Labour and Pensioners

[Mycatsmudge]

So Labour has declared they will not increase taxes and NI on working people, but they need to raise money for their manifesto promises such as free breakfast clubs, more teachers, dentists etc. To help pay for it all would it be a good idea if they remove the triple lock on state pensions and make pensioners pay NI?

Care workers. How do you think their wages should be increased? It’s easy to say, far more difficult to do. It’s a very difficult job in many ways snd an aging population isn’t going to make it easier. I would prefer insurance personally but the “dementia tax” was roundly defeated when Teresa May (sensibly) wanted it. As I said, we are utter fools.

Care workers pay could be increased by reducing the use of agencies / middle men taking their cut. Properly funded public services arranging care would / should be cheaper overall (as no profit goals) enabling better pay for same cost to the user.

I haven't read the whole thread, but has anyone pointed out that wealthy pensioners pay for their own care needs, care homes, etc, and actually subsidise council care home residents? You know those big houses they own? How long do you think they keep them when the fees are £1k A WEEK, per couple. We sold DM and partners house to pay for their £2.5k per week fees, partners fees were greater as he had nursing needs.

I'm a great fan of the St Bernard's waltz. We used to nearly stamp the gym floor through at school! 😄

I think this is partly because 1 in 4 pensioners are millionnaires.

This claim is an example of a click bait headline nonsense.

This Telegraph article Link states that there were 3 million people over the age of 65 living in households with assets (property and pension etc) of £1 million or more.

No attempt is made to analyse that figure. For example whether the assets are owned jointly or solely, in which case there could be two half millionaires and not two millionaires. Or even whether it is a multi-generational household where the main assets are owned by the non-pensioner. ONS figures only capture the households' worth, not each person's individual financial worth.

It is also an erroneous presumption to assume that assets valued at £1million are disposable income that should be taxed.

And yet it is very much harder now.
I bought back in the 80’s at the age of 18.No inherited help.Deposit from earnings.Mortgage less than 3 times multiple.
I was a lowly council employee with a postman partner.That would not be possible now.

I agree. I think a lot of it's yours.

People seem to think that eliminating pensioner tax exemptions would somehow generate large sums of money.

The two exemptions that I'm aware of are

1. exemption from NI, and
2. exemption from tax on the first 25% of their pension pot if they take it as cash, rather than leaving it to generate an income.

Taking these in turn:

1. NI is payable on earned income only. Most pensioners don't have earned income unless they need to supplement their pension by taking a small job. The worst off pensioners would pay more but the wealthier ones, who don't have jobs, would be unaffected. Is that really what everyone wants?
2. Most pensioners don't have pension pots, and those who do normally leave them intact to generate future income. Any withdrawals over 25% are already taxed as earned income. The additional benefit to the Treasury would be very limited.

So bringing pensioners within the NI net would a) target the worst off pensioners and b) raise very little.

As a new ish pension recipient, I think it's important that it's a universal benefit. I also have a private pension fund, a SIPP, and have been managing it for almost 30 years. It covers me, DH and one DC. DC will be able to bring in new members if there are offspring. But I have also paid all the taxes to get to this stage. I would be quite snarky if all the rules and regulations that have informed 25 years of considered decisions were to be ripped up and replaced wholesale.

That’s how Waspi women feel.

@MontyDonsBlueScarf If you amalgamate NI and income tax, you could tax income which is derived from private pensions. It’s a case of taxing income whether it’s earned or not. There’s no need to split the two artificially. I think the Cons have talked about this. There’s no reason why the better off pensioners should pay less tax. In addition, the very many former public employees have their pensions paid by the state with massive contributions made by the state. Young people are paying for these but won’t get them themselves.

I don't see why pensioners shouldnt pay NI if their pensions are over a certain amount. The money could go to the NHS. Tories reducing NI payments is madness.

@TizerorFizz Income from all pensions, both state and private, is already chargeable to income tax, you don't need any changes to make that happen.
I'm not sure I understand what you mean by amalgamating NI and income tax, please could you explain further? NI is currently an additional tax on earned income so if you just abolish it you'd have to increase income tax rates to compensate for the NI that you'd be giving up. That would certainly be doable but it would affect everyone, not just pensioners.

The increased income tax for workers would be offset by the saving in not paying nic so the new rate of income tax could be set tomake it neutral for workers.

Many jobs we wont do are ones we cannot do and/or there is ageism.

Also, not everyone is cut out to do healthcare jobs, which aren't low skilled at all now, much very similar in the sort of nursing my mum would have done as a fully qualified nurse in the 50s and 60s.

Do we really want someone who has little compassion or empathy looking after the sick and frail?

UK employers, ime, want someone to start who needs little in the way of training, many brits simply don't have these skills, even for lower skilled jobs? i wonder how many of the unemployed don't have a driving licence, good english and maths?

When i was made redundant, at 58, the Job Centre was very straight with me "it will be impossible for you, at your age, to get work in a similar field, it will be driving or care work for you"

Then of course the Govt encourages employers to take on immigrants as they can pay them less.....

Yes it would, it would also pave the way to abolish and/or reduce state pensions, as there would no longer be any link to taxes and the State Pension.

Would also mean some better off pensioners paying more in tax, even if the pensioner tax threshold, which the Tories removed, was reinstated.

The Tories are not campaigning to get rid of NI for our benefit!!!

