Pensioners and the tax and benefit system
The Institute of Fiscal Studies has just published a report investigating reforms that might both rationalise the tax and benefit system for pensioners and raise revenue to pay for the Dilnot Commission’s proposals on the Funding of Care and Support. The main beneficiaries of these changes would be pensioners with higher levels of income or significant assets.
Dilnot has, therefore, suggested that any tax rises or benefit cuts designed to pay for the proposals, should be focused on this group of better off pensioners.
The Dilnot Commission proposed changes, which would involve a degree of co-payment between individuals and the state, and a much less harsh means-test on assets than in the current system. The proposals would cost money: £1.7 billion a year in the short term.
Suggestions in the report include:
- Impose National Insurance Contributions (NICs) on employment income of pensioners
- Only give winter fuel payments and free TV licences to those on Pension Credits
- Impose Capital Gains Tax at death
- Reduce generosity of tax free lump sum in pensions
- Impose NICs on pension income
- Restrict tax relief on pension contributions to the basic rate.
The institute exists to provide economic analysis independent of government, political party or any other vested interest, but whether any of the recommendations it makes are ever implemented is entirely in the hands of politicians. The cynic might comment that as pensioners make up a significant (and growing) proportion of the voting public, the politicians will be loath to make changes that could jeopardise their popularity!
If you are interested in reading the report, you can access it here: Pensioners and the tax benefit system