MEANS-TESTING WINTER FUEL PAYMENTS WOULD BE DISASTROUS FOR MILLIONS OF PENSIONERSThursday 3 January 2013
These payments are effectively part of the Basic State Pension We need less means-testing, not more, as penalising self-reliance and saving increases future reliance on the state
MEANS-TESTING WINTER FUEL PAYMENTS WOULD BE DISASTROUS FOR MILLIONS OF PENSIONERS
The CentreForum suggestion to fund Dilnot's social care reforms by taking away the Winter Fuel Payment from any pensioners who do not qualify for means-tested pension credit may sound superficially attractive, but could actually worsen the care crisis in future.
Extending pensioner means-testing will mean fewer people saving and could even increase care funding costs in the long-run:
Yes, reforming social care is urgent, but taking away Winter Fuel Payments from millions of pensioners who are already struggling with their heating bills is not the solution. This would further penalise pensioners who set money aside for their retirement. Such a policy move may have short-term attractions, but it will not save much money and could even increase social care costs in the long-run, as fewer people feel it is worthwhile saving and, therefore, even more will need their care funded by the state anyway.
We need less means-testing, nor more, to make saving worthwhile:
Yes, it is true, we will have to find money to reform social care but tying Winter Fuel Payments to Pension Credit would be a disaster for millions of pensioners who saved hard all their lives and have a little extra retirement income as a result of their efforts. These pensioners, or those who refuse to claim, will be punished by the extension of means testing. We need less means testing - not more - in order to ensure that those who save for their future do not lose out heavily and to be certain that all those who need the money do receive it.
The Winter Fuel Payment is effectively part of the state pension:
The reason we have a separate Winter Fuel Payment is because past politicians had to make up for our inadequate state pension. The UK Basic State Pension is one of the lowest in the developed world. Rather than increasing the pension itself by a few pounds per week, the Government decided to announce a separate pensioner payment of a few hundred pounds per year, which made better headlines. So, taking these payments away would amount to a cut in the Basic State Pension for the millions of pensioners who managed to set aside more money for their retirement and did not want to just rely on the state!
Disincentive to save:
Taking money away from older people who have been prudent and provided for their own future, would be a further major disincentive to those hard-working people who have set money aside for retirement. It is likely to mean more people deciding not to bother to look after themselves, since they see colleagues who may have chosen not to bother setting aside sums for the future receiving far more than they do.
Can raise funds by taxing pensioner benefits or increasing age of entitlement, but principle of universality vital:
Extra revenue could be raised by taxing these payments (just as the state pension itself is taxed) and even by increasing the age of entitlement, but the principle of universality is vital to ensure the money gets to all pensioners and that saving for retirement is considered worthwhile.
Most pensioners are not on very high incomes:
Not many pensioners are on high incomes - only 2% of pensioners pay higher rate tax. Most older people are not living on high incomes so pensioner benefits and the state pension are of the utmost importance to millions of older people.
Many who need it won't get the money:
Take-up of pensioner credit is notoriously low, with many pensioners too proud to claim. It seems some would rather freeze than claim benefits. The need to means-test so many millions of older people would be cumbersome and costly and will add to complexity in the benefits system.
Really rich pensioners don't need state pensions either - will that be next?:
Of course, in theory, it makes little sense to pay money to wealthy pensioners who do not really need it, but then will the next step be to say that these pensioners don't need the rest of their state pension either?
Care crisis solution urgently needed:
There is no doubt that the cost of social care is one of the biggest issues facing this country and we need a fairer partnership between state help and individuals paying for some of their own care costs. But that means more incentives for care savings and self-reliance.
Taking away Winter Fuel Payments risks increasing illness or deaths among pensioners:
As energy bills reach record highs, taking away Winter Fuel Payments from pensioners who have modest incomes will risk many more older people unable to afford heating, suffering cold-related illnesses or even dying of cold. Every winter, over 20,000 pensioners die of cold in this country and these 'excess winter deaths' would increase if more pensioners were denied their Winter Fuel Payment.
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