Pensioners should pay more tax, argues Fabian Society

Pensioners on bikes Most older people are neither wealthy baby-boomers nor pensioners on the breadline, the report says

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Better-off older people should pay tax at the same rate as younger people on similar incomes, a think tank argues.

The report from the Fabian Society argues that as older people are no longer always poor they should "share the pain of deficit reduction".

"All policies that appear to give special advantages to older people as a category should be reviewed," it says.

Age UK said financial options for elderly people were often very limited.

Researchers for the left-of-centre Fabian Society analysed data from the English Longitudinal Study of Ageing (Elsa).

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".

'Profound implications'

"The truth is that the majority of older people today are somewhere in between, neither rich nor poor, and the middle is expanding as a result of recent successes in reducing pensioner poverty," writes author Andrew Harrop.

"Of course this is something to welcome and celebrate, as part of the steady decline of pensioner poverty, but it has profound implications," he argues.

The paper says that "older people catching up with everyone else was not problematic while middle incomes were rising across the board.

"Perhaps it is more so today with growth in median earnings at a standstill."

Mr Harrop cites figures from 2010-11 that suggest that the real incomes of the middle fifth of all households were no greater than in 2003-04 "but middle incomes for retired households were 13% higher".

He added: "Since the financial crisis this disparity has become even more stark: real middle incomes have fallen by 5% overall, but they have risen 5% for retired households."

The report says that when it comes to disposable incomes after housing costs, pensioner couples are now in the top half of UK income distribution because 80% of them are homeowners and most are no longer paying rent or mortgages.

But, Mr Harrop argues, rising house prices have meant a fall in the share of people aged under 45 who are owner occupiers, "with the median 25 to 34-year-old now renting rather owning their home".

Start Quote

It can be difficult for older people to change their financial plans as their options are likely to be very limited”

End Quote Michelle Mitchell Age UK

When it comes to taxation, the paper highlights a "really significant intergenerational unfairness", with retired middle-income households paying 27% of their gross income in tax, compared with 33% for non-retired households with the same income.

The paper concludes that "in financial terms alone, older people are no longer special", and it calls on the government to assess the evidence for existing rules on social security, taxation and the design of services.

The paper says moves to equalise the tax system would have to be carried out more slowly to avoid a sudden fall in living standards.

'Safety net'

In the meantime, it suggests the government should consider taking national insurance from earnings after state pension age and ending tax-free lump sums on private pensions.

It also argues for more taxes on property, such as a land value tax or a reformed council tax, to suppress rises in house prices.

On top of this, the paper suggests scrapping current rules that guarantee that the state pension "will rise annually by an average of 0.26% more than earnings" and restricting universal benefits to pensioners, such as winter fuel allowance, free TV licences and free bus travel.

Michelle Mitchell, of Age UK, said: "The Fabian Society is right to point out that there has been significant progress in tackling pensioner poverty in recent years. But there are still 1.7 million pensioners living in poverty today, while a further 1.1m have incomes only just above the poverty line.

"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."

A Treasury spokesperson said the government was committed to ensuring that older people are able to live with the dignity and respect they deserve and the basic state pension is the foundation of state support for older people.

"In difficult economic times, we have protected the benefits of those who have little means to increase their income, for instance pensioners."

A spokesman for the Department for Communities and Local Government said: "At a time when people are fighting for every pound in their pocket a tax hike is the last thing they need. The government has repeatedly made clear it will not be introducing any changes to council tax banding."


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  • rate this

    Comment number 1061.

    Why do none of these think tanks ever suggest that the government should simply spend less?

  • Comment number 1060.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 1059.

    Average-UK-Male bleated

    In case you didnt read Judith Burns storey the report was NOT published by the government but the Fabian Society which is Left Wing. Still dont let the truthe spoil a good anti gevernment rant.

    Oh dear, you truly don't understand how the controlling powers work do you? Like I said......Sheeple.

  • rate this

    Comment number 1058.

    I paid taxes all my life,blah blah blah.
    I walked to school barefoot,blah blah blah.
    It's all the immigrants fault,blah blah blah.
    It's all the scroungers fault,blah blah blah.
    During the war,blah blah blah.
    Being old does not make you right. But it seems it does make you more right wing.

  • rate this

    Comment number 1057.

    The Fabian Society truly ought to stick its bright ideas in a dark place devoid of sunlight. Really, stop thinking up more and more ways of extorting money from the ordinary people in this country - and have this 'think tank'actually earn its dosh by working on a brand new economic system that doesn't depend on us all being wooed to shop for things we don't actually need.

