In my bi-monthly column for the Hastings, St Leonards and Rye Observer, I have recently written about improved fiscal support for families through tax-cuts to National Insurance Contributions, changes to Child Benefit and the roll-out of free childcare. I have not yet touched upon pensions, so thought it might be something Rye News readers might find interesting, and hopefully useful.
When David Lloyd George introduced the state pension in 1908, which took effect from 1909, life expectancy was 51 and the retirement age was 70 (only around 5 per cent of the population were older than that). The Old Age Pensions Act 1908 also had stringent means testing; you had to be poor, and of good character – meaning you could not be habitually drunk, been in prison in the previous ten years or had never worked when able to do so. Before 1909, people depended on saving for their old age with Friendly Societies, or their only resort might have been the workhouse. Since 1909, pensions have evolved, with the biggest change in 1948 when the modern State Pension system was introduced; available to all and paid for by workers and employers through National Insurance Contributions – although the women’s pension age was reduced to 60 from 65. Men’s pension age remained at 65, which I always find rather odd as women have a longer life expectancy. In 1993, the then-Chancellor of the Exchequer, Ken Clarke, announced that the Government would equalise the State Pension Age at 65, and that this change would be phased in over ten years, starting in 2010. In 2011, to ensure the sustainability of the State Pension system, the Coalition Government accelerated the equalisation of the State Pension Age and pledged to raise it to 66. This meant that the State Pension Age for women would reach 65 in November 2018, and the increase from 65 to 66 would happen by October 2020. No doubt our State Pension will continue to change in the years ahead as life expectancy has rapidly increased over the past few decades and shows no sign of reversing.
Life expectancy has now risen to 81 and pension age for both men and women is currently 66. The State Pension Age will rise to 67 between May 2026 and March 2028. This change will affect people born after April 1960.
The Government has protected and is supporting the incomes of over 12.2 million pensioners by maintaining the Triple Lock, introduced in 2011, and intends to continue to do so. There are around 23,196 pensioners in Hastings and Rye, and it is good news that by this Government protecting the Triple Lock they have received much needed pension increases, of 8.5 per cent this month. This delivers on the Government’s promise to provide dignity in retirement. The full yearly amount of the basic State Pension is £3,700 higher, in cash terms, than in 2010. That is £990 more than if it had been uprated by prices, and £1,000 more than if it had been uprated by earnings since 2010. A full basic State Pension is worth over £19 more per week in 2024/25 under the Triple Lock than if it had been uprated by earnings since 2010.
Further, the Personal Allowance remains high enough that a pensioner only receiving a full basic or new state pension will not pay any tax on this income. They will only pay income tax if their total income is above £12,570 - the current (tax-free) personal allowance. In 2010 the tax-free personal allowance was £6,475, and since 2010, there are 200,000 fewer pensioners living in absolute poverty after housing costs, as this Conservative Government seeks to protect the most vulnerable in society.
To help pensioners with increased costs over the winter, the Government delivered nearly 12 million Winter Fuel Payments and Pensioner Cost of Living Payments, helping to protect the most vulnerable. 11.9 million payments, worth £4.8 billion, have been made to pensioners across the UK, providing vulnerable households with up to £600 to help with their energy bills this winter.
The Government has delivered wide ranging pension reforms that will see the typical pension boosted by £1,000 a year helping people save for their retirement. For example, the Chancellor’s ‘Mansion House Reforms’ could unlock an additional £75 billion for high growth businesses, while reforms to defined contribution pension schemes will increase a typical earner’s pension pot by 12 per cent over the course of a career. In addition, the Pensions Lifetime Tax Allowance has been abolished, incentivising more experienced workers including NHS doctors, teachers and other professionals to stay in work for longer or return to the workforce.
Finally, a reminder about Pension Credit which is not given automatically; pensioners need to claim it. It is worth making a claim even if you think you are not eligible – you might be. You may still be able to get Pension Credit even if you have not paid National Insurance Contributions, have savings or a small pension, or live with your grown-up family or own your own home. Even a small award of Pension Credit can open doors to additional help and support – including help with housing costs, council tax, heating bills, a free TV licence for over 75s and extra cost of living payments.
Pension Credit provides vital income for our most vulnerable pensioners – averaging more than £3,900 per year. Only 3,459 Hastings and Rye households received Pension Credit as at November 2022 – there is room to improve local uptake, so please spread the word.