Restoration of the age related allowance

rpc

zygurat789 wrote: »

Higher cost of living

Which affects most people

having to pay costs personally that others have paid for them

That's what having a welfare state means

extra necessary expenses because the machinery of the body is wearing out

Not necessarily associated with age

All these costs are relative to the costs of younger people and it was for this reason that they initially received an additional age allowance,

Nonsense. It was originally an alternative to the earned (i.e working) income tax relief because:

Hansard wrote:

“I consider that the savings of old people on a small scale are virtually earned income,
and, therefore, a person over 65, whose total income from investments or any other
source does not exceed £500 a year will gain the advantage ...”

the rest paid more tax,

Please explain how someone earning under the tax free allowance paid more tax.

The pensioner generation have been suffering for longer than most in this economic climate having not had a decent return on their pensions and their savings due to QE and to cap it all after they get a tax rise the rich get a tax reduction.

They had no tax rise and I'm pretty sure everyone has suffered from poor savings rates for just as long as each other.

zygurat789

rpc wrote: »

Which affects most people
NO it doesn't

That's what having a welfare state means
Where does the welfare state come into this?

Not necessarily associated with age
But age is associated with this

Nonsense. It was originally an alternative to the earned (i.e working) income tax relief because:
The savings were to provide income after the earning life


Please explain how someone earning under the tax free allowance paid more tax.
Most pensioners pay tax


They had no tax rise and I'm pretty sure everyone has suffered from poor savings rates for just as long as each other.
Yes it is a tax rise because they were promised they would pay less

What a load of rubbish!!!

teajug

Originally Posted by zygurat789
Higher cost of living

Which affects most people

Some more than others it does not effect people earning over £150k that just had a huge tax break in the last budget.

extra necessary expenses because the machinery of the body is wearing out

Not necessarily associated with age

However, it is mostly with age, when there are cuts in the NHS it is always the elderly they blame for bed blocking and use them to hide behind. You nerve hear about young people bed blocking. Also, it always the elderly that unions and council officials hide behind when they are in danger of losing their high salaries or guarantee pensions, it always the elderly they will quote saying they will suffer first with closure of care centres and other essential care services.

It is about time that those officals stopped using the elderly to put over a point to the country as it must have sunk in by now that UK is an ageist country and do not give a dot how the elderly are surviving on the state pensions.

MonkeyMad

If we trouble ourselves to read the much esteemed Churchill speech from Hansard in entirety rather than rely on the same clipping the press choose to give us, you will find nowhere does he say that pensioners should receive a higher allowance than workers of a lesser age or that they face particular a living standards problem to be accounted for.

This apparently important nay, never to be reviewed, watershed in pensioner taxation is actually a footnote part of a speech in which income tax relief had been increased on earned income, and W. Churchill realised that pensioners would not benefit from this since their income was more likely to be from other sources. He was therefore willing to consider smaller amounts of income from savings as equivalent to earnings.

He actually says 'and, therefore, a person over 65, whose total income from investments or any other source does not exceed £500 a year will gain the advantage -...- will gain the advantage of this relief to earned income [mentioned in a previous part of the speech an increase in earned income relief from 10% to one-sixth] , although the income may be completely derived from investments which are the savings of a lifetime'. (I have omitted some non important words about the age at which this relief is relevant).

Now, since that speech also quotes a working man earning £300/yr, a married man with 3 children at both £500 and £750/yr, we might imagine that if these examples represent the Man on the Clapham Omnibus, that the number of pensioner with incomes in excess of £500 was relatively small.

If you read it the Finance Act of 1925 also make a distinction in earned income relief for under 65s and total income relief for over 65s, which is what the speech above was about.

Sounds different now doesn't it? This means therefore that a pensioner and a worker on the same income below £500 would have had the same tax burden does it not? Which might mean that rpc is correct in his rebuttal below, mightn't it?

