Budget 2014: Is not good for all pensioners

The budget announced by the Chancellor George Osborne on Wednesday 19^th March 2014, has been widely reported as appealing to pensioners and savers.

Some measures, such as pensioner bonds, will indeed help sizeable numbers of older people.

Yet for many people over retirement age, it will not be good news overall.

To begin with, though pensions have been exempted from the total benefit cap of £119 billion, to rise only with inflation, several other types of social security payment on which many pensioners rely have not.

For instance pension credit, housing benefit (for those not on jobseeker’s allowance) and winter fuel allowance are included in the sum capped.

So these could be squeezed in future, hitting worse-off pensioners in particular.

Secondly public services continue to face heavy cuts, affecting large numbers of older people.

Thirdly treating pension pots as a form of savings which can be withdrawn at any time, rather than a guarantee of income to maintain an adequate ongoing standard of living, will benefit some and others may suffer, especially in the longer term.

Osborne announced that:

 “We will legislate to remove all remaining tax restrictions on how pensioners have access to their pension pots. Pensioners will have complete freedom to draw down as much or as little of their pension pot as they want, anytime they want”.

“When it comes to tax charges, it will still be possible to take a quarter of your pension pot tax free on retirement, as today,”

He also stated. “But instead of the punitive 55 per cent tax that exists now if you try to take the rest, anything else you take out of your pension will simply be taxed at normal marginal tax rates – as with any other income. So not a 55 per cent tax but a 20 per cent tax for most pensioners.”

This may be helpful for some, especially those with large amounts who can afford to take risks by investing a certain amount in schemes with higher potential returns but less security. But it places others at risk of destitution.

Some may be persuaded to use their money unwisely, but even those who are cautious may be hit.

If their children or grandchildren are at risk of homelessness because of the current lack of affordable housing, they may be willing to help meet the costs of a deposit on a home for them and maybe assist with mortgage payments and there is no guarantee pensioners in such situations will get the money back.

Again if they, or those close to them, are denied adequate social care because of the cuts, they may dip into their pension pot.

The idea of letting a loved one be left without food and drink, or forced to sit in his or her own bodily waste for hours, if they can do something to help, may be too much to bear and this may mean that they run out of money to pay for food and heating for themselves.

The measure appears to undermine further the concept of social security, Nigel Stanley from the Trade Union Congress (TUC) states:

“Pensions policy should be about providing the retired with a reasonable standard of living. This should both lift them out of poverty and provide some continuity with their pre-retirement standard of living. There are many mechanisms that do this through state and workplace provision but in general the focus has always been post-retirement income”

“However, this budget goes in an entirely different direction and while many of its measures make some sense or are even welcome on their own, it is harder to argue that they improve the pensions system. Instead, they replace a pensions system with a savings arrangement”.

So, it should be remembered that bonds of family, friendship, empathy and solidarity connect people across generations.

Indeed, decades ago, many older people helped to change society to improve protection of economic and social rights.

They are not all willing to look on passively as their handiwork is slashed to pieces.

The government should not assume that all pensioners will be pleased with this budget.