Telegraph Expert View – Budget ignores savers and pensioners
by Dr. Ros Altmann
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This was a reforming Budget, with the Chancellor proposing some major overhauls that will be especially relevant to millions of Britons. He signalled huge reforms of tax, National Insurance and pensions, but they will not really help today’s pensioners. He missed a great opportunity to acknowledge the plight of older savers and pensioners, who have been hit hard by high inflation and record low interest rates. It is clear they are not his priority, although he offered a few crumbs of comfort.
Everyone under 65 will receive a big boost to their personal allowance (from £7475 to £8105) lifting 1.1million people out of tax. For over 65s, however, the special personal allowance will only rise in line with retail price inflation.
Under his plans to merge income tax with National Insurance, the Chancellor promised to protect pensioners (who are, of course, currently exempt from paying National Insurance) so they do not face a sudden tax increase. However there was no promise to protect savers. Therefore anyone living on income from their savings could face a 60% tax hike on their income. A 20% taxpayer would suddenly face 32% if tax and National Insurance were merged! Savers have been hit hard enough in the past couple of years, and the last thing they need is a big tax rise.
Future pensioners are being promised a much better state pension. The promised Green Paper on radical state pension reform is welcome news for future generations of pensioners. At last, we might have a state pension that people can actually understand. Instead of the current complex mess which has a Basic State Pension, a Second State Pension, plus Pension Credit – all with different rules and qualification criteria – there could be one flat-rate Pension above the Pension Credit Guarantee level, paying a minimum £140 a week to all future pensioners. This will not help today’s pensioners, but at least would mean a decent system in future. It would benefit many women enormously, especially those who were not credited in to the State Second Pension adequately.
Overall, the Budget was a big disappointment for savers and pensioners. A small cut in the Winter Fuel Allowance was hidden away but also hidden was one piece of fantastic news. It looks like National Savings will be allowed to issue its hugely popular Inflation-linked Certificates again. This would at least allow savers to protect the value of their savings from the ravages of inflation. The sooner this happens the better.