Pension Credit Consultation

Published on 13 January 2004

The Low Incomes Tax Reform Group's response to Pension Credit: A Consultation paper (November 2000, DSS) - 28 February 2001.

Summary

  1. The pension credit is an innovative proposal to address the existing problem of many pensioners thinking they are penalised for having some modest savings. Overall, we also welcome proposals to move towards greater integration of tax and the pension credit, if this will result in greater coherence. Within this, however, primarily as tax practitioners we do have some reservations and should like to see further consideration of some of the fundamentals. We question whether the integrity of the tax system can be maintained whilst add-ons by way of credits are based on a different unit of assessment, the pensioner couple, rather than individuals. There are also inherent conflicts in the tax/benefit treatments of savings such as in the working families tax credit (WFTC) and disabled person's tax credit (DPTC) whereby 'capital' includes tax exempt savings. This introduces inconsistency and, in addition, disadvantages lower income tax credit claimants.
  2. In our recommendations we make the following suggestions:
    • The Inland Revenue should appoint a 'pensioners' champion';
    • Any new public service instituted to provide pension and benefit services to pensioners should include tax within its scope (para. 4.321);
    • Greater integration of departmental computer systems is urgently required;
    • A low-income pensioner should be able to complete a simple core form only to provide basic information to both the Department of Social Security and the Inland Revenue;
    • The unit of assessment should be the benefits definition of a couple and this should be applied consistently throughout the design of the pension credit;
    • Both capital and income in tax-exempt savings and investment vehicles should be disregarded for the pension credit;
    • The pension credit should, ideally, be an annual award but with the ability to make rapid re-assessments whenever necessary.
  3. We look forward to participating in further consultations about the pension credit and trust that this consultative process will follow the Code of Practice issued by the Cabinet Office in November 2000. (Unless otherwise stated, paragraph references in this paper are to numbered paragraphs 'The Pension Credit; a consultation paper', DSS, November 2000, Cm 4900).

 

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LITRG response

(13-01-2004)