Cuts hit over 50s

People aged 50 or above will take their share of the £7 billion cut in welfare spending announced by Chancellor George Osborne on October 20. The good news is that free bus travel – and on the underground, trams and local trains in London and some other cities – will stay. Though the age to qualify in England is rising in line with the state pension age for women – now around 60¼. And, so far, prescriptions and eye tests are still free at 60 – though that age will rise to match women’s state pension age when the Government finds the courage to make the change. In Scotland all prescriptions will be free from April as they are in Wales.

Despite reports in the press that the Winter Fuel Payment would be cut back, David Cameron and Nick Clegg kept their promises to Saga readers that it would be “protected”.  It will stay be paid at the rate of £250 for a household where someone was born on or before 5 July 1950 this winter as it was last. If someone in the house was born on or before 26 September 1930 then the payment will be £400.

However, the long term future of the Winter Fuel Payment is not secured. It could be cut for the winter of 2011/12. An announcement is expected in the spring Budget.

Pension changes
State pension age itself will rise more rapidly than expected. Women’s state pension is already rising. But if you were born on 6 April 1953 or later that process will accelerate and state pension age will reach 65 for women born 6 November 1953, which is almost eighteen months earlier than expected. From that date pension age will rise for men and women and will be 66 for anyone born 6 April 1954 or later. Further rises to 67 and 68 will almost certainly be brought forward and eventually state pension age could reach 70. More details are expected shortly.

There were also big changes promised for people paying into a public service pension – including police, teachers, nurses, doctors, judges, firefighters and anyone working in the civil service or for local government. From April 2012 contributions will rise by three percentage points. So a 6% contribution will rise to 9% - which is a course a 50% rise. The Government says that the 3% rise is an average and it intends that those on higher pay will face a bigger rise while those on lower pay may see no rise at all. The armed forces are exempt from this rise.

In future public service pensions will be changed so the pension is related to the average pay over the whole time in that employment rather than to the salary at retirement. The generous pension scheme for Members of Parliament and Government Ministers will be closed. There will be more details in the spring Budget.

The two and a half million households over 60 who get pension credit will see a rise in their income from April. But the increase will be below the rate of inflation. Prices are rising by 4.6% a year but the main rate of pension credit will only rise by about 3.5% - an increase of around £4.50 for a single person and about £7 for a couple. However, those aged 65 or more with an income apart from pension credit of more than £103.15 (single) or £164.55 (couple) will find the top up they get from pension credit rises by rather less. A single person aged 65 or more with an income of £125 will get a rise in their pension credit top up of less than £2 a week. The change is designed to save about £330 million a year by 2014/15.

Council tax
There are also major changes planned in the help given to people with their council tax. Council tax benefit reduces the tax paid by five million people, half of them over 60. Many get all their council tax paid on grounds of low income. But from 2013 council tax benefit is to be changed. Instead of a system based on rules laid down by the Westminster parliament, local councils will in future decide how help is given. The whole cost of more than £4 billion a year will be passed to 326 English councils and the Welsh and Scottish Governments. But the money handed over will only be 90% of the current cost and how to cut the entitlement of five million low income households will be decided locally. The change, due to start in 2013, will discourage campaigns to get people to take up the benefit. At the moment the Government meets the cost of any extra claims. In future it will have to be found by local councils out of a fixed budget.

One small piece of good news on council tax is that it will not increase in April in England or Scotland. Both governments have announced that there will be no rise in council tax in April 2011. That follows the lowest ever rise in England in 2010 and a freeze in Scotland which could now be extended for several more years. The Welsh Assembly Government had still not decided its position at the time Saga Magazine went to press.

Disability
There is more bad news for some people who are too ill to work. One of the biggest cuts is the £2 billion a year which is to be taken from people who are long-term sick and unable to work. We already knew that they were to be moved from Incapacity Benefit to the new Employment and Support Allowance of £91.40 or 96.85 a week. But in October the Chancellor announced that ESA for the less severely disabled group will be restricted to just one year. After that it will be means-tested – and a million people with savings, a partner, or any other income will find they no longer qualify. The change will begin in April 2012 and will apply at once to anyone who has already been on ESA for 12 months. Those moving to ESA or qualifying for it will be means-tested after a year. The change only applies to less disabled people who are expected at some point to move into work. Severely disabled people in what is called the Support Group who are never expected to be able to work are not affected.

Another group of disabled people under 65 are also facing a big cut in their benefit. Around 88,000 people in care homes with a variety of physical and mental disabilities will face a cut in their benefits from 2012. At the moment they can get the mobility component of £49.85 a week or £18.95 if their mobility needs are less. But from 2012 this benefit will be stopped except for those wealthy enough to pay in full for their own care; they will continue to receive it. The change would include people who use the money to provide themselves with a vehicle under the Motability scheme. The change will save £135 million a year.

Altogether the changes in welfare described by the Chancellor as ‘tough but fair’ will save £7 billion a year by 2014/15. The extra contributions into public service pensions will save another £1.8 billion. These changes are on top of the £11 billion of welfare cuts announced in the June Budget.

e-mail Paul Lewis on paul@paullewis.co.uk