• PENSIONSANDSAVINGS.COM

    From Ros Altmann:economist and pensions,
    investment and retirement policy expert

  • pensionsandsavings.com

    Don’t hit older workers to pay for social care – need a solution that is fair across and within generations

    Don’t hit older workers to pay for social care – need a solution that is fair across and within generations

    • Forcing pensioner workers to pay National Insurance is not a solution to care funding crisis
    • Imposing new National Insurance on just one group introduces new unfairness and could be politically damaging
    • Pensioners are not entitled to many of the benefits that National Insurance covers
    • Working past pension age should be encouraged, not penalised to pay for other people’s care
    • How could Government justify forcing pensioner workers to fund other people’s social care while non-working pensioners on huge pensions pay no more

    Government should not impose National Insurance on pensioner workers to fund social care: Apparently, the Government may be considering imposing National Insurance payments on people working past state pension age, to raise revenue for social care. This would be a huge mistake and deeply unfair as a means of improving social care funding.

    This would replace one unfair system with a new unfair system: It is true that the current system is unsustainable, unfair and unfit for purpose and the UK must address the lack of resources currently earmarked for social care. But hitting just those pensioners who are still working is not a solution. It merely introduces new unfairnesses and would likely upset many core Conservative supporters. Only about one in ten pensioners continues working past state pension age and are not all well off. Many older workers keep working because they do not have good pensions and are trying to make ends meet. It is wrong to see them as an answer to the care funding shortfall. Why should they be targeted to pay for other people’s care while non-working pensioners, many of whom have generous (often taxpayer-funded) pensions, would pay nothing? I hope the Prime Minister will heed the lessons of the last election manifesto, which proved how politically toxic the issue of care funding can be. The aim should be to share the burden of care funding, not single out one group to find funding for everyone else.

    Older workers should not be seen as a ‘cash cow’ to help solve a problem which needs a new national solution: Care is in crisis, there is no money set aside either by Government or individual families, to pay for people’s care. The Dilnot Report suggested the system needs an extra £2billion a year urgently and some believe imposing NI on pensioner workers might raise that kind of sum. But this would be socially inequitable and damaging to society.

    Burden of care funding falls on very small group of people – those who don’t qualify for NHS and still have some assets: At the moment, social care funding comes mostly from those people who need care, in the form of a draconian means-test which takes away almost all their life savings and assets. Those who don’t need care pay nothing at all. And those who get illnesses, like cancer, have all their care costs covered by taxpayers via the NHS.

    Double whammy for those who need care in later life as they must pay for shortfall of council care funding too: Successive Governments have failed to prepare for the costs of rising numbers of older people needing to be looked after. Care funding is left to local authorities whose budgets have been squeezed for years. They cannot afford to pay the full cost of care for those who qualify for council support, so they pay less than it costs care providers to provide the care. Those companies then charge private payers a premium to make up the shortfall of council-funding. So not only do families have to pay for their own care, they also have to pay for others too. While the majority of older people pay nothing at all.

    National Insurance pays for benefits that pensioners are no longer entitled to: Pensioners cannot claim more State Pension, unemployment or sickness benefits, so imposing it would seem unfair, politically dangerous and potentially economically damaging. The employer does pay NI, it is only the worker who is exempt, which seems justifiable in the current system. Those who continue to work longer are contributing valuable extra revenue to the wider economy and if fewer older people work, because of a newly imposed levy, then the new system would be counter-productive.

    The fairest resolution would surely be for as many people as possible to pay something towards social care, rather than just imposing all the costs on any one group: . If they then need care, they will have paid in, and if they don’t need care, they will have paid a social ‘insurance’ policy to cover the risk and help others. A new system should spread the burden more evenly. I hope the forthcoming Green Paper will propose a range of measures that are fairer across and within generations, rather than singling out small groups and forcing them to pay for everyone else.

    The bottom line is that this proposal cannot, in my view, be a solution to the care crisis: Older workers make a huge contribution to the economy, increasing national output, paying taxes and building better pensions to support themselves in later life. That has significant social benefits and should be encouraged. Forcing new NI payments on them will remove the current incentive and could mean the loss of the employer NI contribution as well.


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