Our pensioners quite rightly enjoy a number of benefits and it was of course a Liberal government that introduced the old age pension over a century ago.
As part of the coalition it was a Lib Dem minister, Steve Webb, who steered through the legislation ensuring the triple lock and the introduction of auto enrolment for those workers without an occupational pension.
Great reforms, but with an ageing population there has been an increased focus on whether we can justify or indeed afford the universal payment of benefits such as Winter Fuel Allowance and free tv licences.
There is also need to focus on the issue of free transport concessions.
In my view, the starting point should be that as liberals we are committed to making sure retired people have a good level of support, but we are not about paying money to those who simply don’t need it.
Most importantly of all though there needs to be honesty.
I say this because quietly under the radar the entitlement to Winter Fuel Allowance and free travel has changed.
Both these were previously paid to anyone who had reached the age of sixty, now they are linked to your normal retirement age.
In my case that will be sixty six!
This is reform by stealth, something we should be very much opposed to.
It also goes against good environmental policies aimed at encouraging the use of public transport rather than the car.
So what should future pensioner benefits look like?
Well as a starting point for debate I have set out my proposals below.
1. Free travel – This should be granted to anyone over the age of sixty who has retired from paid work and has an overall annual income below the higher tax rate i.e. 40%
2. Winter Fuel Allowance – This should be paid to pensioners living in the UK who are in receipt of pension credit. It should be paid at a single rate.
3. Free tv licence – This should be granted to pensioners living in the UK who are in receipt of pension credit.
The free travel proposal is environmentally friendly (particularly in London) and takes account of the people who retire from paid work early, with moderate or low incomes.
The Winter Fuel Allowance and free tv licence proposal targets those on the very lowest incomes. It also removes the arbitrary age rules.
This is a set of policies that we can be happy with and more importantly can be sold to the wider electorate.
* David is a member of Horsham and Crawley Liberal Democrats
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32 Comments
Pensioners are the wealthiest section of society.
Why was there money for tripled locked pensions and free public transport regardless of how wealthy they were for them and there was the bedroom tax for another section of society because there was no money?
And why should the young be willing to pay their pensions when they are bring told that they must pay for their own education and won’t get retire until they’re 69.
Seems to be like one generation is getting more than they contributed at the expense of another who is being asked to pay for it? Why are the lib dems proud of their record on this?
Any savings under your points 1 & 2 would be wiped out by the cost of bureaucracy to administer who gets what.
Pensioners should be exempt from the TV license fee and the cost borne by the BBC, with an annual TV poll tax of around £ 3 billion they can more than afford it.
I am genuinely unsure why any of these benefits should continue. Why not just abolish them, and offset it with a one off increase in the basic state pension? (Noting that this would be progressive in that the increase would effectively be taxed at the rate applicable to the pensioner – zero for the least well off, 40% for high income pensioners).
All other things being equal, the liberal solution is to give people the freedom to chose what they do or do not buy. There needs to be some kind of overriding reason why giving them the item rather than the value of the item leads to better outcomes… so lets think about that.
In the case of the TV licence, the people who lose out from getting the freebie rather than a cash equivalent are those without a TV (perhaps because they live in a care home and don’t have one in their room), couples (they effectively get half the benefit of singles) and those choosing to retire abroad. I’m not clear why we want those people to lose out and others to gain. Let’s save the admin and use the money to increase pensions.
In the case of free travel, the “environmental case” seems a red herring if thought about carefully. The environmental case for pensioners using public transport is the same as for everyone else and, while I see the overall case for making public transport cheaper and improving service, I don’t really see the logic of massively targeting support at one demographic group. If you look at winners and losers, the losers are pensioners in somewhat isolated areas and those who are housebound for health reasons – which seems somewhat unfair if anything. Additionally, you have the problem of a percentage of the cost being lost to fraud (unscrupulous bus operators have been known to exaggerate the number of pensioners travelling when claiming reimbursement under the scheme). So, again, why not just give people the cash equivalent? Note that bus operators would still be likely to run discount schemes for off-peak travel (which pensioners are most able to use).
There seems to be slightly more of a case for winter fuel allowance, which appears simply to be a fancy way of saying “let’s give some extra to the poorest pensioners”. But there are issues over whether people are claiming, and we need to look at whether there’s a more effective way to help.
@kevin said: “Pensioners should be exempt from the TV license fee”
Why?
In fact that “why” I just posted could be used in response to the following statements as well:
1) Pensioners should have a higher tax threshold than everyone else and if this is attempted to be changed those changing it will be attacked as having introduced a “granny tax”. (Happily the previous govt held firm on this and the tax bands are now aligned)
2) Winter Fuel payments should not count towards taxable income.
3) Pensioners should not pay National Insurance.
