How does plundering pensioners’ savings get Britain back on its feet?
tHe suggestion by Paul Johnson of the institute of Fiscal Studies (iFS) that pensioners haven’t been hit very much by the tax and benefit changes brought about by the financial crisis (Mail) incenses me. Let’s examine a few facts. instead of spending money on exotic foreign holidays, for many of my working years i saved money in a personal pension and isas. My pension was targeted to yield me an income in excess of £7,000 a year, but due to falling investment profits and annuity rates i finished up with less than £4,000 a year. While working homeowners enjoy the lowest mortgage rates ever, my investment rates have plummeted, costing me more than £2,500 a year. Old-age pensions increases are now based on the lower Consumer Price index (CPi) rather than the previously used higher retail Price index (rPi). the average inflation rate for pensioners runs at around 2 per cent above the CPi, as they have to spend a larger proportion of their income on utility bills and food. this means that they are around 2 per cent worse off in real terms every year. the cumulative effect of this is frightening. the standard personal tax allowance is being increased by £1,335 this year, yielding a tax reduction of £267 for people who work. the pensioner’s allowance has been frozen, which means that my 2.5 per cent pension increase will be taxed in full, and i will receive only 2 per cent. this will cost me around £28 more in tax on my basic pension. My wife and i used to enjoy two days out a month. Now we are lucky if we can manage one day every three months. i now wonder why i bothered saving for my retirement, as i am going to have to start spending my capital in order to survive. When it has gone, i will have no choice but to claim benefits. i don’t see how this can help the country’s finances. if Mr Johnson fails to see how severely this affects pensioners, it’s time he resigned from the iFS. the average pensioner has suffered more than anyone — and now there is talk that some benefits, such as free bus passes, will be cut.
PETER SLATFORD, Tilehurst, Reading.