The question over the state pension triple lock is part of a wider
debate about incomes and wealth in old age and how, as a society, we adapt to
the escalating costs of improved life expectancy, increasing care costs and,
crucially, property prices.
Many do everything to avoid paying higher taxes and hoard
whatever assets they have accumulated, as state support decreases. Now grandparents and parents feel
obliged to provide more than just a good start in life for the youngest members,
possibly for as long as they are alive. This explains why the Tory promise to raise
the inheritance tax threshold for couples to £1m by 2020, and also why wealthy
pensioners argue the state pension and winter fuel allowance should remain a
universal benefit.
No one should want house prices to rise at double or treble the rate of
earnings growth to reach affordability levels that effectively mean homes in
places with decent jobs are out of reach for most people, but home owners are
happy when a house or flat sells for more than the previous one and predictions
of a downturn can spark panic. Pay as little stamp duty or capital gains tax as
you can and recycle the proceeds to provide a leg-up for your own
offspring.
In early 2017, a weakening economy, a squeeze on
disposable incomes from higher inflation and stagnant wages growth, and the
knock-on effect of lower tax receipts, means money must be raised elsewhere. One option is scrap the 2.5% annual rise part of the pensions triple lock, which links the basic state pension to whichever is the higher of
earnings growth, inflation or 2.5% and scrapping the 2.5% lock.
Pensioner groups argue those on the lowest incomes will be the
worst affected, which is true, especially when cuts in the
real value of the state second pension, and the move to a flat-rate pension,
are taken into account.
But keeping a universal benefit also benefits the better off. Why
should today’s workers make sure pensions increase at a faster rate than their
own pay, especially when it leads to greater income inequality among the country’s 12 million
pensioners.
One answer is to means-test the basic pension. An alternative would be
to design an income tax system specifically for the country’s 12 million
pensioners; one that increases the tax burden for the third who have more than
enough money to enjoy their retirement. Or, at least, charge the 1.1 million
retirees who are still working national insurance.
It is impossible to change pensions and taxation while the state
refuses to look after the elderly in care, and build enough homes for those on
low and middle incomes to bring down prices, so wealthy pensioners will continue
to take more out than they put in and hoarding it.
Source: Pensioners will carry on hoarding cash if state won’t step in, by Phillip Inman, The Guardian, 29 April 2017
