Pensioners should pay more tax
Pensioners should pay more tax to "share the pain of deficit reduction", according to a leading think tank.
Older people are now in the top half of the UK earners and have considerable disposable income so they should pay tax at the same rate as younger people, says a report by the Fabian Society.
Andrew Harrop, the report's author, says older people today are often on middle incomes – neither wealthy nor poor – and this has "profound implications" on the way society works, given young people are struggling to get on the housing ladder.
"In public policy and deficit reduction measures, ministers should adopt a presumption of equality across age groups," he writes.
"In financial terms alone older people are no longer distinct ,and blanket policies favouring them should be reviewed."
As well as recommending pensioners' taxes be increased, the Fabian Society says benefits such as the winter fuel allowance should be reassessed and the government should scrap its "triple-lock", which keeps pensions rising with the rate of inflation as working-age incomes fall in real terms.
Michelle Mitchell, the Age UK director general, said: "The Fabian Society is right to point out that there has been significant progress in tackling pensioner poverty in recent years. But there are still 1.7 million pensioners living in poverty today, while a further 1.1 million have incomes only just above the poverty line.
"It can be difficult for older people to change their financial plans as their options are likely to be very limited.
They have also contributed national insurance payments throughout their working lives to receive in return a state pension that ensures a financial safety net but little more."
A scheme originally established in 1944 to provide protection against sickness and unemployment as well as helping fund the National Health Service (NHS) and state benefits. NI contributions are compulsory and based on a person’s earnings above a certain threshold. There are several classes of NI, but which one an individual pays depends on whether they are employed, self-employed, unemployed or an employer. Payment of Class 1 contributions by employees gives them entitlement to the basic state pension, the additional state pension, jobseeker’s allowance, employment and support allowance, maternity allowance and bereavement benefits. From April 2016, to qualify for the full state pension, individuals will need 35 years’ of NI contributions.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).