17 September 2012
The time has come to end tax breaks for rich pensioners, a new report by CentreForum suggests.
Published on the eve of the party conference season, the think tank's report 'Tax justice: whatever your age' urges the coalition parties to remove imbalances in the tax system between young and old. It points out that the richest pensioners pay far less tax than people of working age on the same income.
CentreForum proposes that the government should phase out the tax free lump sum and end national insurance exemptions for affluent pensioners. It says that this would make the tax system more balanced and save taxpayers over £9 billion a year. The savings would be used to raise the personal income tax allowance by £1,700, which is equivalent to a £330 a year tax cut.
The report shows that scrapping these tax breaks would only affect wealthy pensioners: two thirds of current pensioner households would be better off or unaffected by the proposed changes.
It says that using the money raised to increase the personal tax allowance would ease the financial pressure on the "squeezed middle".
Report co-author Tim Leunig said:
"The biggest financial pressures occur when you are young. Large tax breaks for affluent pensioners make no sense."
The report's other author Adam Corlett added:
"At a time of spending cuts, we must rethink tax breaks that favour the richest."
Angus Hanton, co-founder of the Intergenerational Foundation, said:
"Young people are financing tax breaks for older, wealthier pensioners. We need a tax system that plays fair with all generations, one based on wealth and income, not on age."
NOTES TO EDITORS
The CentreForum report 'Tax justice: whatever your age' by Tim Leunig with Adam Corlett can be downloaded.
As well as the measures set out above the report proposes an £8,000 additional national insurance allowance for pensioners. This means those with incomes below £16,000 would pay no national insurance.