We’ve allowed all of our pensions to be cutThe trick to launching a tax raid is always to make it sound as if it affects someone else.
Freezing higher-rate tax thresholds — that’s the rich. Taxing dividends more heavily — business owners. Scrapping the triple lock on the state pension — that’s just old folk. And, as we all know, they’ve done just fine out of the pandemic.
In reality, though, many of these taxes, and benefits, affect us all eventually, and it is only then that we realise how much we have lost.
The state pension is not only for old people. Whether you are 22 or 62, it is yours. When it rises, all our future pensions increase too. When it doesn’t, we are all poorer.
So we need to stop and ask one more time whether the chancellor’s intention to suspend the triple lock that promised to raise the state pension by whichever is the higher out of wage growth, inflation or 2.5 per cent is justified.
Pensioners are not the wealthy bunch of baby boomers that they are often characterised to be. One in three gets less than £150 a week from the state pension; about 1.2 million get less than £100 a week.
Government analysis shows that the average weekly income of a pensioner has increased little in a decade, from £319 a week in 2010 to £331 a week by the end of 2020 — a rise of 3.76 per cent. Those aged over 75 have an average weekly income of £302.
The state pension is not a handout. You earn it by paying for it and working for more than 30 years. Unquestionably the state pension should not rise by the traditional earnings measure, which is September’s growth in average total pay, including bonuses, published by the Office for National Statistics (ONS).
This came in at 8.3 per cent — an unusually high number because of the distortions of the pandemic.
Inflation was 3.1 per cent, and so the government chose to use this measure instead. Yet that too is distorted.
The move costs us £30 billion over the next five years, and strips £2,660 from someone on the new state pension over the same period.
The chancellor, Rishi Sunak, did not need to scrap the link to earnings altogether.
Section 150A, subsection 8 of the Social Security Administration Act 1992 is the legislation that created the earnings link on pensions — and essentially says you can pick any measure you want.
There is a wealth of data from the ONS and the Office for Budget Responsibility to choose from that could have given a fairer figure of, say, 4 per cent or 5 per cent.
Sunak found plenty of wiggle room in the budget to splash the cash — just not enough for pensioners.
The former pensions minister Baroness Altmann is trying to launch a last-minute bid to prevent the chancellor from hurting those who rely on the state pension.
It was the calculation of earnings that was broken, not the triple lock. Rather than fix the part that needed repairing, the chancellor chose to break a pledge that was actually working.