4) Pensioners should have free bus travel.
I am not saying we should reverse all these policies by the way, I’m just saying it’s not obvious to me why they are the case, especially given they apply to all pensioners, even very rich ones.
I think we need to better understand the true costs of these universal concessions and how they are paid for.
For example the free bus pass, how are the bus companies (ie. those who provide the service) re-imbursed? is it based on actual tickets issued or do they simply get an annual retainer based on some formula to provide a service?
It seems to me the issue isn’t the handing out of free bus passes to all who apply, but whether the major users of such passes are those who could afford to pay the fares.
Hence I think until you can demonstrate that the ‘wealthy’ pensioners are either disproportionately benefiting from these concessions, or that the savings that could be made are significant (and more than cover the costs of changing the system), basing change on ‘wealth envy’ is very poor policy…
Going back to travel, remember drivers over 70 have similar accident rates as the under 25’s… So I would rather see encouragements for the elderly (regardless of income level) to stop driving than encourage the ‘wealthy’ to continue driving…
The most important measure I can suggest here is votes for 16 year olds.
Huh? All political parties are in thrall to the grey vote because they turn out and there are so many of them. Giving the vote to 16 and 17 year olds would start to tip the balance back; it would create more space to say the unsayable with regard to pensioner perks, and would force politicians to address the generational imbalances they are doling out at the moment.
In terms of the detail, this doesn’t go nearly far enough for me – why is the state funding TV licences to households just because there is an older person living there, however many people there are who would be eligible to pay? If we scrapped all free TV licences, we’d not just save more but all the bureaucracy and loopholes that go with it.
As a pensioner (reasonably well off) I would accept a limit at which ‘concessions’ stop……But, as ‘kevin’ points out, there does need to be savings made (not just soundbite statements)…..
However, we all know that pensioners VOTE so no party will want to upset such a powerful group…
@Roland
“Going back to travel, remember drivers over 70 have similar accident rates as the under 25’s”
That’s an incredibly simplistic statement Evidence to back it up?
Following up on my previous posting..
Roland – perhaps you could explain why, in the latest AA British Insurance Premium Index, the average quoted premium in 2015 1st quarter for a driver aged 17-22 is £1207.61 while that for a 70+ driver is £387.07. Motor insurers are in the risk assessment business after all.
See http://www.theaa.com/newsroom/bipi/car-home-insurance-news-2015-q1-bipi.pdf
Ah yes. Affluence traps. Good practice for the poverty traps our rulers seem to love.
@Nonconformistradical – have a browse of https://www.gov.uk/government/collections/road-accidents-and-safety-statistics.
A while back when car accident rates among the under 25’s was in the news for some reason, I remember seeing a summary table that showed the high level of accident rates in the over 70’s, only they weren’t grouped together like the under 25’s… [Aside: I may have referenced the table in a comment to the relevant LDV article at the time. Unfortunately I can’t put my hand on a simple summary table, but in the government data it is clear accident rates increase markedly with advancing age.]
As for insurance premiums, yes, I was very surprised recently at the, relatively low, premium being asked for an 84 year old driver. We were hoping it would be much higher and so encourage the voluntary surrender of the car…
Whilst I could put forward various rational suggestions, concerning types of accidents, life expectancy after serious injury etc. I would not be surprised if part of the reasoning for such high rates is based on considerations other than immediate risk. For example, I suggest that drivers with 10 points in their licence will tend to drive differently to those with none, hence with insurance premiums there is added incentive to gain no-claims discount/bonus and hence create a clean insurance record if the premiums are on the high side…
Mark Thompson
“3) Pensioners should not pay National Insurance.”
how about NI should just be rolledd in to Income tax as it curretly hits poor workers with irratic earning disproportionately. It is a tax passed it’s sell by date.
As someone soon to hit retirement I am in favour of restricting benefits paid out simply due to the fact that I’ve lived so long. I don’t have any specific contribution to make as to which ones should be curtailed but it does seem unjust that I should be about to garner more when those at the other end of the age range are about to have their lives made even more difficult by having restrictions being put on them.
Many young people will never vote LibDem because of tuition fees and now you want to attack the pensioners. Except for those who think the world revolves around changing the voting system, reforming the House of Lords or even climate change who is the your target voter? You don’t win elections by telling the voters most likely to vote that you are going to make them worse off.
Malc: you have hit the nail on the head. Most of the buses I go on, with my pensioner pass i would add, appear to be full of people travelling on those passes, therefore without the passes a lot would not travel and the bus service would probably be curtailed. Everything we do has consequences one way or another.
