Wednesday’s Budget seemed neutral enough at first glance, and there were few surprises contained in the Chancellor of the Exchequer’s red book as many of the details had been leaked in the days prior to the Budget.
However, pensioners could find themselves feeling the pinch as a result of one of the announcements made on Wednesday. It was described as a “simplification” of the tax system and will mean that the age-related tax allowance will be scrapped, and those already in receipt of the age-related personal tax allowance will find it frozen at its current levels. The decision has come in for much criticism and charities such as Age UK and Saga say that it will leave pensioners worse off.
Already known as the ‘granny tax’, the announcement came as a surprise to many as there was no suggestion of the changes prior to the Budget and some are saying that pensioners are paying the price of other tax cuts. However, ministers argue that those affected will not be any worse off in cash terms.
Commenting on the Budget, Michelle Mitchell, Charity Director General of Age UK said:
“Older taxpayers will be disappointed that the Government has decided to scrap the age-related tax allowance. This will affect those with modest pensions and savings for their retirement.”
“Someone with an income as low as £10,500 who reaches 65 from April 2013 could be £259 a year worse than under the current system with very little time to adjust their financial retirement plans.”
However Age UK does welcome the news that there is to be a new flat rate pension introduced, an idea which had been suggested some time ago and confirmed on Wednesday; further details of the flat-rate pension will be made available later this year. In a statement Age UK said:
“We agree with the Chancellor that the current pension system is bafflingly complex and so we welcome his announcement that the Government is to bring in a flat rate pension and look forward to reading more detailed proposals.
“Age UK believes that a flat rate pension would enable future pensioners to feel clearer about their retirement income and plan accordingly.”