Who would have thought that many struggling pensioners would come under fire from Chancellor of the Exchequer Rachel Reeves when she stood up in the House of Commons on Monday to weigh in on the country’s fragile public finances?
Not me, of course, and certainly not any other financial commentators, regardless of their political leanings.
Talk about using pensioners as cash cows. I was spitting blood when Reeves said he was going to scrap winter fuel payments for those not on benefits. And not next year, but immediately, just when energy bills are likely to start rising again. It’s a move that will see 10 million pensioners lose a payment of up to £300 a year and save the public purse £1.5 billion.
Spiteful? Yes. Worse than scrapping the triple lock, shouted Baroness Ros Altmann, a leading pensions expert, a move equivalent to a three per cent pay cut for those on the full basic state pension of £169.50 a week. I’m shouting too.
To put this saving to the public purse into perspective, it pales in comparison to the £9.4bn of pay compensation Reeves simultaneously handed out to those working for the bloated public sector, many of whom have wreaked havoc on the NHS by striking and most of whom can look forward to pensions that we, as taxpayers, fund. What a sycophant to the unions!
Hypocritical? Absolutely. Before the election, Labour officials vehemently denied they had any intention of straining citizens’ livelihoods to pay for winter fuel. “There are no plans,” they said.
Finance Minister Rachel Reeves speaks during a press conference on Monday
In fact, last November Darren Jones, the current chief secretary to the Treasury, wrote to the Conservatives asking them to reassure pensioners that they would not be making means-tested winter fuel payments. “Pensioners should not be forced to bear the brunt of the Conservatives’ economic failure,” he wrote.
I cannot understand how Mr Jones, MP for Bristol North West, can now look in the mirror after writing such a lie. A U-turn to end all U-turns.
Not all pensioners are like the Mr Sugars of this world who don’t want the payout. Many are struggling to get by, either because they don’t qualify for the pension credit but still feel the financial pressure, or because they are eligible for the benefit but can’t or are too proud to claim it. They deserve better.
Coupled with the removal of the £86,000 cap on welfare due to come into effect in October next year, it appears Reeves is not just targeting the “rich” (I use that term loosely) to plunder financially.
Reeves also believes that retirees, some of whom are obviously wealthy, are easy prey when it comes to income streams. I dread to think what could happen around the corner.
In fact, I am now reluctant to accept at face value any promise made by the Labour Party to pensioners, regardless of whether it was mentioned in its election manifesto.
I hope that Labour’s commitment to maintain the triple-lock guarantee on state pensions will be honoured for the next five years. This guarantees that state pensions will rise by the higher of average earnings, inflation or 2.5 per cent. However, we should not take this for granted. The Conservatives broke the triple-lock guarantee during the pandemic, so a precedent has been set.
If I were a betting man, I’d guess that Labour would respect it, but you never know. It could be weakened so that recent increases (10.1 per cent for the 2023/24 financial year) caused by a sudden surge in inflation are not repeated in the future.
The Labour Party is unlikely to do anything at all to stop more pensioners paying tax on their household income.
The Chancellor of the Exchequer announced that the payment, of up to £300 a year, will be means-tested, meaning pensioners on incomes as low as £1,000 a month will no longer qualify (file photo)
The previous Conservative government’s freeze on the annual personal allowance (the amount you can earn before tax is applied) has led to thousands of pensioners paying income tax for the first time.
According to HM Revenue and Customs, around 140,000 pensioners will receive tax bills in the next six weeks due to income exceeding the annual allowance of £12,570.
Increases to the “new” state pension (not the lower “basic” pension for those who reached state pension age before April 2016) have raised it to £11,502 a year, prompting more pensioners to pay income tax.
It is a problem the Conservatives promised to solve by guaranteeing state pensions would never be taxed, but Labour dismissed the idea as “desperate”.
Personal tax relief will remain frozen until 2028, meaning thousands more pensioners will be forced to pay taxes.
Reeves is unlikely to end the big freeze. In fact, some experts believe he could take advantage of the parlous state of the UK’s finances to extend it for another year, especially as he has promised not to raise income tax rates. Reeves could also consider removing the exemption from National Insurance contributions for those who have reached state pension age.
The Intergenerational Foundation (IF) think tank has long argued that the exemption is an anomaly that should be corrected, especially as more people now work well into their 70s. It argues that NI is a “disguised form of income tax that falls disproportionately on younger generations and in a regressive way”, and that “the exemption from paying NI contributions for those who continue to work after state pension age should be scrapped”. Reeves might be receptive to this, especially given her fury at Hunt’s pre-election NI cuts.
Like the winter fuel payment, other pensioner giveaways could catch Reeves’ attention. For example, all people over 60 receive free prescriptions. Reeves could limit this giveaway to those who have reached state pension age or, like the winter fuel payment, restrict it to those receiving pension credit. And the same criteria could also apply to free eye exams for those over 60.
Similarly, it could also apply to free bus travel, available to those who have reached state pension age (60 for those living in Wales or London, where free travel is also available at certain times on the Tube and railways).
And of course, when it comes to retirees and their personal wealth, Reeves will likely make sure they keep a larger portion of whatever they wish to pass on to their loved ones when they die. The inheritance tax only goes one way: up.
Of course, I’m painting a picture of what could happen around the corner for pensioners, not what will happen. We’ll know more on October 30, Budget Day. And it won’t stop there.
But in making the decision on winter fuel payments, Reeves has left a signal: be afraid, be very afraid.
One final word: if you are among the 800,000 pensioners who are eligible for pension credit but have not yet claimed it, do so today. Visit gov.uk/pension-credit/how-to-claim.
Do you think the Labour Party is treating pensioners fairly? Email: jeff.prestridge@dailymail.co.uk.
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