@Roland
“A while back when car accident rates among the under 25’s was in the news for some reason, I remember seeing a summary table that showed the high level of accident rates in the over 70’s, only they weren’t grouped together like the under 25’s…”
Without seeing a more detailed breakdown by age that is not clear. It is certainly not clear that your sweeping statement that “drivers over 70 have similar accident rates as the under 25’s” is valid.
“As for insurance premiums, yes, I was very surprised recently at the, relatively low, premium being asked for an 84 year old driver. We were hoping it would be much higher and so encourage the voluntary surrender of the car…”
Why were you surprised? In that particular case did you have specific and genuine grounds for believing the 84 year old should give up driving or did you think they should stop driving just because they were 84?
If that 84 year old driver was being quoted a relatively low premium it was because the insurer did not consider them to be a high risk. For all I know they may have a spotlessly clean driving licence and not been involved in any crashes. They might actually be a very good and safe driver after a lifetime’s experience of driving. They may know their own limitations very well and take care not to exceed them.
In a world where money isn’t unlimited, the issue is how best to use what’s available, balancing the need to (a) reward people who have saved ; (b) protect those who find themselves in poor circumstances whether through bad luck or poor decision); and (c) avoid excessive burden on the working population . There is a real issue over whether benefits in kind achieve the above objectives.
A fundamental problem with benefits in kind is that a liberal in particular needs to answer the question, “why not just give people the cash equivalent?” That way, the individual is free to chose whether to spend the money on bus tickets and TV, or on something else.
Some benefits give an unequal and unfair distribution of advantage. Bus passes benefit pensioners in London and other built up areas over those in rural areas, and the healthy over the housebound. Free TV licences don’t benefit those who live in a care home with only a shared TV, or those without a TV because they lack the eyesight or mental capacity to enjoy it. They also benefit single people over couples.
I don’t really buy the environmental point on bus passes. There’s a case for reducing public transport costs across the board – but the highly targeted support of a particular demographic group to the exclusion of others isn’t an efficient way to do that – e.g. because it doesn’t really deal with congested rush hour traffic where congestion imposes the greatest enviromental and other costs. Bus passes also invite fraud by unscrupulous bus companies, who have been known to over-report OAP travellers to get reimbursement for non-existant journeys.
Such benefits are also regressive because they are untaxed whereas, if a cash equivalent were given, the wealthiest pensioners would be taxed at 40% on that extra income, and the poorest at the zero rate. Obviously this means the cash equivalent would need to be higher than the value of the benefits reflecting some would flow back to HMT in tax.
Winter Fuel Allowance is rather different. It does tend to help the poorest pensioners. I am not sure it does so in the most efficient way (and there are issues over claiming it) but I can see the basic fairness.
Overall, as an economic point, I’d say these benefits don’t make a lot of sense. As a political one, reform needs to be gradual as even keeping the cash there to support pensioners, losers from scrapping benefits will be obvious and angry, while winners will be hidden.
@malc
They are called pensioner benefits, the clue is in the title.
I am simply arguing that the state doesn’t pay money to people who clearly don’t need it.
@Kevin
I don’t see how admin costs would rise because the changes I am suggesting make those who would qualify easy to identify particularly if it was done locally rather than by the DWP.
The status quo can’t be defended.
Why does the free television licence start when you are 75?
Why pay two amounts based on arbitrary age rules to everyone as a winter fuel allowance regardless of their means?
I could go on.
My suggestions are not set in stone, I simply wanted to start the debate.
A debate as liberals we should have.
“1. Free travel – This should be granted to anyone over the age of sixty who has retired from paid work and has an overall annual income below the higher tax rate i.e. 40%”
This would benefit those people who have sufficient pension funds to retire from paid work at sixty but who draw only enough income to keep them below the 40% threshold. Those who don’t have enough pension to be able to retire at sixty would still have to pay for their travel. That does not seem very fair to me.
In the future (and indeed now), one of the biggest divides in society will be between those who have sufficient funds to retire early and those who have to keep on working into old age. It will continue to grow to be a very unpleasant divide in society.
One small suggestion – could the free bus passes please be valid from 1000 til 1600 so there is room on buses for people trying to get to and from work? Likewise GP appointments – slots before 0900 and after 1700 should be for those in full time work!
We need to check on the impact on bus services before taking away free travel passes for pensioners. From my experience (and yes, I do have a bus pass)many of the people travelling outside rush hour are pensioners. Without them the service might struggle and would not be available for others, such as young families, where one person doesn’t have the use of a car.
On the winter fuel allowance, again we need to check on the impact on pensioners who only get the standard state pension. The standard rate pension is not very much and many pensioners are already cutting down on heating to save money. I would agree that it should not be paid to people on higher tax rates. The information should already be there to administer that without too much hassle.
TV licenses are only free to older pensioners and I am not sure much would be saved by stopping that.
