Universal payments for older people have come under attack for being unnecessary or unfair to younger generations. Here we set out some of the questions people have raised and Age UK’s response.
There's actually a fairly limited amount of financial support linked specifically to age. The biggest item of public expenditure for older people is the state pension to which people have contributed – often for 40 years or more.
The main age-related payments are the winter fuel payment, concessions on local buses (assuming there are services to use and people are able to get on and off buses), a free TV licence at age 75 and (like other groups including children and people with certain medical conditions) free prescriptions and eye tests.
While it’s great news that, on average, the incomes of older people have been increasing, and the gap between the incomes of older people and the rest of the population as a whole has narrowed in recent years, there’s still a long way to go.
• 1.6m pensioners (14%) are living in poverty today, while a further 1.1m have incomes just above the poverty line. • Typical income in the first year of retirement is around £11,000 – about the level of the minimum wage. • Just over half of all pensioners don't receive enough money to pay any income tax and fewer than 4% pay the higher or additional rate of tax.
The relatively modest amount of support provided through universal benefits helps to tackle income and fuel poverty and also promotes social participation, improving the health and wellbeing of our older population.
This is likely to help society and could save resources in terms of the need for health and other services.
The cost of winter fuel payments has been falling, whereas over the last few years energy bills have risen. For example, between February 2004 and January 2011 gas bills rose by 121% and electricity bills by 79%.
The standard annual winter fuel payment is currently £200 (the same level as payments back in 2000-01).
In today’s prices, expenditure on winter fuel payments was £2.98bn in 2008-09, compared to £2.17bn this year and a forecast of £1.97bn by 2016-17.
This fall reflects the increase in women’s state pension age and that there are no plans to raise the level of payment.
Means-tested benefits are complicated and often fail to reach many who need them. For example around 1 in 3 older people who are entitled to pension credit are missing out.
Universal benefits are the most effective way of ensuring that vital support reaches all who need it, including the very poorest who are not receiving the means-tested benefits they are entitled to.
Any increase in means-testing risks penalising those vulnerable people who may slip through the net or who are too proud to claim. The winter fuel payment has become an essential weapon in the battle to stay warm during winter and is an important income boost for many older people with low state pensions
Plus, means-tested benefits are expensive to administer. In 2010-11 each new Pension Credit claim cost £351 and existing claims £47, compared to £91 for a new state pension claim and £14 for existing claims.
Research by the Institute of Fiscal Studies (IFS) shows that having a specifically-labelled payment has an impact on how people spend their money. It states: ‘Households receiving the winter fuel payment are almost 14 times as likely to spend the money on fuel than would have been the case had their incomes been increased in other ways.'
Other research by the IFS has shown that many people still struggle despite this support, and concludes that ‘in very cold weather it remains the case that the poorest pensioners cut back on spending on food to finance the additional cost of heating their homes’.
Age UK believes that we should not be reducing support when there are 721,500 older households in fuel poverty in England (and about 1.2m individuals) and when there were 30,950 excess winter deaths in 2012-13 among people aged 65 and over in the UK.
There are some who do not need extra help towards fuel bills, but a handful of very rich people who get payments should not be used as a reason to get rid of a straightforward scheme that works well for the majority of pensioners with low or modest incomes.
Taxing universal payments would limit the support for those with moderate and higher incomes, but would greatly increase the complexity of the tax system and could, for example, require more older people to fill in tax returns.
It's also very difficult to see how support such as bus passes could be taxed, given their value depends on the number of journeys people made.
It would be important to carefully weigh up any potential savings made with increased admin costs, especially as fewer than half of pensioners currently pay income tax.
People do not get a bus pass automatically. Bus operators are reimbursed based on how much older people travel on their buses. Therefore it does not cost the state anything unless it is used.
Research shows that ownership and use of the concessionary bus pass is highest for those on the lowest income. The concession allows older people to reach key services, friends and family without having to make difficult financial decisions.
Older pensioners typically have lower incomes than younger people. Half of people aged 75 and over live alone, disability increases with age, and people aged 75 or over are more likely to say they are sometimes or often lonely than those aged 65-to-74 (40% compared to 27%).
The TV is an important source of information and entertainment for isolated older people and a free licence ensures no-one over 75 worries about this expense.
The proposals set out in the Pensions White Paper will only affect people reaching state pension age in the future, so it will be as important as ever to maintain support for current older people.
For future pensioners a higher single-tier state pension should reduce the need for additional means-tested support for many, but on its own a weekly pension of around £144 is still not a huge amount and may not cover all basic costs.
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