This piece first appeared in Saga Magazine in October 2005
The text here may not be identical to the published text

 

Labour's pension poser

For or against citizen's pension?

Just what is the Government’s attitude towards a Citizen’s Pension? A few months ago it appeared to be considering the idea of replacing the current state pension with one based on residence rather than how many National Insurance contributions had been paid. But over the Summer David Blunkett, the new Secretary of State, appeared to rule out this radical change.

Speaking at a meeting organised by Age Concern in his Sheffield constituency, Mr Blunkett said "I mean we can't give people a pension automatically who have not earned it because I think people would really blow at that. We'd have the reverse of the Costa del Sol, instead of everybody going to Spain in retirement they'd all come to Britain."

The statement is doubly embarrassing for the Government. First, two years ago it appointed a high powered Pensions Commission to come up with long term answers to income in retirement. It is expected to report in November and its chairman Adair Turner has said he will be making recommendations on the state pension. For the Secretary of State to appear to rule out one very popular option could be seen as undermining the Commission.

Second, David Blunkett’s predecessor Alan Milburn took the opposite view. Earlier this year he told Saga Magazine year that he was very interested in a citizen’s pension. "We’re talking about the basic state pension being paid to everybody on a universal basis on a residence test. I am looking at this as one possible component. I believe it is worthy of very serious consideration." Now the new Secretary of State appear to have reversed that policy within weeks of coming to office and with no public debate.

Also his criticism is simply mistaken. Any citizen’s pension would have a tough residence condition – perhaps twenty years living in the UK. So there would be little scope for what has been called ‘benefit tourism’.

David Blunkett’s remarks were made in response to an 18-person Citizen’s Jury who had spent two days listening to the experts and come up with their own proposals, including a citizen’s pension. The Minister went on to say "You all said that you thought there was a real inequity for women and it is a scandal actually. I'm mindful to looking at how we can give people much more generous contributions for the years of caring." In other words, tweak the present system which Adair Turner has already said is "the most complex…in the world". Further changes will only add to what Adair Turner called its ‘bewildering complexity’.

The Department for Work and Pensions played down the significance of Mr Blunkett’s remarks. A spokeswoman told Saga "He was talking about the citizen’s pension…but it was in the context of a discussion about lots of different options. He’s not ruled it out." But she added "He definitely supports the something for something agenda."

Hi Tech risk
Home insurance costs could soar for the over 50s as we indulge our love of the latest gadgets. Today’s pensioner households contain relatively little technology - only a tenth of the value of the electronic equipment found in the homes of families with children. But that could change as today’s 50-somethings grow older. They are the biggest spenders on DVDs and computers and have the highest value of appliances like microwaves and dishwashers. Now they are adding digital cameras, iPods, MP3 players, even portable satellite navigation devices. These small high value items can easily be stolen. Insurers are warning that they should all be covered – but it will cost. Online broker esure.com says that the value of hi-tech gadgets in pensioner households could rise fivefold over the next ten years and that will push up premiums.

Fairer fees on the cards
The OFT will decide later this month how much credit card companies can charge if we miss a payment or go over our credit limit. Most charge a standard £20 or £25 for such breaches. But recent court cases have questioned whether these standard charges are lawful. The Unfair Terms in Consumer Contracts Regulations 1999 allow customers to challenge terms in contracts that are unfair even if they have signed and agreed to them. Now the Office of Fair Trading has stepped in. Its provisional conclusion is that default charges of up to £25 are ‘excessive’ and it has written to the eight major card companies – it will not say which ones – to ask for their response.

The companies are entitled to levy some penalty. Anyone who fails to pay their bill on time or exceeds their credit limit without permission breaches the contract they have with the credit card company and it is entitled to compensation for that breach. But the OFT says the charge must be limited to the damages the company would be awarded if it took the customer to court. Without putting a figure on what it should be, the OFT says "the default charges imposed by the credit card companies need to be reduced in order to be fair."

The companies have already said that they think the charges are fair. But if they are not reduced by the middle of October, the OFT may force cuts. Meanwhile, anyone who has such a charge imposed should call the card company, explain the circumstances and ask for it to be withdrawn. Most companies will do that for individual customers who have no previous bad record.

Posters can be real corkers
The art market is a strange place. Posters about champagne are now fetching more than a bottle of even a top vintage bubbly. The 1922 poster of Contratto champagne flowing over the edge of the glass is expected to fetch between £2000 and £3000 when it is sold by Christie’s on 26 October. The London auctioneer is selling a collection of 85 posters by Italian designer and artist Leonetto Capiello. Born in 1875 he designed advertising material for a range of French companies selling luxury goods from chocolate to hats, and perfume to champagne. He even advertised French tourist destinations like the French alpine thermal baths town Aix-les-Bains.The whole collection of 85 vintage posters should bring in £120,000 for the champagne house of Castellane which owns them. Given the rarity of such items and the seductive designs recalling past holidays in France, the posters – and they start as low as £250 – could well prove a bargain. Viewing from 22 October at Christie’s South Kensington.

Live now, pay later
The Government committee considering the future of the Council tax has looked at a scheme which would allow homeowners to postpone the tax until they die. Instead of paying the tax, which now averages more than £1200 a year, people could give the council what is called a ‘charge’ over their home. The council would have the right to recover the debt from their estate.

A similar scheme already applies to care home costs. As we have reported in Saga Magazine before, anyone due to pay for some or all of their care home costs can choose not to do so under the deferred payments scheme. The local council then takes what is called a legal charge on their home and recovers the debt after their death. That scheme is becoming very popular, not least because the debt builds up without interest being charged – it is in effect an interest free loan to pay the fees.

Deferring the payment of council tax would be far more expensive as the debt would build up over many more years and it is unlikely that it would be interest free. Estimates by the Conservative Party show that the debt on an average Band D property in England with a charge of £1214 which was deferred for 20 years would amount to almost £76,000. A large chunk to pay even out of the rising value of property. The calculation assumes that council tax will continue to rise by 7.4% a year and that compound interest would be charged at 4.3% a year on the debt.

The Government said recently it would give powers to the Northern Ireland Executive to introduce such a scheme for domestic rates and any new scheme that succeeds it (council tax does not apply in Northern Ireland). In a survey 61% of local people thought deferment was a good idea, though among the over 50s support was slightly lower at 56%. But any change will have to wait for the devolved government in the province to be restored.

A review of local government funding in England is due to report by the end of the year. A spokesman confirmed to Saga that deferring payment of council tax has been looked at with other options but would not say if it would appear in the final report.

October 2005

 


All material on these pages is © Paul Lewis 2005