Tax Misery for State Pensioners

EdInvestor

terryw wrote: »

Ed, I am not really grumbling about my lot in life, merely using my own case (and that of many many others) as an example of how the government penalises those who try to save for their old age. I am concerned about the future and I would like to see government policy which ensured that personal responsibility was encouraged.

terryw

I quite agree of course, but in making the case to the Government it's essential to get all the basics right as they will pick on any small discrepancy to trash your argument.

May I suggest you write to your MP to complain about the matter, especially highlighting this unfair gap relating to the personal allowance/pension credit affecting 60-64 year olds?

With the Labour MPs in revolt against the end of the 10% tax band and the local council elections due shortly, now is the time to drive the matter home IMHO.

dunstonh

The age allowance and pension credit rules came in at different times under different governments. The pension credit rules also came in when it was possible to get state pension at age 60. Something that is being phased out and increased to 65, then 66, 67 and 68.

So, if the Govt were to make any amendments, I think we can safely assume that the pension credits are likely to match state retirement ages rather than have the personal allowance reduced to age 60.

EdInvestor

dunstonh wrote: »

So, if the Govt were to make any amendments, I think we can safely assume that the pension credits are likely to match state retirement ages rather than have the personal allowance reduced to age 60.

Pension credit already matches state retirement age at 60 (for women). It is paid to men as well, because otherwise it would break EU discrimination laws.

The obvious solution (other than restoring the 10% band for the group) is to have an interim higher personal allowance to match the pension credit level affecting the 60-65 year olds.

This allowance would naturally phase itself out as the female retirement age rises.

BTW, it has been mentioned elsewhere that the age for free bus passes and fuel allowance will be rising in future to match the women's state retirement age.

But I haven't seen pension credit mentioned.

Has anybody else?

terryw

dunstonh wrote: »

The age allowance and pension credit rules came in at different times under different governments. The pension credit rules also came in when it was possible to get state pension at age 60. Something that is being phased out and increased to 65, then 66, 67 and 68.

So, if the Govt were to make any amendments, I think we can safely assume that the pension credits are likely to match state retirement ages rather than have the personal allowance reduced to age 60.

Thanks. I think you are dead right. Watch out for the chaps who think their JSA will more than double on their sixtieth birthday and then find they have to wait another year! Those receiving Pension Credit at 60 at present are lucky bunnies.

terryw

EdInvestor

Here we are, from the Pesion Service website:

From 2010 the age from which you can get Pension Credit will gradually increase. This will be in line with the State Pension age becoming 65 for women as well as men by 2020.

So we need an enhanced personal tax allowance or restoration of the 10% band on the same basis.

Taffyscot

Hi What is fuel allowance please? My partner and I have pension credit and wooppee I became of pensionable age last week and was looking forward to my pension. Not so my wee pension means that I now get £10 a week carer's allowance and my pension, and the pension credit gets cut so I get nothing at all with my pension. Actually our total amount went down £1.57 a week. Not a huge amount you might say but it's a cup of a tea and a soup once a month in a cafe for him and I that we can no longer have.
Taffy

BTW, it has been mentioned elsewhere that the age for free bus passes and fuel allowance will be rising in future to match the women's state retirement age.

But I haven't seen pension credit mentioned.

Has anybody else?[/quote]

terryw

EdInvestor wrote: »

But in fact she is over her personal allowance if she's under 65 and gets 121 a week (6292 a year).The personal allowance is 5435.

That's what's so ridiculous: if a person got the equivalent 121 a week in state and private pensions, they would be subject to tax on the amount over the personal allowance, ie 857.Tax would be payable now @20% of that, ie 171.

This would reduce their income to 6,121.Presumably, they would then be eligible for pension credit to bring it up back up to the minimum level. :eek:

The system is just plain silly.

Almost agree with you about the system being plain silly. On the example given it is even worse than silly, as the Pension Credit claimant will receive tax free HB and CTB whereas the frugal saver will have to pay this out of taxed income, unless they wish to subject themselves to a degrading means-test, when they might get a proportion of it back.

terryw

EdInvestor

terryw wrote: »

...whereas the frugal saver will have to pay this out of taxed income, unless they wish to subject themselves to a degrading means-test, when they might get a proportion of it back.

terryw

Hi again terry,

How does this work exactly? Is the means test the same one as for pension credit?

[Deleted User]

well the 20% hit home yesterday. I get about £112 pm state pension plus teachers pension of £5047 pa plus little bit of drawdown pension of £1040 pa. I got a P60 from teachers pensions yesterday and have started paying £88 pm. I calculate that I will be paying £1295 pa on a total of £11911

I am a 60 year old woman

Good job I have savings and a dh with a good prospective pension in 4 years

margaretclare

EdInvestor wrote: »

Hi again terry,

How does this work exactly? Is the means test the same one as for pension credit?

You apply for HB and CTB from the local council whereas pension credit comes from the Pensions Service arm of the DWP. AFAIK there is a similar means-testing applied by the council for HB and CTB.

However, HB only applies if you're renting, not if you have a mortgage.

HTH