Interviewed by the Sunday Telegraph, Work and Pensions Secretary Iain Duncan Smith urged wealthy pensioners who do not need the universal benefits they receive to hand them back to the State.
What he didn’t say in that interview, or at least it isn’t reported, is that pensioners are able currently to inform the Government they do not want to receive, for example, the Winter Fuel Payment (WFP). Some already have, but do you know how many? I got hold of the numbers last week thanks to the Freedom of Information Act.
Over 12.6 million people receive the WFP, and for the latest winter – 2012/13 – a grand total of 128 had an entitlement but elected not to receive the payment. Crunch the numbers and that’s about 0.001% opting out of their annual £100-£300 tax-free freebie.
The combined value of this saving was, according to the information released to me by the Department of Work and Pensions (DWP): £21,100. Now, I genuinely do agree with Liam Byrne and Tesco that every little helps, but with our national debt now north of £1.3 trillion and the cost of servicing that debt at £43bn in 2012 alone, I can’t see this as helping all that much.
Apparently, according to the DWP, a further 40 have opted out of receiving it since the last payments were made (that’s still 0.001% however).
I also asked in my FOI request to the DWP whether any research had been carried out into how many people might be willing to forgo their WFP and how much this would save. Their answer: they have no plans to commission any such research, so Duncan Smith can have no idea how many might cancel their WFP entitlement or what particular nudge might work.
One place he could start however is his fellow MPs. At the time of the 2010 election, 19% of MPs elected were aged 60 or over (Smith Institute 2010 [pdf]) and therefore eligible. That’s around 120, so unless all the current optoutees are MPs, that’s an easy way to pretty much double the number who willingly forgo their annual WFP. If Duncan Smith is serious, that would be a nice gesture to kick off his optout plan.
* Stuart Bonar was the Liberal Democrat parliamentary candidate in Plymouth Moor View.
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15 Comments
This makes a good case for incorporating the winter fuel benefit into the state pension so it is treated as taxable income. Poor pensioners with income below their allowance would keep it all and better off pensioners would pay tax on it at their highest tax rate.
Excellent article.
It’s good that there are no plans to further means-test it, as for various reasons you’ll have to excuse me for not spelling out (it being just after dinner and all) extending means testing is almost always disastrous. Of course, those who thiink they don’t need these benefits would be better off paying it to charity. I believe there are charities that exist solely for the purpose of taking unneeded benefits and they should be incentivised.
Best of all would be to replace the winter fuel allowance with a more truly well-targeted payment along the lines of somthing which already exists, bearing the name (I think) of Cold Weather Payment, made to recipients of out of work benefit and Pension Credit. It could be made to all recipients of the state pension when the temperature drops below a certain point. And if the winter was mild they wouldn’t need it at all, would they? (If they are buying things that have nothing to do with heating because it’s the only way to make ends meet, that’s a seperate issue which will hopefully be addressed by the coalition’s raising of all pensions).
Nonconformistradical – I agree with you entirely. Universal benefits ensure that no-one is humiliated by means testing and everyone actually receives it, whilst the tax system claws back from those who don’t need it.
In the meantime, I think I would prefer to redistribute my winter fuel allowance by giving it to a charity that works with elderly people.
Why hand it back voluntarily? Far better to GiftAid it to a local charity!
Which does raise a serious question as to what effect this constant downward pressure on pensioner’s income will have on charity donations and legacies from this group, unfortunately not the sort of information one can obtain from an FoI request.
Mary Reid- absolutely right, as she so often is!
Mary Reid, Roland and Peter Tyzack: Certainly, other WFPs will have been donated and I can’t get hold of that via an FOI… although I did ask whether any research had been commissioned into returned WFPs and that could easily also include research into how many ppl donate it. Whatever, I think that process could be made easier; couldn’t there be a system whereby a person earmarks their WFP each year to be sent direct to a designated charity?
Asquith: I agree with you about Mary Reid about the limitation of means testing. My problem with it is that the cut off point always comes too low, so it’s just left for the very poorest, rather than just cutting out the richest. The famous “squeezed middle” tend to get a little more squeezed by means testing. There is the cost of administering it all as well, of course.
Nonconformistradical: indeed, that’s one way of sorting things out a little.
Why not try- just prior to when people become pensioners they receive a letter stating- On date..***.. you become eligible for winter fuel allowance. If you feel that you do not need this allowance sign and return enclosed form (1). Should you choose to receive it in the future sign and return form (2).
Very cheap- and it could just work!
If you are of pensionable age but not getting a state pension you have to claim the Winter Fuel Allowance*, so someone who doesn’t need or want it may simply not bother to fill in the claim form.
* “You should get a Winter Fuel Payment automatically if you get the State Pension or another social security benefit (not Housing Benefit, Council Tax Reduction or Child Benefit). If you qualify but don’t get paid automatically, you’ll need to make a claim.” (Source: http://www.gov.uk/winter-fuel-payment/overview )
I didn’t know you couldn’t hand it back. There are complications though. If there is one person in a household of the qualifying age, that person gets two hundred pounds. If there are two, they each get one hundred pounds. So, if I say “No thanks” , does this mean that my wife will then get two hundred pounds, as she did when she was old enough and I wasn’t?
I do give much more than the winter fuel allowance each year to good causes and charities, gift aided where allowable, and I do pay tax on the winter fuel allowance. So I think changing the regime will be pretty low on my list of priorities. I suspect many others in my age group would feel the same in my circumstances.
Thanks Antony.
AC Trussell: I think if IDS is serious about trying to nudge more affluent pensioners into giving up their WFP then he’ll need to think of ideas like that. As Ian Sanderson says, going out of one’s way to deregister for it is prob low on anyone’s priority list… as with Lib Dem membership, most ppl join because someone asks them to join, and as someone once said, “If you don’t ask, you won’t get”.
How many MP’s have handed the winter payment back. There are no figures, which is interesting.
We are all in this together?
Helen – how many MPs are pensioners?
@Mary Reid
From Stuart’s article
“At the time of the 2010 election, 19% of MPs elected were aged 60 or over … and therefore eligible. That’s around 120”
Obviously, that figure would include those who have either delayed taking their state pension or don’t qualify for automatic payment. However, I doubt we will know the real numbers as this information clearly falls into the personal and HMRC/DWP confidential category.
In the article it states a 100 plus are in that category.
I did read the article and also someone had made that comment, there is also a generous addition of millionaires receiving expenses and perks of the job.