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2010 Budget Review

Well, there you have it, George Osbourne's first budget. This was the 'Emergency' Budget to resolve the rotten mess that the country's finances are in. So how will it affect the country's pensioners and are we better off or not?

On the face of it you'd think that we'd probably done quite well, but let's just think about it for a moment. On the plus side, the Government has restored the link between pensions and earnings. To be precise, pensions will keep pace with earnings, the Consumer Price Index or 2.5%, whichever is greater, with effect from April next year. As Mr Osbourne said: "There will be no more 75p increases to the State Pension." That's great, but it is no more than all the parties had said before the election, so it's not exactly news, welcome though it is.
Unfortunately, the increase in VAT to 20% is likely to wipe out any benefit. Neither will the VAT increase be offset by the reported £1,000 increase in the personal tax allowance to £7,475. That's because we already benefit from a personal tax allowance of £9,490.

Inflation is likely to rise and there is no sign of any increase in interest rates and this is bad news for those on fixed incomes, like us for example.

There were some other 'teasers' that were a bit light on detail, but which indicated the way the Government is thinking. It will no longer be compulsory to buy an annuity before the age of 75 and this will be broadly welcomed, but we don't have the detail yet.

Anyone under 60 might be a bit concerned about the news that the Government will be 'accelerating' the advance in the retirement age to 66. It was previously understood that this would not happen until 2016 for men and 2020 for women, but it sounds as though this might come in much more quickly. There is going to be a comprehensive review of the retirement age and we won't know any more until the review is completed, but you can bet your pension that the increased retirement age will come in before 2016. That means that millions of people under 60 are not going to get a pension until they're 66.

This Budget seems to be a bit of a Curate's egg for us pensioners - good in parts, but you could argue it both ways. According to Emma Simon in the Telegraph: "Pensioners are the biggest losers".

Looks like we might need Retirement Revenue after all.

Be well.