TaxPersonal TaxPre-Budget statement: Brown ‘abolishes’ state pension

Pre-Budget statement: Brown 'abolishes' state pension

The Low Income Tax Reform Group has applauded the chancellor?s moves to bridge the gap between rich and poor pensioners, but it was a move condemned by one Big Five tax partner as 'effectively abolishing the state pension'.

The chancellor used the pre-Budget statement to announce increases to the minimum income guarantee, the state pension and the winter fuel allowance.

The basic state pension will increase by £5 a week next year and £3 per week the following year for single pensioners – bringing it to £75.50. Pensioner couples will receive £8 a week extra next year and £4.80 the following year, bringing them £120.70 in April 2002.

This year?s winter fuel payment will increase to £200. In addition, the chancellor has announced consultation on a pension credit to be introduced in 2003. This will aim to link the minimum income guarantee to earnings throughout the next parliament and reward savers.

However, Ann Redston, tax partner at Ernst & Young, said that the moves suggested a switch from the state pension to benefits for many pensioners.

‘I think he’s effectively abolishing the state pension. He’s moving towards means-tested benefit. All the new money is going into top ups for those on low incomes and that is a very big policy shift,’ she said.

The LITRG has said that it will continue to campaign for tax simplification on behalf of pensioners. ‘There is still much to do by the chancellor and the Inland Revenue to simplify the basic tax regime for pensioners, for example, by taking virtually all pensioners with incomes of less than £17,000 out of the oppressive self assessment regime,’ said LITRG chairman John Andrews.

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