In what has been dubbed a “mini budget,” the government this week introduced sweeping tax reforms that will bring big changes for retirees from next year.
Designed to pay the NHS and social services, the tax overhaul will for the first time cause around 1.3 million active retirees over 65 to pay National Insurance (NI) contributions out of their income.
For those who earn above the threshold when NI goes into effect – currently £ 9,568 per year – there will be a 1.25 percentage point levy on income above that amount. The change should affect more than 10% of retirees over 65 and still employed.
On the same day, the government also announced a temporary suspension of the triple lockdown on public pensions. This ensures that payments increase each year by the highest rate of inflation, 2.5%, or the average increase in wages. Next April’s increase will not be earnings-related, but will instead increase by the higher of the other two measures.
Here, four retirees talk about how the overhaul will affect them.
“It’s a scam”
Terry Wrigley at Amesbury thinks it is a “bloody scam” that he will have to pay dues to NI and lose to the triple lock suspension. “I’m from the working class and I left school in 1967 and paid NI for over 50 years,” said the 68-year-old who works full-time in construction. “I think it is nerve on the part of this government to withdraw my additional contributions, especially when it means that I will no longer receive a pension.”
Wrigley has said he doesn’t know how much he will lose, but will have to use his savings to make up the shortfall. “I am still working because the state pension is nowhere near enough for what I need,” he said. “My wife normally works full time, but for 14 weeks she has been incapacitated due to an injury.
“I’m 69 this year, I can’t retire and I don’t know when I can. Will I have to work until I’m in my grave?
“It’s only smoke and mirrors”
For Pauline, 67, in Oxfordshire, the suspension of the triple lockdown and the obligation to pay again for national insurance give her the impression of having “passed through the cracks of the system”.
She works three days a week in administration, earning around £ 14,000 a year, and said she ‘would like to be able to quit her job but just can’t afford it at the moment’. Pauline was affected by the increase in the retirement age for women and lives alone after her husband died in 2010. She was his full-time caregiver for 22 years, but left for work after his death.
“I was forced to go back to work, which was not easy after being away from work for so long,” said Pauline.
“I don’t have a private pension, so I have to keep trying to build up some savings to have money for the future.”
She said she was ‘frustrated’ with the way pensioners have been treated and finds it ‘quite difficult’ for anyone to live on a state pension of £ 175 per week. “I had to fight my way and scrimp and scratch to collect what I have. The way the protection of our homes has been presented by the government gives a totally false picture, as it does not cover accommodation and food, ”she said.
“I think it’s all smoke and mirrors.”
“It’s a kick in the teeth”
“It will have an impact on me for the rest of my life,” said Alastair Campbell, 67, who is retired and worked in sales. Campbell, who lives in Perth, Scotland, retired on a limited income and believes it is “shameful” to see the government back on the triple lock. “It’s a kick in the teeth,” he said. “For people like me, every book is a prisoner and you do your best to plan ahead.”
“I started working at the age of 17 and have 44 years of National Insurance (NI) contributions. I had a reasonable income back then and now it has been taken away from me.
The triple lockdown, now suspended, would have resulted in an increase in pensions of more than 8% in April next year. Without the increase, Campbell calculated he would lose £ 529 on a year of triple-lock suspension based on his annual state pension of £ 9,630. He’s nervous that the break might last longer. “To say that it is only for a year is totally misleading because once a lock is broken, it is broken,” he said.
“Let’s say I hope to live another 20 years, that’s around £ 10,000 that I can’t plan ahead. It is a huge sum. “
“We had to sell the apartments of my mother and my mother-in-law”
“I will never tire of voting for the Conservatives again,” said John Brown, 77, of Ormskirk. “I’m disgusted by conservatives who take the poorest, like low-paid young workers with families to support, and who are now breaking manifesto promises with the suspension of the triple lockdown – I have no time at all to them.”
Brown, who worked for 45 years as a railway engineer, said without his company pension he “would be hard pressed to exist” on the state pension alone. “We had to sell my mom and stepmother’s apartments to pay for their care and I think it’s horrible that people have to put their houses up for sale,” he said.
“Personally, I would like to see our foreign aid budget cut dramatically to help, and HS2 dropped. As someone who has worked on the railroads, we won’t see a train on this line until around 2030, when people will be working from home anyway. Obviously something has to happen, but these are just two places where the money can come from.