Election Manifesto for older voters : my 6-point plan for reform
Former pension minister Ros Altmann outlines how she wants to see the next government help poorer pensioners, older women and families facing elderly care.
Government plans for Brexit and the economy will dominate many people's thinking, but a coming Election Manifesto needs to cover other important issues that will affect the lives of older voters significantly.
Here's some initial thoughts - a six-point plan to improve older people's lives, while giving a more affordable, sustainable and fairer system for the future. Below are my suggestions.
1. Radical overhaul of social care
In terms of fairness, it is absolutely vital that the government finally addresses the ongoing and worsening crisis in social care. The current system penalises elderly people and their families and lowers care standards, while raising costs for those paying privately.
It is undermining the NHS and places the biggest burdens on those who fall ill, rather than sharing them fairly. There is no help for the poorest people with moderate needs, which makes it more likely that they end up in hospital or care homes and lose their independence.
Meanwhile, older people who do have savings have to lose everything, including the value of their home, before they get any state help at all. The draconian means-test coupled with council cutbacks, on top of rapidly rising numbers of elderly people, has caused huge strain on the social care and health services, undermining the quality of social care (such as only allowing 15 minute visits and employing low-paid staff on zero hours contracts). The system is riddled with unfairnesses and is simply not fit for the 21st century.
Private payers who are denied state help end up paying over the odds for care, to make up for local authority underpayment. This doubly penalises those families who are unlucky enough to need elderly care – first they get no help from the state, and secondly they also have to pay extra to cover the costs of those who are covered by the state.
To add further to the unfairness, elderly people who are judged to have a health need, rather than a social care need, will have all their care costs met by taxpayers. This arbitrary allocation of resources is unsustainable and is placing the NHS under intolerable strain, even before the huge bulge of babyboomers reaches advanced old age. Proper integration of health and social care is long overdue.
There is no money set aside for this purpose and younger taxpayers will be unable to afford it. Therefore, incentivising those older people who have pensions, Isas or other savings to earmark a sum to pay for care, while the state then covers the extra on top of that, would kick-start funding which is currently non-existent.
Introducing a Dilnot-style cap on care costs, then allowing tax free withdrawals from pension funds if needed to pay for care, plus introducing a special Care Isa allowance (that can be passed on free of inheritance tax) or allocating some proportion of property value up to a limit of, say, £70,000 per person, would ensure babyboomers have incentives to prepare for their coming care costs, while also signalling that everyone will need to think about providing for care in old age, as well as pensions.
2. State pension triple lock could move to a double lock
The triple lock commits to increasing (only some parts of the) state pension by the highest of price inflation, average earnings or 2.5 per cent. The 2.5 per cent commitment contained in the triple lock adds billions to the cost (it is estimated that state pension has cost £3 billion more over the years 2010-16 than if a double lock had been in place).
The longer the triple lock lasts, the greater the future cost will be, with official forecasts predicting it will add at least £15 billion to the long-term cost of state pension provision.
The Pensions Commission recommended only increasing state pensions in line with earnings, but perhaps the government should offer pensioners the higher of prices or earnings inflation, as a double lock, to protect against rises in the cost of living and average living standards of those in work.
If other benefits are being frozen, or only protected by either prices or earnings, to add the extra 2.5 per cent protection for pensioners will cause increasing resentment and also adds to pressure to increase the state pension age faster, which disadvantages those with lower life expectancy and in poorer health.
3. Double lock should apply to pension credit
The triple lock, in fact, contains inherent unfairness which will worsen in coming years as more younger pensioners receive the new state pension. The triple lock does not actually protect many of the poorest and oldest pensioners because it does not cover all state pension payments.
It only applies to two bits of state pension - the old basic state pension (up to around £120 a week) and the full new state pension (up to around £160 a week, but only available to the youngest pensioners).
Most importantly, it does not apply to pension credit (which the poorest pensioners receive).
A much fairer system would see the double lock protection extended to pension credit to help the oldest and poorest pensioners.
4. Improve pension outcomes for women
Women lose out in pensions in many different ways and, although the government has made some improvements, both state and private pensions policies still discriminate against women. As regards private pensions, women are losing out in workplace pensions. There are several reasons for this.
The gender pay gap means they earn less than men, so their pension contributions will be lower; but recent studies also show that women work in jobs with lower employer contributions and on average their employers pay 1 per cent of salary less into their pensions than for the typical male. Women also take career breaks, which reduce their lifetime earnings.
In addition to these factors, women are also losing out in auto-enrolment as they are more likely to be low earners. Only people earning over £10,000 a year in any one job are auto-enrolled by their employer. So these lower earners lose out on their employer's contribution.Many women work in multiple low paid jobs, in order to fit their work commitments around caring responsibilities. Even if these women's total income is above £10,000, if they earn less than this in each job, they lose out on auto-enrolment completely.
The government estimates that over 70,000 women are affected. These women are also more likely to be losing out in state pensions too. The cracks in the national insurance system penalise far more women than men.
Those earning less than £5,876 a year in any one job get no credit for their state pension, even if they have multiple low-paid jobs that would bring their earnings over the national insurance threshold. The Government estimates 20,000 -30,000 women are affected and they get no credit towards their state pension.
In addition, women who have children but are in households with incomes that disqualify them from child benefit have to claim the benefit even if they know they're not entitled to it, otherwise they lose out on their state pension credit too.
All these wrinkles in the national insurance state pension system should be removed, so that women are no longer discriminated against in these ways.
Finally, there are many WASPI women who were not properly notified of changes to their state pension age. The government should recognise the hardship its failure to communicate properly has caused and should ensure those affected are able to receive some early payment, to compensate for the short-notice increase in pension age which they did not have time to prepare for.
5. Reform pensions tax relief
The government decided not to reform the current system of pensions incentives, which revolves around tax relief. The present arrangements are not understood by the majority of people, who don't realise that 20 per cent tax relief gives them a 25 per cent government bonus on their pension contributions, while higher rate taxpayers get 40 per cent tax relief, which equals a 66 per cent bonus on their contributions.
Instead of confusing people with a Lifetime Isa that could also be used for house purchase, the government should introduce a fairer system of pension incentives shared more fairly, with a 33 per cent government bonus being offered to everyone.
The annual contribution limit would need to be cut from the current £40,000, and the lifetime allowance should be reformed or abolished.
6. Encourage longer working life
If the Government is serious about controlling immigration, given the ageing workforce it will also need to ensure that more older people stay engaged in the labour market than ever before. This will need a radical rethink of workplace practice, as well as greater encouragement of mid-life training, career reviews and apprenticeships.
Those who can and want to work flexibly as they get older should be supported positively, with employers required to ensure age is no barrier to ongoing training and re-skilling opportunities.
Businesses should take the value of older members of their workforce more seriously and unlock the potential of older workers. This can boost the economy both now and in future, as people have higher lifetime incomes and opportunities to build up better pensions.