23 May 2014

Means-testing of pensions

I am reposting this piece from August 2010, in the light of the recent Daily Mail investigation by Tony Hazell that the government will not be paying the additional state pension to everyone, as claimed. The report also points out that an inflation increase, which certain former employees were guaranteed, will no longer be paid.
When Money Mail contacted the Department for Work and Pensions, it claimed it had never actually paid these inflation increases and the belief stems from ‘an over-simplification’. Yet we have obtained Government statements and leaflets published over many years which state time and time again that it does pay these inflation increases.
It looks as if the policy of cheating national insurance payers, where they think they can get away with it, is alive and well.

* * *

Of course the terrible financial crisis is taken as justification for yet more penalising of the more functional members of society in favour of the less functional (‘we must protect the poor’).

Both the means-testing of pensions, and the charging of those who have some capital assets for ‘care’ either in their homes or NHS prisons, are iniquitous. However the ‘care’ situation is complicated by treating as a ‘benefit’ (the same thing as a person might have paid for with his own money) what is really better described as an oppressive persecution. So I leave discussion of this complex question for the moment and confine myself to the rise of means-testing.

The state pension was initiated well before the rise of the Welfare State circa 1945, and for that reason was conceived as something which would be received as a right by those who had made the necessary number of qualifying payments - which were supposed, always fictitiously, to provide a fund which could be invested, and from the income of which the pensions would eventually be paid.

When I first went to the Society for Psychical Research after being thrown out of Oxford University in 1957, I thought that I must do everything possible to reduce the disadvantage at which I would be in comparison with, say, an Oxbridge professor of physics on reaching retirement age. At the time I did not find it credible that it would take me many years to get back into the right sort of academic position, but until I did, I would want the intervening years to drag down my pension income by as little as possible. Therefore I paid voluntary contributions for the unpaid student years, and went back to paying them each year as soon as I was no longer receiving a salary from the SPR.

As time passed, I became aware that the hostility to the idea of my working my way back into a suitable career was very great, and perhaps permanently insuperable. I continued every year, without fail, to pay voluntary pension contributions both for myself and for anyone who became associated with me and might be permanent. So I was paying four, and maybe five or six, contributions per annum out of what was usually a nugatory income. After forty years my own pension became payable, although I was still having to pay three voluntary contributions a year for other people. But the situation was turning around from being a drain on our pathetic resources to an annual income, although even when all the pensions became payable, the total income would still be very far short of what was needed to run the very smallest residential college cum research department.

Soon after my 40 years of efforts had been rewarded with the then basic state pension, I started to notice statements by officials to the effect that pensions would be allowed to ‘wither on the vine’, implying that no attempt would be made to keep them adjusted to inflation. After I had received my pension for some years the government decided that these pensions should be means-tested, so that help could be given to the ‘poorest’.

I felt (and always have done) pretty close to being the poorest of the poor myself, in being deprived of a salaried career, but I had built up capital over the years. This was because my only way of getting ahead in life had been to provide myself with capital, the gains on which could be used to finance my institutional environment, so that eventually I might be able to do something.

The means-testing was achieved surreptitiously. Annual increments became much smaller than they would previously have been, while an annual ‘Pension Credit’ (initially ‘Minimum Income Guarantee’) payable to those with very little in the way of savings began to increase.

Making the pensions means-tested was retrospective legislation, as everyone paying into them had been led to believe that they would not be means-tested.

Now I receive only the basic state pension, and not the supplement, which is paid to those who had made no attempt to increase their independence by saving money, such as the chronically unemployed who roam the streets of Oxford and draw disability allowances.

I believe it is the case that I would be receiving thirty-six percent more than I am receiving, if I were eligible for pension credit.

The question of ethics with regard to pension policy is one of the issues on which critical analyses could be being published by Oxford Forum if it were provided with adequate funding to do so. Meanwhile, the idea that it is ‘fair’ to penalise better-off pensioners is likely to receive further reinforcement from pseudo-research published by the universities.