@MontyDonsBlueScarf You scrap NI and raise income tax. Jeremy Hunt wants to abolish NI. He’s right, have one tax for everyone. There’s no reason we have two taxes for younger people and one for the elderly. NI could be abolished. Hunt saw it as something to be afforded but you could adjust income tax to maintain tax take,

@KnittedCardi My DMs fees were £1300 per week just for her. Nowhere here is the probes you quote for care homes. Plus, you are talking about capital. I’m talking about taxing income at the same level as earned income.

Increase the SP to that of the national min wage? perhaps.

Why should a pensioner be given less to live on that that deemed by Govt for a working age person? but at the same time tax them at the same rate.

Cuts both ways.

Yes, I'm pretty suspicious about the Conservative plan to remove NI.

You could argue that by just folding NI into income tax (dropping NI and increasing income tax to match) it's broadly the same effect and simplifying taxation brings efficiency benefits.

But it's definitely a useful lever currently. Reducing NI is a way of reducing the tax disincentives to work whilst not reducing tax on unearned income. That makes it a slightly cheaper way to encourage work participation than simply using Income Tax. So that's a disadvantage of amalgamating them - you lose that targeted lever.

And you'd have to cover not only the 8% employee contribution but also the 13.8% employers contribution in order for the government to get the same amount of money. You'd be assuming that salaries would increase to cover that 13.8% now coming from employees gross pay instead of from employers directly (that would leave everyone with the same amount of money after PAYE) but it's unlikely to work perfectly and the headline tax rates would look scary!

Eg if you currently earn £35k
You currently pay £4486 income tax and £1794 NI. And your employer pays £2578 NI on your behalf which you never see.
So the employer pays £37578
The government gets £8858
You get £28720

So fold that into Income tax but keep everyone paying/getting the same:
You'd get a 7.3% pay rise so that your gross salary is now £37578 (what the employer used to pay with their employer NI contribution added)
You need to give the government £8858 on that salary, so your standard tax rate above £12570 would now be 35%.

It ends up everyone paying/getting the same amount, but can you imagine a government saying they intend to raise the standard tax rate to 35%?!

So why are they doing it?

NI was introduced - and is still talked about - as a way of funding the state pension as well as out-of-work benefits. I think that's very significant.

If it was removed, it would make it much easier for the government to remove the state pension in say 30 years time, when the people reaching pension age haven't paid NI all their lives. Since then they won't be able to argue as we can now that NI gave us good reason to believe the promise that we'll get a pension.

@strawberrybubblegum
NI does not fund what it set out to do, it’s an outdated. There is no link now other than qualifying payments. I think you are missing the point that unearned income is still income. You could keep income tax as it is but tax unearned income as well when both taxes are amalgamated. Govt could tax at a slightly higher rate than Income tax but working people would be better off,. Why does the person earning a £35,000 pension get a nearly £1800 tax break? It’s clearly wrong.

I agree.

In fact, historically, until the 80s/90s, different types of income were taxed in different ways, with typically higher income taxes on "unearned" income!

But as for a link between actually paying NIC and state benefits, that link broke a while ago. Now pensions are based on "credits" which you can earn based on circumstances and there's no link at all between NIC paid and pension. You can "earn" credits by being a worker earning over the NIC threshold (which means paying NIC) but you can also earn credits in other ways, such as being a carer, unemployed or more importantly, a part time worker not earning enough to pay NIC, but earning enough to meet the qualifying lowest NIC threshold. So the "record keeping" side of NIC credits is basically now just a tick box binary "yes or no" for each year, with a "yes" tick for qualifying for NIC credits regardless of actually paying any or not. That system easily satisfies future needs for eligibility of state benefits without the historic need for actually paying NICs. It's like being back to the old "stamp" where people bought a physical stamp and put it on "your card" to earn benefits, with all stamps costing the same amount. Over the decades, we morphed into earnings based state pensions (graduated pension then SERPS then S2P) but they're now scrapped and we're back to basically an electronic version of "stamps on a card".

Nobody’s earning their pension. That’s the entire point.

So my take home from my pension income would be reduced by 8%? Just like that? Is that "fair"? I can't replace / increase my pension pot through work now to compensate.

A pensioner has had 40 years to "save" for their own retirement. They're less likely to have the costs of raising children, they don't have costs associated with working (commuting etc). They should have paid off their mortgage (and if still renting will get state support to pay the rent if they didn't bother to save or get a decent private pension).

It really doesn't "work both ways" - two groups are completely different. Genuinely "Poor" pensioners are well looked after in terms of other benefits alongside the state pension right through to having care home fees paid for them if they have no assets themselves. No one is aiming any tax rises etc at the genuinely poor pensioners. The tax rises or benefit reductions are aimed at the pensioners who already have incomes more than the average worker and who are currently paying less tax on those same incomes as the average worker!!

Only for pensioners with higher incomes, not genuinely "poor" pensioners.

Anyway, no your "take home" wouldn't be reduced by the full amount of NIC. That's because there are lower thresholds below which no NIC is payable (on current rules) and NIC is payable "per source". So if you had two pensions of £12k each (like currently two part time workers with wages of £12k per employer), you'd pay no NIC. (That's also crazy and needs changing, but it is how things are at the moment!). If you had a pension of £24k, you'd only pay NIC on half of it!

As to fairness etc., then an increase in basic rate income tax would hit you too, as it would hit everyone. That's life! If people had properly planned their retirement, there'd have been contingencies put in place. Surely you can't expect that income tax would never change which would likewise hit your income??