Pensions and Independence

We recently held an debate on the Scottish Referendum in Glasgow and one on the main concerns arising was that of pensions after independence…

Pensions are an extremely important issue for older people, but they are also a highly complex area. When added to the inherent uncertainty and partiality which pervades the independence debate, it’s not surprising that older people may struggle to get the grasp they want on what independence might mean for them.

The Scottish Government’s own white paper on pensions and independence published last September, and further details appeared in the referendum white paper Scotland’s Future published in November. Age Scotland wrote about this last year.

The Scotland Office and the Department for Work and Pensions (DWP) published the latest in the UK Government’s Scotland Analysis series on Thursday 24 April. It relies on an analysis of current pensions and benefits spending both in Scotland and across the UK, and long-term projections of how these might change in future based on demographic trends. It also factors in the proposed changes which the Scottish Government wants to make to pensions and working-age benefits if there is a Yes vote in September.

The UK Government’s analysis is that Scotland already gains £60 more per head of population per year in welfare spending than the rest of the UK, and that an independent Scotland would face higher pension costs per head of population – up to £450 extra per person per year. Despite Scotland’s lower life expectancy – which makes pensions more affordable if people die earlier – they claim that Scotland’s overall spend on welfare would cost it an extra £1.4 billion per year by 2035 – 8% more than is currently spent here.

There would also be costs in setting up and maintaining the infrastructure needed to run an independent Scotland’s own social security system. An independent Scotland might not automatically gain all of the UK Government’s assets in Scotland – such as the network of JobCentres – or take on public pensions staff working in Glasgow and Dundee. And the UK-wide IT system is based on consistent benefit structures, payment levels and eligibility tests. If an independent Scotland wanted to change these – and the Scottish Government certainly does – then there could be substantial set-up costs which Scotland would have to find.

The UK Government claims the Scottish Government should tell people how these costs would be afforded. The Scottish Government rejects the analysis as either incorrect or exaggerated.

Older people simply want to know what independence might mean for their standard of living, so it can inform their vote. So the continual arguing over the facts can be both frustrating and confusing. Age Scotland will continue to try to help to inform the debate, and we will be publishing responses from the two campaigns to questions we posed them in the next issue of Advantage magazine and on our website, www.agescotland.org.uk. But with certainty an unlikely prospect, older voters might be left wondering which version of events seems more likely and whom they are more likely to trust.

 

Hands off universal pensioner benefits

By Agnes McGroarty from the Scottish Seniors Alliance

‘Hands Off’ is the clear message coming from older people across Scotland, as a new UK wide campaign was launched last month defending the need for universal pensioner benefits.

Agnes McGroarty

Agnes McGroarty

The Hands Off campaign, which has already been backed by some of the most influential older people’s organisations in the UK, aims to safeguard benefits such as the winter fuel payment, bus pass, free prescriptions and TV licences after the 2015 general election.

Following comments made by the main political parties at Westminster indicating these benefits may be under threat, this campaign will emphasise their importance in achieving a decent standard of living for millions of pensioners across the UK, whilst also highlighting the costs and barriers associated with means-testing such benefits.

I would encourage people of all ages to sign the online e-petition and to email their local MP via the campaign website at www.handsoff.org.uk. If the e-petition reaches 100,000 signatures, it will be considered for debate in the House of Commons.

Clearly, a debate would raise the profile of this issue with the current coalition government and amongst other UK political parties who may be in power following the 2015 general election. The real reason why pensioners need additional benefits such as the winter fuel allowance and the free bus pass is because our state pension is so poor. Yet despite this, every year older people add an extra £40bn to the economy in taxes, volunteering and unpaid caring. Universal benefits help to keep people active, independent, warm in their homes, healthy and involved in their communities. Universal benefits need to be defended not only for today’s pensioners, but for the pensioners of tomorrow as well.

During the last year, pensioners have felt under constant attack. The myth that older people have escaped any austerity measures is totally groundless, and we will fight to ensure there are no further cuts or means testing of vital benefits such as the winter fuel payment, bus pass, free prescriptions or TV licences. We call on every individual, regardless of age, to support us in our campaign to ensure these benefits are maintained for pensioners now and in the years to come.