Since we are so concerned about taxing the poor returning savings of pensioners consider thus:
My cash savings are in ISAs so I don't care if the tax allowances change for that portion of my income.
I have NS&I bonds tax free (index linked no less) - I don't care if the tax allowances change for that portion of my income
I have dividend generation shares - received as tax-paid all the way up to the high rate limit, so freezing the allowance is not going to hurt the more modest fund.

If you have stuck your savings in a tax-attracting wrapper that will be affected by freezing the allowance, then you really only have yourself to blame as there are plenty of alternatives.

MonkeyMad

@zygurt786 Regarding removal of the 10% rate and subsequent raising of personal allowance. I like data.

Try this link from the Institute of Fiscal Studies:
http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&ved=0CGYQFjAC&url=http%3A%2F%2Fdiscovery.ucl.ac.uk%2F14722%2F1%2F14722.pdf&ei=sBzST_7EKIaV8gPUuY2FAw&usg=AFQjCNH_tTf0UxC66lS7GPn4qpuZKouXsA&sig2=mlTZFdlQ30J5ru6TixMOsQ

I'll quote some for you

'Together, the abolition of the 10% band, the cut in the basic rate and the £600
increase in the personal allowance mean that:
• People aged under 65 with non-savings income between £6,635 and
£13,355 are still paying more in income tax than they would have been
had none of the changes mentioned above taken place. We estimate
there to be around 6m people in this category (although only 2.9m are
paying more than £1 a week extra in income tax). The loss is greatest, at
£112 a year (equal to the original loss of £232 less the £120 cut in
income tax from the rise in the personal allowance), for someone
earning £7,755.
• Most people aged 65 or over, and those with non-savings income
between £5,435 and £6,635 or between £13,355 and around £40,000, are
now paying less income tax. The biggest gain is £457 a year at an
income of £36,140.
• Those with incomes above around £40,000 gain very slightly, and will
gain even less once the changes to the higher-rate income tax threshold
and the National Insurance upper earnings limit announced in Budget
2007 have fully taken effect in 2009–10

It remains the case that (almost) no individuals aged 65 or more are paying
more tax as a result of the reforms, and that the increased generosity of tax
credits ensures that single-earner families receiving tax credits are no worse off
as a result of the reforms. Furthermore, many of the individuals still paying
more income tax may live in families or households with someone who is
paying less income tax such that the family (or household) overall does not

What's your source?

margaretclare

It's amazing that people can't see that the world in 1925 was vastly different from the world today. I can't believe that these arguments are still going on. It's just the same as the other thread saying that George Osborne must do a U-turn. I don't see that there's any 'must' about it.

Ainsley1

Well said Margaret. Times and expectation do and ought to change and living standards for most are much better (still) than in years gone by.

I am surprised this thread is still running.
It seems to me.......
It is still polarised between those who think pensioners (at least some or many) have it fairly easy and do not deserve better treatment than they currently get or have been getting and see this as a young vs old or working vs on a pension argument.....

...and those who think that pensioners deserve a better deal, have greater needs for energy/care/support etc.(a generalism as there certainly are other deserving groups too); think that the rich have benefited and pensioners not; and the rest of society should help them out given the privations suffered in the past for all our current benefit and the pitful pension increases that have fallen well behind wages (again even considering current problems).

Whatever figures and stats are argued over there are still pensioners now (and those who will not benefit from the increase to £140 ish in the near future) who need to rely on the state (and perhaps a little bit extra if they are lucky) who will no where near meet the average or median wage (and this includes the vast majority of pensioners), must be considered very poor (below several measure of the poverty line), still pay some tax and are virtually powerless to do anything to improve their lot.

