TAX ON FULL STATE PENSION APRIL 2027

snarffie

Auti said:

I am sure there are other pensioners who are like me though agree in a small minority - who have tried their best with what they had. Just a voice pointing out that to ‘pensioners had a life time to sort out good pensions, it is their fault they didn’t’ ‘pensioners have all the money’ posters/thinkers, circumstances sometimes got in the way but they still tried their best.

Agree 100%.
So many people see the world in black and white. Shame.

MK62

af1963 said:

MK62 said:
So what do you think is a reasonable amount of income tax to expect a pensioner, living on just the state pension, to be paying?

Is there any good reason why a pensioner on £13k a couple of years from now shouldn't pay tax but a low paid part time worker should ?

At the moment, they pay zero.  Even after a few years of further above-inflation rises, it will still be a fairly trivial amount, because you only pay tax on the excess over the tax free allowance. ( When the pension hits £14k and if the allowance hasn't risen, a pensioner will be paying £5.72 per week in income tax.)

My question (quoted above) was a direct response to the suggestion that the personal allowance should be lowered to £5k.
And nowhere have I (or anyone else) suggested that a pensioner "shouldn't pay tax but a low paid part time worker should".

Yes, at the moment they may both pay zero.......but that wouldn't be the case if the personal allowance was lowered to £5k.......the key difference though is that at least younger people can seek more or different work......what options does an 85yo single pensioner have to increase their income if faced with such a draconian cut in their personal allowance?

BlackKnightMonty

MK62 said:

af1963 said:

MK62 said:
So what do you think is a reasonable amount of income tax to expect a pensioner, living on just the state pension, to be paying?

Is there any good reason why a pensioner on £13k a couple of years from now shouldn't pay tax but a low paid part time worker should ?

At the moment, they pay zero.  Even after a few years of further above-inflation rises, it will still be a fairly trivial amount, because you only pay tax on the excess over the tax free allowance. ( When the pension hits £14k and if the allowance hasn't risen, a pensioner will be paying £5.72 per week in income tax.)

My question (quoted above) was a direct response to the suggestion that the personal allowance should be lowered to £5k.
And nowhere have I (or anyone else) suggested that a pensioner "shouldn't pay tax but a low paid part time worker should".

Yes, at the moment they may both pay zero.......but that wouldn't be the case if the personal allowance was lowered to £5k.......the key difference though is that at least younger people can seek more or different work......what options does an 85yo single pensioner have to increase their income if faced with such a draconian cut in their personal allowance?

The option is pension credits. A means tested benefit for those truly in need.

MK62

hugheskevi said:

It is quite interesting to look at the September 2024 Office for Budget Responsibility's long-term expenditure forecast: (all categories accounting for 5% of GDP in any of next 50 years shown, remaining categories grouped)

The big increases in spending as a percentage of GDP are:

• Debt repayments (8.0 percentage points of GDP increase over the next 50 years).
• Health (6.6pp )
• State Pension (3.0pp)

Other areas of increase are:

• Adult social care (1.1pp)
• Other pensioner benefits (0.3pp)

The areas that are declining as a share of GDP are:

• Other capital spending (-1.5pp)
• Education (-0.8pp)
• Public service pensions (-0.5pp)
• Other spending (-0.5pp)
• Non-pensioner benefits (-0.1pp)

It is stark how much extra expenditure is going to be directed at the elderly in years to come, as things stand. There are very significant age-related spending challenges ahead - as bad as things might seem now, this is very likely to be as good as it gets for many years. Serious changes to tax and spending policies will need to happen, one way or another. They can probably be kicked down the road for a while yet, maybe even the next 20 years, but doing that will just mean greater change at some future point will be needed.

The main driver behind the projected increase in GDP% of state pensions is the projected increase in the number of state pensioners......the demographic timebomb as it's called........without a corresponding increase in the number of working age adults (the old age dependency ratio).
There are no easy answers to this problem........my view is that further increases in SP age and increases in the number of qualification years required for a full state pension, are inevitable......coupled with further reforms to the welfare state and other areas of government tax and spend policies. 

LHW99

BlackKnightMonty said:

MK62 said:

af1963 said:

MK62 said:
So what do you think is a reasonable amount of income tax to expect a pensioner, living on just the state pension, to be paying?

Is there any good reason why a pensioner on £13k a couple of years from now shouldn't pay tax but a low paid part time worker should ?

At the moment, they pay zero.  Even after a few years of further above-inflation rises, it will still be a fairly trivial amount, because you only pay tax on the excess over the tax free allowance. ( When the pension hits £14k and if the allowance hasn't risen, a pensioner will be paying £5.72 per week in income tax.)

My question (quoted above) was a direct response to the suggestion that the personal allowance should be lowered to £5k.
And nowhere have I (or anyone else) suggested that a pensioner "shouldn't pay tax but a low paid part time worker should".

Yes, at the moment they may both pay zero.......but that wouldn't be the case if the personal allowance was lowered to £5k.......the key difference though is that at least younger people can seek more or different work......what options does an 85yo single pensioner have to increase their income if faced with such a draconian cut in their personal allowance?

The option is pension credits. A means tested benefit for those truly in need.

What worries me about the current system of benefits for those in need, is the passported benefits added on. It means someone just below, eg pension credit level, actually can remain poorer than someone with just a few pounds less coming in.

Perhaps the means testing should top everyone up to a given level, and then that's it. They have to pay their way like anyone whose pension / salary gives them that level too. What that level should be is obviously the question.

BikingBud

Two routes to change the rate of GDP that goes to pay benefits:

• Reduce the level and number of benefits - has some mileage but............Insert any one of many excuses why this cannot occur.
• Posture the economy for growth so that we get appreciable increase in GDP.

Increasing tax take is not increasing GDP - it is reducing surplus income and reduces discretionary expenditure, shrinking the economy. It is also stifling business growth. 

Auti

I don’t think there should be passported benefits - it should all be monetary income. This should then be taxed if it exceeds the personal allowance just like other benefits/ wages/ income. People should take responsibility for how they spend their money. If housing benefit is needed and it takes you over personal allowance once added to income then it is taxed as someone who has earned that amount so does not claim housing benefit - there should not be financial advantage - to sound harsh everyone should struggle the same ( and I am aware it is a struggle but it should be an equal struggle).

af1963

BikingBud said:

Two routes to change the rate of GDP that goes to pay benefits:

• Reduce the level and number of benefits - has some mileage but............Insert any one of many excuses why this cannot occur.
• Posture the economy for growth so that we get appreciable increase in GDP.

Increasing tax take is not increasing GDP - it is reducing surplus income and reduces discretionary expenditure, shrinking the economy. It is also stifling business growth. 

Not as straightforward as that.  Depends what you do with the increased tax take.  Spending on public services, which requires paying staff or contractors,  or redistributing to lower-income people who will spend it, can put more spending power into the economy than leaving it in the bank accounts of people who won't spend it.

Conversely, cutting pensions/ benefits/  public sector wages, takes spending power out of the economy.

chuffinnora

Conversely, cutting pensions/ benefits/  public sector wages, takes spending power out of the economy.

I understand how it might be seen like that, but all that spend is coming from the tax take. Most of which would be spent by those paying tax anyway. Its a tough balance, but as the debt ratio is increasing by the month and the interest on that ballooning to very high levels, we have to start addressing that with all the pain it entails. Same goes for most other countries. 

Auti

Some of the 9.9 million claiming are in work - that seems weird that you can be in full time work and still get UC housing benefit etc - why are companies being subsidied by benefits paid to workers? There seems to be something strange going on.