We must make our voice heard now! Millionaire pensioners have been used as justification for further cuts or means-testing, but this campaign represents the views of real pensioners who are already struggling to make ends meet.

The Hands Off campaign is being officially backed by the Scottish Seniors Alliance, the National Pensioners’ Convention, Age Sector Platform in Northern Ireland and the Welsh Senate of Older People. For more information on the campaign, and to sign the e-petition, please visit www.handsoff.org.uk.

This was taken from our Magazine Advantage. Soap Box columns do not necessarily reflect Age Scotland’s views or policies. To submit an article call Advantage on 0845 833 0200 or email advantage@agescotland.org.uk.

Hands off our benefits!

Agnes McGroarty from the Scottish Seniors Alliance introduces a new campaign to defend universal pensioner benefits.

Campaign logo

‘Hands Off’ is the clear message coming from older people across Scotland, as a new UK‑wide campaign, launched last month, aims to defend the need for universal pensioner benefits.

The Hands Off campaign, which has already been backed by some of the most influential older people’s organisations in the UK, aims to safeguard benefits such as the winter fuel payment, bus pass, free prescriptions and TV licences after the 2015 general election.

Following comments made by the main political parties at Westminster indicating these benefits may be under threat, this campaign will emphasise their importance in achieving a decent standard of living for millions of pensioners across the UK, whilst also highlighting the costs and barriers associated with means-testing such benefits.

I would encourage people of all ages to sign the online e-petition and to email their local MP via the campaign website at www.handsoff.org.uk.  If the e-petition reaches 100,000 signatures, it will be considered for debate in the House of Commons.  Clearly, a debate would raise the profile of this issue with the current coalition government and amongst other UK political parties who may be in power following the 2015 general election. 

The real reason why pensioners need additional benefits such as the winter fuel allowance and the free bus pass is because our state pension is so poor.  Yet despite this, every year older people add an extra £40bn to the economy in taxes, volunteering and unpaid caring.  Universal benefits help to keep people active, independent, warm in their homes, healthy and involved in their communities.  Universal benefits need to be defended not only for today’s pensioners, but for the pensioners of tomorrow as well.

During the last year, pensioners have felt under constant attack.  The myth that older people have escaped any austerity measures is totally groundless, and we will fight to ensure there are no further cuts or means-testing of vital benefits such as the winter fuel payment, bus pass, free prescriptions or TV licences.  We call on every individual, regardless of age, to support us in our campaign to ensure these benefits are maintained for pensioners now and in the years to come.

We must make our voice heard now!  Millionaire pensioners have been used as justification for further cuts or means-testing, but this campaign represents the views of real pensioners who are already struggling to make ends meet.

The Hands Off campaign is being officially backed by the Scottish Seniors Alliance, the National Pensioners’ Convention, Age Sector Platform in Northern Ireland and the Welsh Senate of Older People.

For more information on the campaign, and to sign the e-petition, please visit www.handsoff.org.uk.

 

Why we need the triple lock

Far from feather-bedding wealthy older people, the ‘triple lock’ on pensions increases is vital for future generations says Sally West.

Coins

In a surprise announcement at the start of 2014 David Cameron, the Prime Minister, said that maintaining the ‘triple lock’ for the basic state pension will be a key part of the Conservative’s next election manifesto. This would mean that, at least until 2020, the basic state pension would be increased annually by the rise in prices, earnings or 2.5 per cent – whichever is higher. In response the Labour leader Ed Miliband has also said he is committed to the triple lock.

Reaction has been variable. Some newspapers immediately suggested this would affect other benefits such as the winter fuel payment – the Daily Mail’s headline was ‘Turmoil over OAP benefits’. The Independent welcomed the announcement but said it does not go far enough pointing out that the basic pension is still only £110 a week.

Alternatively, others have focussed on what this means for younger people with the Intergenerational Foundation stating the move is unaffordable and ‘betrays’ the younger generation.

The real impact of the triple lock

So what impact does it actually have?  By April 2014 the Coalition’s commitment to the triple lock means the basic state pension will be £113.10 a week – around £8.50 a week higher than if it had been increased in line with earnings, and around £2 a week higher than if it has been linked to prices rises.