As an 82-year-young pensioner and appreciative Pension Credit recipient… I would very much appreciate Messrs Farron and Lamb each spelling out their policy on the future of pensioner benefits… thank you…
There are over-60s still in employment who use their bus passes to commute to work. It was surely never intended for that. I would support David’s suggestion to keep it for those who have retired, but wonder how that could be managed? Otherwise, assuming that the main justification free travel is because pensioners have no earnings and are therefore in straitened circumstances, concessionary travel should only be available at the state pension age (which for me will also be 66).
Just to clarify some of the queries raised and the discussion:
The rules regarding the “older persons” bus pass changed in April 2010.
Basically, the pass is now only available to those who have reached their state retirement age (prior to this date any one over 60 could apply). The pass permits free off-peak (9:30am to 11pm weekdays and all day weekends and bank holidays) bus travel. However, each county may augment this with local arrangements.
The scheme is operated by the county councils rather than central government and requires people to apply and renew their bus pass at least every five years.
However, in Scotland I believe it is still a 60th birthday present; a sort of ‘well done for reaching the three-score mark’ prize.
I think this is part of a wider discussion we need to have on tax and benefits, unless an economist can come up with a new way of squaring the circle of boom and bust as Keynes did. It is obvious that our country cannot afford to give benefits of whatever kind to those who do not need it if they are to help people living in real poverty.
However, there would need to be a determined campaign to explain this as I’ve had the bus pass conversation with fellow pensioner Lib Dems and they become very upset at the thought of losing it even though they could afford to pay the fares. Perhaps I see the injustice more clearly because I am unable to use buses because of ill health and disability so have a prejudiced view.
Outside London the free bus pass is only usable after 0930 so using it to commute is tricky. I worked past retirement age and used my pass to get home but paid full on peak fare to get to work. T he net cost was almost exactly the same as an annual season ticket. I now use the pass instead of a car so the environmental case works for me but people who live in rural areas with no buses lose out massively. On all my journeys the pass is scanned and recorded each time although I don’t get a ticket.
If I had to chose I’d keep the pass and give up the fuel allowance. My solar panels make a profit you see…….!
@Roland
Thanks for clarifying the details around the bus pass entitlements.
Its a very emotive issue.
In Reading we had 24 hour free bus travel for the over 60s for as long as I can remember funded by the local authority.
When we had a Tory/Lib Dem coalition in 2011 they proposed to change it so the free travel started at 0930.
As a carer I went to a meeting about it, where a lot of older people were present.
To say they were not happy was an understatement!
The Labour councillor observing couldn’t stop smirking.
Kay, you can give your fuel allowance away either to local charities or to someone who needs it.
@Jane Ann Liston – Sorry, I didn’t caveat my statement with: “In England…” 🙂
Just a couple of other clarifications:
1. Free travel -Other than the Bus Pass, there are other travel concessions, however the Over 60 railcard isn’t such good value any more, as it doesn’t permit a grandparent to take the grand children out – for that they need a Family & Friends railcard…
2. Winter Fuel Allowance – Whilst this is a ‘universal’ benefit, there are some interesting conditions that need to be satisfied. (See: http://www.nidirect.gov.uk/index/information-and-services/pensions-and-retirement-planning/all-about-benefits/benefits-when-you-retire/winter-fuel-payment/winter-fuel-payment-how-to-claim.htm )
Also in considering this benefit, we should not overlook the Cold Weather Payment, available to those who get Pension Credit. And the Christmas Bonus, which has remained fixed at £10.
3. Free TV licence – This is only available to pensioners over the age of 75.
To me the argument about entitlement is very simply resolved by treating the pension and it’s associated benefits in exactly the same way as we treat salaries and benefits received through employment, namely having all pension benefits assigned a value and listed on a P11D. The approach also permits the setting of a gross pension and the creation of flexible benefits, just like the schemes many employers now operate. So the whole issue of income is handled through the tax system rather than through some parallel bureaucratic universe.
Thinking further about “Pensioner Benefits”, I do wonder whether the debate is too narrowly focused on current benefits and their cost and not on what should reasonably be included in the pension package.
One example, is the GOV.UK tax. The increasing use of online services assumes that everyone has access to (at minium) a basic internet service [Aside: This is 2mbps ADSL – the minimum service level mandated by Broadband Delivery UK ( BDUK) .] and a computer capable of accessing these services. Given there are still public facing government websites that only really work with Microsoft IE (this has been much commented upon in the IT press), this package isn’t necessarily cheap – particularly if you buy a new computer in the high street. Providing this allowance would permit people to either run their own system or take advantage of a small number of
drop-in centres where they can receive expert assistance (yes even in today’s Internet world there is a significant group of people who find computers and the Internet difficult).
[Aside: Posted as two comments, as for some reason the original was deemed too long.]