I BELIEVE this could be the worst Budget in modern times for pensioners.
Rumours are rife about Chancellor Rachel Reeves’ plans on November 24 when she delivers her Budget.
But one thing is for sure, pensioners are in her sights.
Earlier this week, the Chancellor said: “each of us must do our bit”.
MPs repeatedly talk about helping “working people” – apparently those who earn under £45k a year – and that is why they think they can safely target pensioners and pensions.
Pensioners would face a huge hit if rumours of a 2p income tax rate rise become reality, especially if it is offset by a National Insurance cut.
Working families would not be affected by the changes – but pensioners would be hit.
This is because pensioners do not pay National Insurance after state pension age – but they do pay income tax.
Someone with a retirement income of £35,000 a year would pay £400 a year more tax.
Another possible raid on older people would be a so-called ‘mansion tax’.
It may target properties of the wealthiest, but could catch people with ordinary family homes in London or the South East – which are certainly not mansions.
Older people living in them often have quite low incomes, and could not afford this tax.
There are also strong rumours of Capital Gains Tax reforms – including charging CGT on family homes, where gains are currently tax-free; or increasing CGT rates to align with income tax.
Both these changes would hit older people hardest.
There are further risks to less well-off pensioners.
If the state pension rises as planned next year due to the triple lock then more pensioners will be dragged into paying tax.
Those with some savings or a small private pension, who don’t qualify for Pension Credit, would have to pay more tax, even if they are already struggling to make ends meet.
Finally, there may be changes to pensions tax relief.
Cutting the amount of tax-free cash, reducing annual allowances, preventing carrying over unused allowances from previous years would all reduce the amount of money in people’s pension funds, making future pensioners poorer.
The Government seems to justify taking money away from pensioners to fund benefits for others, by claiming most older people are better off than the young and don’t deserve to be. That assumption is just plain wrong.
That was clear when they removed winter fuel payments last year.
At least, they partially backtracked on that this year so that those earning under £35k can receive the payment of up to £300, which is a lifeline in winter towards energy bills.
Instead of all this, I believe the Chancellor could raise billions of pounds to improve growth, by ensuring more of our pensions are invested in Britain.
Currently, only a small fraction goes into the UK.
Ensuring pension funds invest, say 25%, of new contributions into UK assets would help boost investment and growth, revive our financial markets and reduce pressure to raise taxes.
A much better, fairer way to balance the books, if only the Government would grab the opportunity.