Other parts of retirement income are not of course increased by the triple lock – savings income is low and private pension income may not even keep pace with inflation.  So for current pensioners, while the basic pension on its own is still not enough to live on, the triple lock has provided an important boost in difficult times and helps ensure that the value of at least one part of their income is maintained. This is why Age UK has been campaigning for all parties to commit to the triple lock going forward and is very supportive of the recent announcements.

But we are also concerned about the position of future pensioners. Legislation before Parliament replaces the current complicated state pension system with a new single-tier pension for people reaching state pension age on or after 6 April 2016. All the Government’s analysis on the impact of the new pension assumes it will be increased by the triple lock – but this is not set out in the legislation.

Unless this happens younger people will find it much harder to build up an adequate retirement income. The independent Pensions Policy Institute calculates a younger person with lower earnings has a 63 per cent chance of achieving an adequate retirement income if the state pension is increased by the triple lock, but this could fall to 36 per cent with an earnings link.

So far from the triple lock being unfair to younger people, if there is a commitment for it to apply to the new state pension, as well as the current system as Age UK is calling for, it could make all the difference to today’s younger generation.

It’s especially important to those struggling with low wages who can make limited private pension savings. Without the triple lock, they could find the value of their state pension – when they eventually receive it – has been eroded and is too low to enable them to achieve a comfortable retirement.

Sally West is Strategy Adviser for Income & Poverty with Age Scotland partner Age UK.

Tomorrow’s fish and chip paper – New bills, old debts

Doug Anthoney offers Age Scotland’s take on this week’s news stories.

man at chiropidist

This week saw publication of a long trailed Bill to join-up, and so improve, health and social care services – the snappily titled Public Bodies (Joint Working) (Scotland) Bill.  We’ve been campaigning for this for quite some time, and have been broadly supportive of the Scottish Government’s proposal; namely to make NHS and Councils work together in delivering health and social care services, with pooled budgets and shared targets and accountability.

So, does it cut the mustard?  A first review (we’ll be trawling it repeatedly over coming weeks) suggests much is as expected, which is pleasing.  But we’re concerned that a watered down duty to merely ‘consult’ the third sector might marginalise the role and influence of the many voluntary groups and social enterprises that play such a crucial role in keeping older people healthy, happy and independent in their homes.  Our call for the Bill to be underpinned by values and human rights also seems to have been ignored.  We’ll be raising these points with Alex Neil, the Cabinet Secretary for Health and Wellbeing, next week.

The week’s other big story was publication of Scottish Widows UK Pensions report which scores Scotland lowest for retirement preparations.  It claims that over a third of Scots (39%) who could and should be preparing financially for their old age are under-saving for retirement, nearly three times the UK average (14%).  Meanwhile, our aspirations for retirement income have increased to £24,500 per year, almost double what the average person retiring at 65 could expect (£11,200).  The research also found that we are entering retirement with an increasing number of credit commitments, including loans, mortgages and credit card debts.

Scottish Widows, while inevitably signposting people to its own services, has highlighted a serious issue, and behind these figures are many people who will be very anxious about their future incomes as they approach retirement.  Things look a little better for future pensioners, with the introduction of a flat rate state pension of £144 per week in 2016, and with automatic enrolment in workplace pensions, but this does nothing for those on the brink of retirement now.

What can be done?  Westminster and Holyrood could, and should, put energy into alleviating poverty among our current pensioners, we said.  Employers can also help their older employees to plan effectively for retirement, as the most enlightened already do.  And individuals can take action to maximise their income; for example by calling the Age Scotland Helpline for a benefits entitlement check, and by making use of the Pensions Tracing Service to see if they have a forgotten historic pension pot.

Doug Anthoney is Age Scotland Communication and Campaigns Officer

Should pensioners pay more tax?

Lindsay Scott considers a new report from the Fabian Society that says old age is no longer a proxy for poverty and pensioners should pay more tax.

Senior couple worry about money

Pensioners should “share the pain” of austerity cuts and pay more tax to promote inter-generational fairness in the housing market, because high levels of home ownership among older people is unfair as middle-income workers’ wages stagnate and they cannot afford to buy a home.

