Last week’s ‘write-in’ email campaign purports to have the support of 62,000 members of the public and demands, on account of pensioner poverty, that the basic state pension should not be taxed.
I know that many pensioners are struggling but those who haven’t qualified for the state pension can apply for Pension Credit and anyone who is wholly reliant on the state pension as their sole source of income will not be paying any income tax on it because they have a personal tax free allowance of £12,570. In addition, pensioners do not pay National Insurance.
To exempt well off pensioners from paying tax on their basic state pension would be deeply unfair to the pensioners who are struggling, and to everyone else still at work and paying taxes to pay the pensioners.
Many of my correspondents forget that the pension is a state benefit, albeit not a universal benefit, but qualified for by national insurance contributions, a state benefit nevertheless.
We are often indignant when reminded about this. We insist that we are entitled to our pension because we have earned it by paying our contributions. Not so, we qualify for it by paying our national insurance contributions, we do not earn it. when we fully qualify we all end up with exactly the same pension notwithstanding that some will have paid many thousands of pounds more in contributions than others.
If our contributions were going into a fund and our pension was dependent upon the investment returns on the amounts we paid into that fund, then we could legitimately claim we had earned it, and not merely qualified for it.
Alas, there is no such fund. Our national insurance contributions are a tax like any other.
The reality is that current taxpayers are paying the pensions of current pensioners in the hope and expectation that this arrangement between the generations will continue.
So, perhaps pensioners might moderate the demands that will be placed on future generations as the numbers of the retired increase, and the working population shrinks.
The baby boomers enjoyed the ability to earn defined benefit private pensions which are no longer available, they had free higher education, and much easier access to house purchase.
My children have none of these things, and no prospect of being able to spend as much as a third of their lives in retirement.
The suggestion that the state pension should be untaxed is quite out of place.