Universal Pensioner Benefits: right or bonus?

Universal Pensioner Benefits: right or bonus?

With the Winter Fuel Allowance payments due to be sent out this month and next and the recent furore at the Conservative Party conference we look at the whole question of entitlement.

Other non means-tested payments that are on offer include free bus passes, free prescriptions, eye tests, TV licences for the over 75s and senior railcards. Many commercial outlets offer discounts and concessions for pensioners such as theatres cinemas, restaurants and hairdressers.

These benefits are available whether you are struggling to manage on your pension or a millionaire.

At the recent Conservative party conference, Dr Liam Fox told the audience that now was the time for the government to make further cuts to pensioner benefits.

He said: “This is the time to fix the roof. “We have a broken opposition. We have just won a general election and we need now to take the tough decisions we believe are right.”

But it was the comments made by Alex Wild, of the Tax Payers’ Alliance, during a fringe meeting at Conservative Party conference in Manchester that caused indignation, when he said the cuts should be made as soon as possible after an election for two reasons:


“The first of which will sound a little bit morbid – some of the people… won’t be around to vote against you in the next election. So that’s just a practical point, and the other point is they might have forgotten by then.

“If you did it now, chances are that in 2020 someone who has had their winter fuel cut might be thinking, ‘Oh I can’t remember, was it this government or was it the last one? I’m not quite sure.’

“So on a purely practical basis I would say do it immediately. That might be one of those things I regret saying in later life but that would be my practical advice to the government.”

The National Pensioners Convention, Britain’s biggest older people’s organisation, has called on the Taxpayers’ Alliance to apologise for the “cynical” and “offensive” remarks.

Dot Gibson, the NPC’s general secretary, said: “Mr Wild’s remarks are both politically cynical and personally offensive and there needs to be an apology. It represents some of the most awful ageist nonsense I’ve heard in a long time.

“He doesn’t consider the fact that the winter fuel allowance is essential because every year tens of thousands of older people die from the cold. Taking it away would just make this worse – but perhaps that’s what he wants. “

Pensioners’ incomes

Over the decade to 2012/13, average net pensioner income grew by 18% in real (RPI-adjusted) terms, compared to a 7% real fall in average full-time earnings over the same period.

The distribution of pensioners’ income became wider during the 80s and early 90s as income rose more quickly for better off pensioners.

28% of pensioner households received means-tested benefits in 2012/13. 17% of pensioner households have income from earnings, down from 19% the previous year.

In recent years the value of the basic State Pension has risen in relation to average earnings, after a long period of relative decline.  In April 2013 the basic pension for a single person was worth 17.8% of average full-time gross earnings, compared with a peak of 26% in1 979.

However figures released in October 2015 by The Institute for Fiscal Studies showed the generosity of work pensions, better state support and the diligence of the ‘baby boomer’ generation in paying off mortgages had made the retired “better off than ever before”.

Pensioners now enjoy larger weekly incomes than people of working age after an “astonishing turnaround” in poverty among the elderly, analysis of average pay shows for the first time.

Its research showed on average pensioners earn £394 a week compared to the £385 median among the working age population.   However tax is payable on these incomes which adds to the economy.

Costs to the tax payer

Universal Pensioner Benefits cost the Exchequer over £8 billion a year. This is not a massive sum compared to overall government expenditure, but is it right that every pensioner gets WFA, even cash millionaires?

It could well cost more in administration, fraud and overpayment than it would save. It is also unclear what would be means-tested. Is it earnings or assets? If earnings, then over what period? If assets, then which assets?

Worst yet, if pensioners had to apply for WFA, many less well-off, but proud, pensioners would choose to go without. Only two thirds of pensioners eligible for Pension Credit are actually in receipt of the benefit for that very reason.

Off-putting process

There is also a real risk of the application process putting off pensioners who are intimidated by form filling. Forms are genuinely frightening to many people – Citizens Advice dealt with 1.2 million cases related to means-tested benefits in 2009 to 2010, 17 per cent of their total case load.

While not all of the figures are readily available, the Winter Fuel Allowance costs between £2bn and £3bn a year, but the cost of means-testing this may be more than any saving.

In context, of course, the amount spent by the Government on winter fuel payments is dwarfed by other benefits measured by the DWP, even if pensions are excluded.

One opinion is that if the UK paid all pensioners an adequate pension, WFA, free bus passes, the Christmas bonus, free TV licences etc. would not be necessary – the pension would cover all these costs. Pensions are not a free ride; unlike other benefits, the pension is based on how much has been contributed. And remember, unlike other benefits, the pension is already taxable; “wealthy” pensioners are already means-tested.