Pensioners are the “biggest losers” in today’s Budget, an industry body has claimed.
Although the National Association of Pension Funds welcomed the Chancellor’s proposals to introduce a single tier state benefit for future pensioners to replace the Basic and second State Pension, it warned that existing claimants stand to lose more than £2 billion in age-related tax allowances over the next few years.
In his Budget speech today, George Osborne announced the creation of a new single-tier pension, which will be set at about £140 per week and based on contributions. More details will be announced in the spring.
But he also stated his intent to simplify age-related allowances which, he said, currently require around 150,000 pensioners to fill in “complicated” self-assessment forms and, “as we have real increases in the personal allowances, their value is already being eroded away”.
As a result, Osborne intends to eradicate them and introduce a single tax allowance for anyone reaching the age of 65 on or after 6th April 2013. The aim is also to freeze the cash value of the allowance for existing pensioners until it aligns with the personal allowance.
“It is a major simplification. It saves money. And no pensioner will lose in cash terms,” the Chancellor attested.
A blow
But workplace pensions body, Napf, was not so sure. “It is pensioners who are the biggest losers in today’s Budget,” it said. “Over the course of this parliament pensioners stand to lose over £2 billion in age-related tax allowances. This will come as a blow to millions of pensioners who have paid in to the tax system throughout their working lives.”
The body was happier about the Chancellor’s decision to introduce an automatic review mechanism for increasing the state pension age, however.
The mechanism, it said, “should give people more notice of future changes so that they can prepare for retirement and make their financial plans”. The details are scheduled to be published this summer.
In relation to the controversial decision to axe child benefit for households in which only one worker earns more than £50,000 (but not two workers combined), the Chancellor tried to deal with the situation by deciding to withdraw the allowance only gradually.
This means, he explained, that 1% of child benefit would be removed for every extra £100 that someone earns over £50,000.
The apparently complex move would see an extra 750,000 families keeping some or all of their allowance, although individuals with an income of more than £60,000 will lose all of their child benefit. Nonetheless, 90% of all families would continue to remain eligible for it, the Chancellor said.
