Rich pensioners may lose benefits to pay for care

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nursing elderlyOliver Berg/DPA/Press Association Images

A leading think-tank has been examining solutions to the social care crisis looming in the UK, and has come to a painful conclusion for better-off pensioners.

It is arguing that they need to lose some of their benefits and face higher rates of tax. But why should they bear the brunt?

The challenge

The Nuffield Trust has seized on the scale of the crisis facing the UK's older people. By 2030, over 10% of the UK population will be aged 75 or over - some 70% more than in 2008. Even before the current round of cuts, there has been relatively slow growth in spending on social care, so that in many parts of the country it falls well below minimum standards. The Dilnot Commission estimated that, over the last four years, demand has grown to 9% higher than spending.


The government has earmarked funds for some extra spending, but this will not be enough. Add to this the Dilnot Commission's recommendations, and there will be an additional annual cost of £1.7 billion.

Pensioners lose benefits

The think tank therefore considered alternatives, and concluded that better-off pensioners may have to bite the bullet. The report said: "One potential source of funding, therefore, could come from restricting some of the universal benefit payments to older people with higher incomes and wealth. This could include, for example, the winter fuel payment, free TV licenses and travel concessions (the free bus pass)."

Of course it recognised this was tackling benefits that many pensioners rely on, and said the financial benefits needed to be balanced "against the costs in terms of fairness and the impact on social solidarity."

This is going to be a tricky thing to pull off given the guarantees the government has made about the winter fuel allowance - and the huge backlash it faced over the 'granny tax'.

Tax

Nuffield added that if this measure didn't free up sufficient cash, pensioners could be targeted with higher taxes too. Among the possibilities are: imposing employee national insurance contributions on pensioners' earnings, reducing the generosity of the tax treatment for lump sums taken from pensions and restricting tax relief on pension contributions to the basic rate of income tax.

It tried to soften the blow by saying: "Any such tax increases should be levied in a way that is progressive and has a neutral impact on the distribution of income and wealth across ages and income groups."

However, for pensioners the prospect of a double whammy of losing benefits and paying more tax may mean they struggle to consider the proposals as either 'fair' or 'neutral'.

But what do you think? Let us know in the comments.

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