Pension fury after ‘£1,900 tax bombshell’ plan put forward to ‘hammer’ savers
Pensions: Money Box caller talks impact of age differences
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Pensions have been at the heart of recent economic debate after the Government suspended the triple lock policy. The state pension will rise by 3.1 percent, in line with September’s inflation figure, not by 8.3 percent as it would have done under the triple lock, in line with an increase in average earnings. But a Conservative Party candidate in the race to replace Owen Paterson as North Shropshire’s MP was accused last week of calling for working pensioners to pay thousands extra a year in tax. Neil Shastri-Hurst said working pensioners should begin paying National Insurance contributions that would see their annual tax bills rise by nearly £2,000.
He also said the triple lock should be scrapped for good, but research has suggested that his ideas would severely hit pensioners.
According to research by the House of Commons Library, Mr Shastri-Hurst’s proposals would lead to hundreds of thousands of working pensioners hit with a £1billion tax bill.
In the constituency of North Shropshire, over 65s would lose out by £1,900 each.
Mr Shastri-Hurst proposed the ideas in an article for ConservativeHome in January this year.
He argued that, with increasing life expectancy and improved health in later life, “the artificial bar of retirement at 65 no longer makes sense”.
The Tory candidate added: “Flowing from this is the inconsistency whereby those over the age of 65 are not expected to pay national insurance. There is no good reason for such an exemption and it should be closed off.”
Liberal Democrat Work and Pensions spokesperson Wendy Chamberlain said Mr Shastri-Hurst must “explain why only earlier this year he was calling for new taxes on the over 65s and for the scrapping of measures to protect the state pension”.
She added: “Pensioners who have worked hard and paid their taxes all their lives just want to enjoy a comfortable retirement. Instead the Conservative candidate wants to hammer them with a £1,900 tax bombshell and cuts to the state pension.”
Chancellor of the Exchequer Rishi Sunak has already sparked debate over taxes this year, after he and Prime Minister Boris Johnson announced an increase in National Insurance contributions in September.
Employees, employers and the self-employed will all pay 1.25p more in the pound for National Insurance from April 2022.
But from April 2023, National Insurance will return to its current rate, and the extra tax will be collected as a new Health and Social Care Levy.
This levy – unlike National Insurance – will also be paid by state pensioners who are still working.
However, the Government’s plan received widespread criticism, as there are concerns that the increase will have a higher impact on the lower-paid.
Economist at the free-market Institute of Economic Affairs, Julian Jessop, told Express.co.uk at the time of the announcement that there is no guarantee the plan will even work.
He said: “It’s a tax increase for a start, you have to question whether you needed to raise taxes in the first place.
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“But also, the money doesn’t look like it’s going to be well spent, so it doesn’t even look like it’s going to achieve the aim of improving health and social care.
“I think it’s a missed opportunity to have a fundamental rethink about social care and tax. Instead they have gone for a short term fix that actually may end up fixing nothing at all.
“There’s actually not going to be money for social care for several years, initially the money is going to be used to solve the backlog in the NHS.
“In the longer run, there’s no actual guarantee that this money will go to social care because, although they say it’s going to be ring-fenced, why would you necessarily believe a Government that’s just broken so many manifesto promises in a single day.”
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