Age Concern says tax credit won't help

GORDON Brown had some good news for pensioners with the promise that the annual state pension will be no lower than £100 for a single pensioner and £160 for couples from April 2003. And that the new pensions tax credit will go further to help those that save for retirement.

But Age Concern fear it could mean more bureaucracy and form filling for pensioners.

The pension tax credit, due to be introduced in April 2003, will reward those pensioners who have saved modest amounts for their retirement, whether through an occupational scheme, stakeholder plan, a second state pension or with other savings. Gordon Brown has said that such pensioners will be rewarded for their thrift by way of a special tax credit.

But Gordon Lishman, director general at Age Concern, says it isn't the right way to go about helping pensioners.

He says: ?The pension credit is well-intentioned and will for the first time reward savings. However, it will add yet another layer of complexity to the already complicated benefits system and will result in more than a half of pensioners being on means-tested benefits. Older people who have paid a lifetime of contributions should be able to receive an adequate income through the basic state pension without having to resort to means-testing.

For a single pensioner on the basic state pension and an occupational pension of £1,000 a year the pension credit will mean an extra £600 a year. And for a couple on the basic state pension and with an occupational pension of £1,500 a year – it will mean an extra £900 a year.

Under the current system, pensioners on the minimum income guarantee lose a pound of benefit for every extra pound of their second pension or earnings income. The pension tax credit aims to tackle this.

The government has also promised today that the basic state pension will always rise by at least £100 a year for single pensioners adn by £160 for couples.

Lishman at Age Concern says this will be of little help to the one in five pensioners who live in absolute poverty: 'A missing part of the Government‘s pension policy is a commitment to raise the state pension to a level that covers basic costs, although at least we now have a recognition that pensioners should never face a paltry 75p increase ever again. Without a properly funded state pension younger people will lack the incentive to save, for example, for the stakeholder pension,‘ he says.

The Secretary of State for Work and Pensions, Alistair Darling, is set to publish the findings of the consultation paper on the pension tax credit along with the necessary legislation to introduce it.