The amount by which the state pension increases next April will be felt immediately by those above state pension age, and it’s also our more elderly who are most likely to be beneficiaries of an improved approach to social care funding. But with neither state pensions nor social care costs coming out of some pre-funded pot, it’s those of working age who will bear the costs of the Government’s decisions.
Steven Cameron, Pensions Director at Aegon comments: “Both state pensions and social care funding are hugely important policies that need long term stability. They also both come with a multi-billion pound price tag so it’s important that they win support across the generations, rather than pitting one against the other. At a time when the Chancellor needs to get the UK’s finances back on a sounder financial footing, every penny counts and the billions under debate here make up a lot of pennies.
“Across all ages, few would disagree that we need a new approach to social care funding, providing dignity in old age to our most vulnerable while sharing costs fairly between the state and individuals, with a greater contribution from those who have more wealth.
Funding the state’s share through a hike in National Insurance alone does seem to place a disproportionate burden on those of working age. But the full package is likely to still see individuals who need care and who do have more wealth contributing up to say £80,000, plus ‘room and board’ costs. If sticking to NI rather than income tax rises, the Government could further address generational unfairness by levying NI on earnings after state pension age or by considering additional adjustments to wealth taxes.
“Next week, the ONS will publish the earnings figures which underpin the state pension triple lock formula. If anything like last month, this could result in a record 8.8% increase for pensioners, but with an £8bn price tag for workers’ NI next year and every future year. Stripping out the distorting impact of the pandemic on earnings growth figures could lead to an increase of closer to 5%, which many including pensioners might agree is fairer. Now is the time for the Government to come clean on its intentions to avoid setting unrealistic expectations around next year’s state pension increase.
“Any adjustment to the triple lock or any increase in NI to fund social care would both represent a Manifesto breach and are likely to generate some initial ‘outrage’ from older and younger generations. However, the Manifesto was written in a world before the pandemic and the Government needs to face up to difficult decisions, while explaining its rationale in both affordability and generational terms.”
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