Saturday, 24 March 2012

I wish the government would "granny tax" me

You'll all have probably heard about the furore over the government's so-called "granny tax".

What this basically is is a decision to freeze the tax allowance for pensioners (which is about £10,500) until the tax allowance for everyone else has caught up. And you know what, I don't really have a problem with that. I can't really see why the retired should get a bigger tax allowance than everyone else - particularly when you consider that the change will only cost them, on average, £85 a year.

Mind you, with high fuel and utility bills and the increase in VAT a lot of elderly people are feeling the pinch so asking them to pay extra isn't exactly helpful. But, then again, lots of other people who aren't retired and who don't get the higher tax allowance are also hit by higher utility bills and living costs as well.

Fortunately though, the government isn't taking £85 away from pensioners. In fact, pensioners are going to be wealthier because of the budget.

That's because the Lib Dems have implemented our policy to restore the link between inflation and pensions. Because of our triple lock, pensions are now guaranteed to rise by inflation or the average increase in wages or 3% each year - whichever is the higher of the three.

As a result, pensions are actually going to rise by £5.31 a week this year - which works out at about £276 for the whole year.

So if we take away the £85 pensioners are going to lose, but add the £276 they're going to gain then they actually work out £191 better off.

Now, if that's a "granny tax" (which Labour and the tabloids are presenting as the end of the world) then all I can say is that I wish the government would apply the granny tax to me!

5 comments:

  1. They are actually doing a lot better than that.

    THIS April the age related allowance is going UP from £9,940 to £10,500 for those aged 65-74 and from £10,090 to £10,660 for over 74s.

    This follows last years rise of £450.

    So this coming year any pensioner with income above that level will have saved £200+ a year, on top of two good rises in the state pension.

    Only then does the allowance get frozen, at it's highest level ever by some margin.

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  2. I haven't bought a newspaper for years, I can't believe how expensive they are. People do pay alot for other peoples views don't they? I have to contest the term 'newspaper', surely they are 'viewspapers' now aren't they - a kind of hard copy blog!

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  3. But you see, George, the £5.31 increase is to cover inflation. The pension isn't increasing in value; it's holding its value.

    Some would say that the inflation figure is fiddled. I'd not go quite that far, but it would be true to say that, at least this year, with food inflation being higher, and with fuel inflation even higher, pensioners on fixed incomes are likely to have suffered inflation above the 5% mark, so they will have lost value.

    It's also true to say that many pensioners depended in the past on a little interest on savings to pad out one of the lowest pensions in Europe (by comparison to average pay). With interest rates far lower than inflation, it actually pays you to get rid of your savings before they are worth only enough for a day trip to the beach.

    New pensioners are suffering incredibly badly because of the drop in value of their pension pots.

    A few years ago a pension pot of £100,000 would buy you a £10,000 a year pension. Now it will only buy you around £5,000. Most people don't have £100,000, or anything like it (the average might be around £40,000).

    Old people have little choice about their incomes. Most can't get work, even if they wanted it, so they can't pad out their money.

    Private (company) retirement schemes used to be really good in the UK, and as a result the state took a back seat. Mrs Thatcher removed the obligation to increase pensions in line with wage inflation and realigned them to price inflation (until recently always lower). This has reduced the state pension in value by around £40 a week.

    But it was only the very poorest who suffered badly, as they had no other income. Mrs Thatcher didn't give a stuff about them. The rest had their (excellent) company pensions to rely on.

    But then Gordon Brown raided the pension funds for the money for New Deal (much of which was wasted in the first few years on lavish fripperies for the job centres ...new desks, new signs, new paper, new everything, and expensive training for the staff held sometimes at 5* hotels!!!). The value of company pension funds fell; companies stopped doing final salary; sometimes they went broke, and people got no pension.

    Now quantitative easing has further depleted pension funds.

    I wouldn't like to be a pensioner here. With the company/private pensions worth very little and the state pension getting lower and lower, it will be a miserable end. There's not even any point in saving money because it loses value.

    Nope. I think I'll have to commit suicide before I get old. Better than being stuck all day in a cold house, wrapped in blankets.

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  4. Your point about inflation meaning that this is a cut is fair enough - but given that people where I work haven't seen a pay rise in three years then I think I'd still prefer the deal the pensioners are getting.

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  5. Yes, that's fair too, George (we're compromising here!!!)

    It's wrong that people on very low wages haven't had pay rises. Inflation has gnawed its way into their standards of living too. (Higher paid people loose out too, I know, but for them it's the new car or the pony, the holiday or the expensive gym membership that has to go, not food and heat.)

    However, with respect, you'd not like, I guess, to have to pay an electricity and/or gas bill when you've had to spend most of the winter indoors, with the heating on...all day, on around £140 a week.

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I'm indebted to Birkdale Focus for the following choice of words:

I am happy to address most contributions, even the drunken ones if they are coherent, but I am not going to engage with negative sniping from those who do not have the guts to add their names or a consistent on-line identity to their comments. Such postings will not be published.

Anonymous comments with a constructive contribution to make to the discussion, even if it is critical will continue to be posted. Libellous comments or remarks I think may be libellous will not be published.

I will also not tolerate personation so please do not add comments in the name of real people unless you are that person. If you do not like these rules then start your own blog.

Oh, and if you persist in repeating yourself despite the fact I have addressed your point I may get bored and reject your comment.

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