In what has been dubbed a “mini budget”, the government this week introduced sweeping tax reforms that will mean big changes for pensioners from next year.
Designed to pay for the NHS and social care, the tax overhaul will result in about 1.3 million working pensioners over the age of 65 paying national insurance (NI) contributions on their earnings for the first time.
For those earning over the threshold when NI kicks in – currently £9,568 a year – there will be a 1.25 percentage point levy on earnings over that sum. The change is expected to affect more than 10% of pensioners over the age of 65 and still in employment.
If national insurance must fund social care, at least make it fairRead more
On the same day the government also announced a temporary suspension of the triple lock on state pensions. This ensures payments rise annually by the highest of inflation, 2.5% or the average wage increase. Next April’s increase will not be linked to earnings, but will instead rise by the highest of the other two measures.
Here, four pensioners speak about how the overhaul will affect them.
‘It’s a rip-off’
Terry Wrigley from Amesbury.
Terry Wrigley in Amesbury thinks it’s a “bloody rip-off” that he will have to pay NI contributions and lose out because of the triple lock suspension. “I’m working class and left school in 1967 and have paid NI for over 50 years,” said the 68-year-old who works full-time in construction. “I think it’s a cheek of this government to take further contributions from me, especially when it means I won’t be getting more pension.”
Wrigley said he doesn’t know how much he will lose but he will have to use savings to make up the shortfall. “I still work because the state pension is nowhere near enough what I need,” he said. “My wife normally works full-time but for the last 14 weeks she has been incapacitated because of an injury.
“I’m 69 this year, can’t retire and I’m not sure when I will be able to. Will I have to work till I’m in my grave?”
‘It’s all just smoke and mirrors’
View image in fullscreenPauline from Oxfordshire.
For Pauline, 67, in Oxfordshire the suspension of the triple lock and the requirement to pay national insurance again makes her feel as if she has “fallen through the cracks in the system”.
She works three days a week in administration, earning about £14,000 a year, and said she “would love to be able to give up work but simply cannot afford to at the moment”. Pauline was affected by the rise in pension age for women and lives alone, after her husband died in 2010. She was his full time carer for 22 years, but went out to work after he died.
“I was forced to go back out to work which wasn’t easy after being so long out of the workplace,” said Pauline.
“I have no private pension so I need to continue to try to build up some savings so I can have some money for the future.”
She said she is “frustrated” by the way pensioners have been treated and feels it is “pretty tough” for anyone to live on a state pension of £175 a week. “I’ve had to fight my way and scrimp and scrape to get together what I’ve got. The way the protection of our homes has been presented by the government gives a totally false picture, because it doesn’t cover accommodation and food,” she said.
“I think it’s all just smoke and mirrors.”
‘It’s a kick in the teeth’
Alastair Campbell from Perth, Scotland.
“This will impact me for the rest of my life,” said Alastair Campbell, 67, who is retired and used to work in sales. Campbell, who lives in Perth, Scotland, retired on a limited income and thinks it is “disgraceful” to see the government renege on the triple lock. “It’s a kick in the teeth,” he said. “For people like me, every pound’s a prisoner and you do your best to plan ahead.”
“I started working when I was 17 and have 44 years of national insurance (NI) contributions. I was a reasonable earner at the time and now that’s been taken from me.”
The now suspended triple lock was forecast to have delivered a rise in pensions of more than 8% in April next year. Without that uplift, Campbell has calculated that he will lose out on £529 on one year of a triple lock suspension based on his annual state pension of £9,630. He is nervous that the break could last for longer. “Saying it’s only for one year is totally disingenuous as once a lock is broken, it’s broken,” he said.
“Say I hopefully live for another 20 years, that’s around £10,000 I can’t plan ahead for. It’s a staggeringly huge amount.”
‘We had to sell my mother’s and mother-in-law’s flats’
View image in fullscreenJohn Brown from Ormskirk.
“I won’t get off my backside to vote for the Conservatives again,” said 77-year-old John Brown from Ormskirk. “I’m disgusted with the Tories for taking from the poorest such as low-paid young workers with families to support, and now breaking manifesto promises with the suspension of the triple lock – I’ve no time for them at all.”
Brown, who worked for 45 years as a railway engineer, said without his company pension he would “find it hard to exist” on the state pension alone. “We had to sell my mother’s and mother-in-law’s flats to pay for their care and I think it’s horrendous that people have to put their homes up for sale,” he said.
“I would personally like to see our foreign aid budget cut dramatically to help, and HS2 abandoned. As someone who worked on the railways we won’t see a train on that line until around 2030 when people will be working from home anyway. Obviously something’s got to happen but those are just two places where the money can come from.”