It will have come as no surprise that the Budget, like most other headlines, was dominated by COVID-19, the need to protect jobs and re-build our economy. It’s welcome news that the Office for Budget Responsibility estimates that the economy will recover faster than anticipated and whilst the UK’s vaccination programmes is promising, it’s clear that the economic impact of the pandemic will take years to recover from. We’ve analysed the 2021 Budget and here are our seven key takeaways for older people:
1. The triple lock is protected
The Budget did not mention the triple lock on pensions, despite rumours that it would be removed, which means that it’s safe again for the time being. This means the State Pension will rise by 2.5% in the 2021-22 tax year, equating to a boost of £228.80. However, the long-term future of the triple lock remains uncertain. Later Life Ambitions will continue to campaign for its protection as we know what a lifeline it is for so many pensioners.
2. Pensions lifetime allowance frozen
As rumoured, the Chancellor did announce that the pensions lifetime allowance (LTA), the total amount you can save into your private pension without incurring an extra tax charge, will be frozen at £1,073,100 until April 2026. The change will be effective from 6 April 2021 and it removes the link to the Consumer Price Index for the next five fiscal years. The move will affect those with the largest pension pots and the Government estimates that 95% of savers approaching retirement are currently unaffected by the change. If you have pension wealth close to this limit or anticipate you will be over the limit when you retire, this might influence your pension savings behaviour and you may need to readjust your pension strategy to factor in the lifetime allowance freeze. Critics argue that this will impact both those approaching retirement and younger people who prioritise pension contributions and earn strong investment returns.
3. Income tax thresholds frozen
The Chancellor announced the income tax personal allowance and the higher rate threshold will be uprated in line with the Consumer Prices Index (CPI) as planned in April 2021 and then remain frozen at this level until April 2026. The move will see the basic rate personal allowance increased to £12,570 and the income tax higher rate threshold will rise to £50,270. However, there are concerns that more people will be pulled into the 40% income tax bracket as, over the last 15 years, the point at which people reach this tax threshold has only increased by £6,395. As such, any inflationary increases to individuals’ salaries will result in more of their salaries being taxed at the higher income tax rates. For those approaching retirement, this is an important change to be aware of as it could affect disposable income.
4. Stamp duty holiday extended
It was widely speculated that the Chancellor would prolong the popular stamp duty holiday further and last week, he delivered on this. He confirmed an extension until 30 June instead of the initial end date of 31 March. Later Life Ambitions welcomes the extension, as we recognise the role it has played in helping older people downsize into housing more suited to their needs. We know that the initiative has helped young people get on the housing ladder and it does play a small part in helping to resolve the wider housing crisis. However, underlying issues remain and expanding good quality housing options for older people is desperately needed to make housing work for all generations. Later Life Ambitions recently collaborated with the Associated Retirement Community Operators (ARCO) in publishing a report which found 9 in 10 people wanted the Government to improve housing for older people, with more than half of older people saying they were interested in moving but lacked good local downsizing options. The housing crisis cannot be seen in isolation, reviving our town centres and high streets is a key priority for Government in their plan for recovery. Ensuring good quality and well-located housing options for older people will help carry this ambition.
5. Health and Social Care
There was no immediate or longer-term support for social care announced at this Budget, which may come as a surprise given the attention that care homes have received over the last year, with more than 40,000 care residents tragically dying because of the virus. The Budget also didn’t include any detailed plans for the NHS other than £1.65 billion for the vaccine rollout in England, with devolved administrations receiving additional funding through the Barnett formula. Unions and health experts have criticised the Government for remaining silent on the need for increased funding for our health and social care system. There are particular fears that a backlog of surgeries, appointments and an increase in mental health issues could leave the NHS struggling, despite Covid-19 related hospitalisations and deaths dropping. The guidance which came into force this week allows people in England to meet with one other person outside and for visits to care homes to take place. This is welcome news, particularly as the pandemic has been an incredibly isolating period for so many older people. However, we know issues in the health and social care sector pre-date the pandemic. Whilst the UK’s vaccination programme is promising, we cannot continue to kick the metaphorical can down the road when it comes to properly funding our health and social care system. By continuing to do so, it is vulnerable people who will continue to pay the price.
6. Community renewal funds
Alongside the Budget, the Government launched the prospectus for the £220 million UK Community Renewal Fund. The Fund will support communities in the next financial year to pilot programmes as the Government moves away from the EU Structural Funds and towards the UK Shared Prosperity Fund. The Government is also launching a new £150 million Community Ownership Fund to help ensure that communities across the UK can benefit and support local facilities, community assets and amenities most important to them. Community groups will be able to bid for up to £250,000 in matched funding to help them buy or take over local community assets which are at risk of being lost, as community-owned businesses. Given the lockdown restrictions over the last year, this is welcome funding to ensure that community facilities are retained and able to be accessed for all. The funding is an important step for the Government’s ambition to revive town and city centres and ensure that local businesses and community assets are able to not just survive the pandemic but thrive.
7. Contactless payment limit increased
The Budget also announced that the limit on a single payment using contactless card technology will increase to £100. At the beginning of the first lockdown, it was increased from £30 to £45 and has now more than doubled. Over the last 12 months in particular, the use of contactless payment has increased as people have tried to avoid using cash. Whilst for many, this may be a welcome and convenient move, there are concerns about fraud risks which will need to be monitored closely. We also know that many of our members do not use contactless and rely on cash to pay for everyday items and services. Later Life Ambitions understands the reasons for the decline in the use of cash as the digitalisation of society continues, however, we believe it is vitally important that the network of cash withdrawal facilities is maintained, always offering a cash option for those who need it. We will continue to campaign for this.
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