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Response to Observer article

Read below the response from Jan Shortt NPC General Secretary to the editor of the Observer regarding the recent Phillip Inman Observer article on pensioners

Sunday Observer – email:

Dear Editor,

Re: Phillip Inman: ‘It’s the Old that get Benefits, and the Tories the Election Wins’

As one of the Pensioner lobby groups alluded to in Mr. Inman’s article on the validity of income for older people, we set out below our reply to his statements in the interests of those who believe implicitly in equality, fairness and a universal society.

Mr. Inman states that organisations such as ours make false claims about pensioners having paid for their retirement incomes. They have (as he is). They do so by working, paying tax and National Insurance and saving whilst they work. A generation who were told by parents and grandparents to save for their old age.

Pensioners do pay income tax when they reach the relevant threshold. There are around 11.9 million pensioners in the UK. From that number a total of 545,00 pay tax at the two higher rates. From the remainder, less than half pay tax at the rate of 20% and the rest pay no tax at all as their income falls well below the threshold. Older people also contribute around £160 billion a year to the treasury in direct and indirect taxes, free childcare, unpaid caring and volunteering. Older people keep on giving all through their life.

There are currently two state pension schemes. Those who retired prior to April 2016 receive £137.60 per week/£7,155,20 p.a. and those who retired after April 2016 receive £179.60 per week/£9,339.20 p.a. – hardly a king’s ransom by any means. Not every pensioner receives a full state pension, particularly women who have a different life/work style to men. That is why the triple lock was introduced in 2010 – to lift pensioners out of poverty. In spite of that, pensioner poverty has increased and longevity has declined. The gap between earnings and the state pension has increased.

Percentages are used to give commentators like Mr. Inman a reason to manipulate figures. For example, a 2.5% increase on the new state pension is equivalent to £4.49 per week/ £9,572.68 p.a. Whereas the same increase on the average earnings of £29,000 p.a. is £13 plus per week.

Private pensions are completely different as they are paid for by individuals and are entitled to the final payment when they retire. Those who can afford to pay the premium for a £50,000 a year pay-out on retirement are those on the highest earnings and claim tax relief on those payments (although some tax is paid when the pension becomes payable).

Mr Inman is making another naïve attempt to instate conflict between generations. There are wealthy young people and wealthy older people. There is more inequality within generations than between the generations.

The National Pensioners Conventions exists to ensure that every pensioner has the right to choice, dignity, independence and security as an integral and valued member of society.

Pensioners of the future will be worse off – not because of pensioners of today – but through the ill-conceived policies of a government that has no understanding of the lives and challenges of older people in the UK today. It is they who are stealing the future of the young, not parents or grandparents who regularly step in to support their families when and however they can.

Yours sincerely,

Jan Shortt

General Secretary,april2021
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Read the Phillip Inman article below

It’s the old that get the benefits, and the Tories the election wins

The government spends more than twice as much on each pensioner as on each working-age Briton

Many pensioners have gained from the triple lock on pensions as well as from measures such as subsidised bus and train travel.

One of the major shifts in government spending over recent years has been away from young people and towards those in retirement. A study due this week from the Intergenerational Foundation think tank shows that while spending on pensioners and children respectively increased at similar rates before 2010-11, the austerity years to 2019 proved much more generous to the old.

The report finds that in 2018-19, the government spent “on average £14,660 on each child, £10,180 on each working-age adult, and £20,790 on each pensioner” and that the gap in per capita spending on children and pensioners more than doubled over the previous 20 years.

This means pensioners captured 30% of the growth in public expenditure throughout the period, with most of the gains coming after 2010 and the introduction of the triple lock, though many and varied ancillary benefits also played a part.

That’s the George Osborne legacy. It was a clever policy for a man obsessed with maximising the Tory vote. Older voters rewarded the Conservative party with electoral wins in 2015, 2017 and 2019.

Of the £900m a year spent subsidising bus and train travel for the old and disabled, the foundation calculates 88% is claimed by the old, and a growing health bill before the pandemic was also disproportionately accounted for by outpatient appointments for the over-60s.

In one area, mental health, the foundation finds per capita spending on outpatient treatment for pensioners more than tripled between 2011–12 and 2018–19, whereas spending on children’s mental health rose by only 5.6%.

The situation is likely to persist as long as a majority of voters think means-testing benefits for the old is outrageous, but that it’s acceptable for families and children.

It is inconsistent that parents with an income above £50,000 are denied child benefit and that only workers on the lowest incomes can receive universal credit, yet a pensioner with a private income of £50,000 still gets the state pension and a free bus pass, all without any obligation (if they are fit and healthy) to continue making a contribution to society.

Much of the discussion of intergenerational unfairness has been stymied by the pandemic. The virus kills many more old people than young and so to rail against a tax and benefits system that unfairly profits the old is distasteful.

Debate is also curtailed by two misleading concepts that appear to be truisms, and yet are anything but.

The first false claim, put forward by some pensioner lobby groups, is that pensioners have paid for their retirement incomes, so means-testing the core pension should not apply. They also point out that pensioners pay income tax just like everyone else.

It is true the UK pension system has a contributory element: taxes paid over a life of work account for some of the monthly payout. It is also true that pensioners pay income tax. Yet a pensioner with an income of, say, £20,000 a year, has a much higher disposable income than a warehouse operator (the UK’s most advertised job) on the same salary, especially if the worker is trying to do things many pensioners took for granted in their youth, like start a family or buy a home.

A pensioner also doesn’t pay national insurance and, equally importantly, the national insurance contributions they made over a life of work account for a fraction of what is needed to pay the state pension over what can be 20 or 30 years.

The second claim, made by the current Conservative government, is that the best way to tackle intergenerational unfairness is to minimise the debt passed from one generation to the next. This argument acknowledges that with interest rates across the world at historically low levels, debt is cheap to finance at the moment, but stresses that interest rates can rise.

It’s true that they can rise, but the major central banks have signalled that can only happen after a sustained period of growth strong enough to warrant calming with interest rate rises. And that can only be the case if the working population has acquired the skills – and with them the productivity gains –needed to push GDP growth above previous norms.

Given that investment in skills training and education is falling as a percentage of government spending, that is not very likely. The pandemic and the transition to net zero emissions will only force governments to borrow more, further persuading central banks to keep interest rates low.

Poor pensioners do need support, but wealthy boomers should step aside and let the government dedicate its effort and cash to the young.

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