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EnergyOsborne breaks pledge to UK pensioners
Filed under: Pensions
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Did George Osborne break his promise to British pensioners? Osborne's so-called 'Granny Tax' has been found to go against a 2011 pledge that the age-related personal allowance would rise with the retail price index, until at least 2015.The discovery was made by the National Pensioners Convention (NPC), who have launched an online petition calling for the Government to restore the allowance inflation link.
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Broken promise
Osborne, then, appears to have shredded the promises he made in 2011. Under the revised changes, the age-related allowance for those between 65-74 rises to £10,500 on Friday from £9,940. For pensioners 75 or more it rises to £10,660 from £10,090. After that, no more rises.This means that around 5m pensions will likely pay at least £3bn extra in tax over the following four years.
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"Those who have contributed so much to society," Jane Ashcroft from not-for-profit housing provider Anchor told AOL Money, "should be able to expect support in old age yet they consistently seem to be bottom of the Chancellor's priority list. This raid on elderly people comes at a time when many are already reeling from falling state support for their care."
Worse off?
However this 'Granny tax' is more likely to hit those most about to retire in the next few years. It's worth remembering also that many of today's pensioners still enjoy the fruits of a final salary pension scheme. Not all, by any means, but a very substantial number.Retired people also pay no National Insurance Contributions, plus there is fuel payment support, free bus passes and prescriptions.
Osborne's changes however will hit those on modest incomes the most. Many pensioners still live on the paltry interest from bank savings. And those with pensions of more than £25,400 will not lose out at all.
The Treasury claims nobody will pay more tax in cash than they do today. "The poorest half of pensioners are unaffected by this change and will still pay no tax in 13/14. In addition all pensioners will benefit from the basic state pension rising by over £5 a week, the biggest ever cash increase."
You can sign the NPC petition here.
Budget winners and losers
- Winner: 50p taxpayers<p> As of April 2013, the 50p rate will be reduced to 45p following a study which Osborne claims revealed it would make little or no difference to the amount of tax raised but would significantly reduce the damage to the economy. </p>
- 2. Typical APRs<p>Financial service providers always refer to 'typical APR' in advertising to attract customers with favourable rates of interest.</p> <p>Yet the typical APR on loans and credit cards is only available for those applicants who have a squeaky clean credit record, everyone else could end up with a much higher rate. For example, under EU rules, credit card providers only have to provide the typical APR advertised to 51% of applicants.</p> <p>So always consider this when applying for accounts and products, and if approved – look out the actual APR that you will be charged.</p>
- Loser: Families<p> The much-debated cut to child benefit was confirmed, albeit through a less direct hit than was outlined in the pre-Budget report. The benefit will be removed gradually for those earning more than £50,000 – reducing by 1% for every £100 earned over the threshold, cutting off completely at the £60,00 mark. The Chancellor had planned to axe it where one parent earned over £43,000.</p>
- Winner: South East England air travel<p> A potential winner - Osborne particularly name-checked the South East in his Budget which many assume is a veiled reference to a Heathrow expansion.</p>
- 4. Huge care costs<p> The cost of a room in a care home in many parts of the country is now over £30,000 a year, according to figures from Prestige Nursing and Care. So even if the prime minister announces a cap on care costs - last year the economist Andrew Dilnot called for a new system of funding which would mean that no one would pay more than £35,000 for lifetime care - families will still face huge accommodation costs. Ways to cut this cost include opting for home care rather than a care home. Jonathan Bruce, managing director of Prestige Nursing and Care, said: "For older people who may need care in the shorter term, home care is an option which allows people to maintain their independence for longer while living in their own home and should be included in the cap." However, the only other answer is to save more while you can.</p>
- Loser: Prospective homeowners<p> A new stamp duty rate of 7% (up from 5%) will be introduced on properties worth over £2 million - widely considered a sop to the Lib Dems calling for a mansion tax. </p>
- Motorists - winners<p> As was widely predicted, Osborne froze the fuel duty hike due in September 2013. He announced that his repeated scrapping of this duty has saved the average Ford Focus owner £7 on every tank of petrol.</p>
- Winner: Booze<p> Alcohol is on safe ground - for the moment. Duty will remain the same but do expect an announcement on alcohol pricing.</p>
- Winner: Manchester<p> Manchester was given particular prominence in the Chancellor's speech. From an extension to the northern rail hub, a £1.2bn infrastructure investment and it being named as one of the cities to receive funding for superfast broadband, the Chancellor was keen to make a point that the Coalition cares about the North.</p>
- Loser: Tobacco<p> Duty will rise on all tobacco products by 5% above inflation, which will add 37p to a packet of cigarettes.</p>
- Winner: Wallace and Gromit<p> The Chancellor naming Wallace and Gromit caused quite a commotion on the Tory backbench and was possibly the most lively moment in the Chancellor's speech. The Chancellor is intent on keeping UK TV and film productions in Britain and will ramp up support to stop the exodus of British production companies abroad.</p>
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