Irrespective of the rights and wrongs of the Chancellor's changes and the arguments put forward on this thread, I consider that state of poverty deplorable. I also consider it deplorable when others, with no fault of their own, are in a similar position. Society at large ought to help these people. Where people have the opportunity, ability or time to help themselves then that is a different matter. Remember we all get old, hopefully, and we would wish good treatment too.

jamesd

Ainsley1 wrote: »

who will no where near meet the average or median wage (and this includes the vast majority of pensioners)

It's worth remembering here that pensioners do not need to have as much income as a person who is not a pensioner. Here are some of the reasons why:

1. Housing costs. Far more pensioners own their homes outright so no longer have a mortgage to pay. (FRS page 38)

Households with one or more adults over pension age:
Owned outright: 69%
Buying with mortgage: 8%
Social rented: 18%
Private rented: 5%

All households:
Owned outright: 33%
Buying with mortgage: 35%
Social rented: 17%
Private rented: 15%

So those receiving a state pension are mostly owner-occupiers or in social housing. Households where there's state pension income are 31% of all households.

2. Pension investing. Those who aren't pensioners can be adding to their pensions, those who are retired are withdrawing from them. So no or little pension cost for pensioners.

3. Lower or no work-related costs such as work clothing and transport.

The effect of those things is that a pensioner household is likely to be at a comparable living standard with 60% or less of the income of a non-pensioner household. 60% is also a very important threshold because it's the one used to decide if a household is in relative poverty (but not absolute poverty).

This isn't intended to suggest that there are not lots of needy pensioners. Just that it is undesirable for a pensioner to have as much income as when working because that would make them better off than when working due to the lower outgoings. This is part of why 60% of a person's current earnings is a common retirement income target.

Ainsley1 wrote: »

who will no where near meet the average or median wage (and this includes the vast majority of pensioners) ... I consider that state of poverty deplorable.

I don't consider it deplorable for the reasons above.

It is proper and prudent personal and state planning not to target a pensioner income above 60% of working income.

More prudent targets need to allow for lower housing costs, lack of pension investing costs, lack of work-related costs and lack of childcare costs when retired.

For those reasons my own retirement income target isn't anything close to 60% of my current salary. It just wouldn't make sense to delay retirement long enough to get there.

This doesn't mean that I want those in absolute need to be suffering, of course. I want that prevented by appropriate safety nets.

Thrugelmir

Ainsley1 wrote: »

Irrespective of the rights and wrongs of the Chancellor's changes and the arguments put forward on this thread, I consider that state of poverty deplorable. I also consider it deplorable when others, with no fault of their own, are in a similar position. Society at large ought to help these people. Where people have the opportunity, ability or time to help themselves then that is a different matter. Remember we all get old, hopefully, and we would wish good treatment too.

None of which solves the problems we face in balancing the books and all of us living within our means. We are allowing ourselves an unaffordable lifestyle currently. So the change has to be structural. Which means everybody has to make a sacrifice.

Ainsley1

I didn't want to really get embroiled in an argument that seems to be going nowhere and I cannot but agree that a sensible level of pension income could be 60% of working salary - provided you are on a decent salary to begin with! 60% of a £15K wage is just £9000 and hardly sufficient. That is more than the proposed £140 per week flat rate.

It is not a surprise that all household figures show more people still purchasing their property, and fewer owned outright, as it take us a number of years to purchase on a mortgage. However, taken from your figures, nearly one third of pensioners do not own their own homes unencumbered and these still have some high costs, be they mortgage, public or private rentals. So, for them they still have at least one very significant expense. Let's not mention all the other costs that inflict one in old age that typically do not when one is young and working. Generalisms and averages are dangerous as those that are not the norm are often forgotten. We should not set up or agree a system that just addresses the majority and those who are better off but consider the real hardships of many of those who are below the norm.

Thrugelmir makes some good points. Many people do have unaffordable lifestyles and we should all perhaps make sacrifices if needed. However some in society are not making sacrifices, pensioners have over recent years through erosion of income relative to workers (be the income from the state, savings or loss of better pensions - at least on endowment company comes to mind - and many pensioners, especially those in later life have already made sacrifices over the years from which we all benefit.

Address the evasion and avoidance 'schemes', the unnecessary handouts to the well off before the elderly as a group.These extras to the 'rich' affect all low income taxpayers and not just pensioners. The change to child benefit was good example but implemented badly.