Press Release
Age UK’s response to the Chancellor’s Autumn Statement 2012
5 December 2012
In response to the Chancellor’s Autumn Statement, Michelle Mitchell, Charity Director General for Age UK said:
On social care
The care system is already on the verge of collapse so we are deeply disappointed that the Chancellor has not taken this opportunity to announce fair and sustainable funding to provide vital support for older people.
“While it is reassuring that the National Health Service budget has been protected from the cuts falling on other areas of government spending, unless funding for social care is urgently addressed then the knock on costs to the NHS will continue to grow. We already see hospitals under severe pressure because of a lack of community and social care services for older people who are left to struggle to cope without the vital support they need. The Chancellor’s announcement that in two years time, councils will have to cut another two per cent from their budgets is likely to lead to more cuts to frontline care and support services that are already in many cases stripped to the bone.
“Allowing the social care system to limp along leaving too many older people isolated and afraid of what tomorrow might bring, is not only morally questionable but makes no financial sense. “
On changes to pension tax allowances
“The proposal to cut the lifetime and annual tax relief allowances are only likely to affect people on higher incomes or on lower incomes with particularly generous pensions. 99 per cent of pension savers make annual contributions below £40,000 – the level of the annual allowance that will apply from 2014-15 – with the average person contributing around £6,000 a year
“We believe there need to be fairer tax incentives to encourage people on modest incomes to save for a pension. So we would like to see some of the savings made from reducing the annual and lifetime allowances to be used to encourage people on lower incomes to save. It is disappointing that the Chancellor hasn’t used these changes as more of an opportunity to take a broader look at how to reward people for saving in a pension and better provide for their later life.
“A number of people already in retirement have contacted us about the rules for ‘income drawdown’ and we welcome the change announced in the statement. The tax laws allow pension savers to draw income directly from their pension fund (‘income drawdown’), within limits designed to stop people running out of money. The limit used to be that the maximum you could draw was 120% of the amount you could have had with an annuity, but the government had previously reduced this to 100 per cent. This caused hardship among people who had already retired and were using income drawdown. The Government has therefore said it will return to the original limit of 120%.”
Background briefing:
· You get tax relief on your top rate of tax on contributions you make to a private pension. From 2014-15, the Government has reduced the lifetime allowance for pension contributions from £1.5 million to £1.25 million and the annual allowance from £50,000 to £40,000.
· The Government has also announced that people can draw more income directly from their pension fund (‘income drawdown’).
What this means for older people
A high proportion of pension tax relief currently goes to higher rate taxpayers. In 2010-11, tax relief for pension savings cost the Government around £33 billion, with over half of this relief going to higher rate taxpayers. According to the Government, 98 per cent of individuals currently approaching retirement have a pension pot worth less than £1.25 million – the level of lifetime allowance that will apply from 2014-15 – while the median pension pot for individuals approaching retirement is £55,000. 99 per cent of pension savers make annual contributions below £40,000 – the level of the annual allowance that will apply from 2014-15 – with the average person contributing around £6,000 a year
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