  • rate this

    Comment number 1056.

    I paid tax for 49 years, in a variety of jobs, without more than three weeks without work. I have paid into my pension,into a private small pension and am still paying tax on both my pension and on my savings. It is typical of a socialist inspired and funded organisation to wish to steal from those who have worked and saved to finance their grandiose social engineering schemes and the lazy.

  • rate this

    Comment number 1055.

    They should not pay more tax than anyone else but wealthier pensioners SHOULD have their benefits means tested.

  • rate this

    Comment number 1054.

    Surely the point of this article is that there are many wealthy pensioners who do not really need the money they are getting from the state. When pensioners are complaining they are not that wealthy aren't they saying that what is a fair point does not apply to them? The issue is how to decide who needs state help and who doesnt.

  • rate this

    Comment number 1053.

    Our warmongering welfare state is starting to balk.
    We tax too much, we regulate too much, we invade too much.

    I don't know any country that has attained prosperity by doing this. We, citizens, now and into the future, are forced to pay for this.
    Will more of the same insanity work? No!

    What prosperous countries don't do as we do? Switzerland, Andorra, Liechtenstein. Let us emulate them!

  • rate this

    Comment number 1052.

    so it now seems that saying we should be cutting tax and sorting out immigrantion as a means of sorting the mess labour left rather than cutting the spending to leave pensioners alone is "OFF TOPIC".

    ? IS THE BBC and ARM of the FABIAN SOCIETY and therefore the LABOUR Party too ?

  • rate this

    Comment number 1051.

    Another failed promise from cameron in failure to cap government pensions at 30 k per year use the money to increase the state pension.Clearly these are all benefits.However pensioners will have to pay for nursing homes and hospital stay in the future at higher levels.for example pensioners should pay by way of top slice income the taxable benefit on the services this is free to low income pension

  • rate this

    Comment number 1050.

    What do we pay others to do as we get older: deliver our groceries; clean the windows; the heavy gardening; the cleaning (epecially the oven). All the things we can no longer do because our knees are shot, as are out backs and our hips.
    The trouble is, as Oscar Wilde said, 'Youth is wasted on the young'!

  • rate this

    Comment number 1049.

    Gordon Brown stole our pensions when he introduced his £5bn pension tax raid in 1997 and afterwards. Lets have some of that back!!

  • rate this

    Comment number 1048.

    "Unfairness..." " No longer special in financial terms..." Well maybe for quite a few.

    What about, because of age, the past heart attack, the current aortic aneurism the aches and pains, the inability to walk more than a couple of hundred yards without intense leg cramps, and more?

    To hell with the old, the middle class leftist Fabians say. Make life just a bit more of a trial. Soak them.

  • rate this

    Comment number 1047.


    My thoughts precisely!!! I noticed a situation along the A14 from Cambridge to Felixstowe about 4 years ago with huge electronic traffic display boards going up placed every mile which tell us that we are in a traffic jam while the road had potholes!!!

  • rate this

    Comment number 1046.

    Married couples allowance will be phased out soon. Personal allowances should be equalised regardless of age. The age allowance trap should be scrapped as it removes an incentive to save. Frankly if everyone had a living pension you wouldn't need bus pass/heating handouts. These are just political bribes which cost the country money. The UK tax system is complicated, inefficient,poorly enforced.

  • rate this

    Comment number 1045.

    @Proud Welshman
    Thats a great plan. A little like the wife who tells her husband who is facing financial ruin that the problem isn't that she need to spend less, he needs to earn more.

    How are you going to create these jobs? Do you not think thats what the government has been trying to do for the past few years?

  • rate this

    Comment number 1044.

    The report from the Fabian Society argues that as older people are no longer always poor they should "share the pain of deficit reduction".

    The Labour party, who caused the current deficit by running a structural deficit during the boom years, should take the entire pain of deficit reduction

    The Labour party, and its Fabian Society affiliate, will do anything to get others to pay for their error

  • rate this

    Comment number 1043.

    More divide and rule! What will Labour say about their Fabian friends?

    Labour moaned about the Granny Tax when Osborne took away tax allowances from pensioners as he had implemented higher income tax allowances. Now do they want their own version?

    Having recently retired, my pension which I funded, just about washes its face. Now I just have two nightmares: income tax and council tax.

  • Comment number 1042.

    This comment was removed because the moderators found it broke the house rules. Explain.


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