal allowances for pensioners (which must have been hard for them, being as he is a Conservative) and suggests the Government might want to consider additional measures such as extending liability for National Insurance for pensioners, scrapping the tax-free 25% pension lump sum and possibly applying additional land taxes on property wealth and inheritance.
Michelle Mitchell, of Age UK, told the BBC: "The Fabian Society is right to point out that there has been significant progress in tackling pensioner poverty in recent years. But there are still 1.7 million pensioners living in poverty today, while a further 1.1m have incomes only just above the poverty line.
"It can be difficult for older people to change their financial plans as their options are likely to be very limited. They have also contributed national insurance payments throughout their working lives to receive in return a state pension that ensures a financial safety net but little more."