This is the gist of a report produced by the left-of-centre think tank, the Fabian Society, which analysed data from the English Longitudinal Study of Ageing (Elsa) and came up with recommendations such as increasing pensioners’ taxes, cutting benefits, introducing a tax on property wealth and scrapping the Westminster Government’s “triple-lock” guarantee, which keeps pensions rising in line with the highest measure of inflation.

The paper, part of a series produced for the Hanover housing charity, suggests that the majority of older people are neither wealthy baby-boomers with “a surfeit of wealth and leisure” nor “pensioners on the breadline facing poverty, isolation and ill health”, so there should be a “presumption of equality” as “old age is no longer a proxy for poverty”.

Some of the Fabian Society’s suggestions may be worth exploring – it can be argued that it is illogical for wealthy pensioners to get untaxed hand-outs such as winter fuel payments while welfare payments to millions are squeezed. Benefits in kind, such as bus passes for people aged over 60 and free television licences for those over 75 are also something that could potentially be taxed.

But universal benefits can only be clawed back in tax if people have sufficient income, and the fact is there are only around 200,000 UK pensioners in the higher rate tax bracket and most of the country’s 11 million plus pensioners have much lower incomes, so the amount of money raised would not amount to anything near the £7.2 billion annually that the report predicts.

Scotland’s 1.2 million pensioners have undoubtedly made a significant contribution to our society and economy and will continue to do so in years to come, and it can be difficult for older people to change their financial plans as their options are likely to be very limited. They have also contributed national insurance payments throughout their working lives to receive in return a state pension that ensures a financial safety net but little more. So we shouldn’t be sparking inter-generational conflict by punishing home-owning pensioners – forcing them to downsize or face ever-higher taxes, but rather should be addressing the reasons why home ownership is decreasing among younger groups.

Supply is not meeting demand partly because planning laws are too stringent and stamp duty rates are sky-high. Perhaps another reason for younger groups not owning their own homes is the high and rising cost of housing in England and Wales, and particularly the south of England. Among those in the bottom half of the income distribution graph, housing costs are 25% higher in England and Wales than Scotland. A decade ago the gap was 10%.

Remember, everyone ages, so whatever taxes are introduced for today’s pensioners will also affect future generations of pensioners. It is fundamentally wrong to shift the burden onto a single group, regardless of which generation it is. People in later life are no more advantaged or disadvantaged a group than any other in society.

Lindsay Scott is Age Scotland Communication and Campaigns Manager

New Lords committee report a wake-up call to government

Following a new report on demographic change by the House of Lords, Age Scotland’s Lindsay Scott asks if the nation is ready for an ageing population. 

three men

The UK government is ignoring the social and economic challenges presented by an ageing society, a Lords committee has warned, stating that the fact that people are living longer, whilst offering benefits for many, also threatens a series of crises unless action is taken to mitigate the impact on public services.

Ready for Ageing?, a ground-breaking report by the House of Lords select committee on public service and demographic change, is the first coherent attempt to provide a passport for older life that treats the over-60s as active citizens, and not as passive recipients of government largesse and a looming threat to anyone younger.

It points out in stark terms what Age Scotland has been arguing for over many years, namely that big changes in pensions, health care and employment practices are urgently needed if people are to be able to sustain a good quality of life as they age, and is the first time a group of senior UK policymakers has shown a grasp of the scale and nature of change needed across our society in response to the gift of longer lives, from which everyone will benefit.

The report argues forcefully that the status quo has to change. Among the measures it suggests are a White Paper, cross-party commissions, changes to employment, pensions, housing and financial preparation for old age and, crucially, a “remarkable shift” in the NHS, to properly join up health and social care (and hopefully put a fair value on care itself – as older people need to be cared about, not just cared for).

The committee is calling on Westminster to set out its thinking on the UK’s ageing population before the next election and for all parties to consider the implications for public spending, in their next election manifestos. Whoever is in power after the next election, the committee said, should establish independent commissions to examine how pension and savings provisions could be increased, how equity release could be better exploited and how funding for social care could be improved.

Whilst some of the major policy areas covered in the report, such as health & social care and housing are devolved to Holyrood, pensions, benefits and employment are not. Reminding us that the generations are inextricably bound together, not citizens of hostile nations, the report concludes by calling for leadership, vision and new initiatives.

Whether these will be forthcoming of course remains to be seen.