This briefing provides information on the Government's proposals for adult social care reform, including the cap on care costs.
The debate will be on the motion ‘That this House is concerned that older people and pensioners risk being at the sharp end of the cost of living crisis as a result of spiralling inflation, a lack of Government action on household energy bills, a poorly thought-through tax rise on older people in work and a real-terms reduction to the state pension; notes that the state pension is being cut in realterms by hundreds of pounds a year and that working pensioners will begin paying the Health and Social Care Levy from next year; regrets that levels of pensioner poverty and pensioner debt have risen over the last decade even before the current cost of living crisis with almost one in five pensioners now living in poverty; and calls upon the Government to cut home energy bills, halt the planned tax rise on working pensioners and ensure older people are protected from the cost of living crisis.’
Pensioner spending on energy and food
The rise in inflation is currently being driven by energy and food prices, and a higher proportion of the spending of older households is spent on these products, as shown in the table below. This means they are more affected by price increases in these goods.
Source: ONS, Family spending workbook 1: detailed expenditure and trends, Table A11
It is important to note that there is large variation between households aged 65+ when it comes to expenditure, particularly across income deciles. The households which spend the largest proportion of their expenditure on food, fuel and petrol are low-income households, and this has a bigger impact than age.
More information can be found in Library briefings Rising cost of living in the UK.
Changes to taxes, benefits and pensions
From April 2023, those in employment over state pension age will have to pay the 1.25% Health and Social Care Levy. At present pensioners are not liable to pay NICs on any earnings they receive from employment.
In April 2022, benefits and state pensions will be uprated using inflation figures from September 2021. Inflation in September (3.1%) is much lower than it is forecasted to be in April 2022 (around 8%), so recipients will see a real-terms fall in their income. This is discussed further in section 3.2 of Library briefing, Background to Spring Statement 2022
Below is a list of Library briefing papers and think tank reports that cover the rising cost of living:
Background to Spring Statement 2022, 17 March 2022
Rising cost of living in the UK, 16 March 2022
Energy price rises and the Energy Bills Rebate 11 February 2022
The energy price crunch, 14 January 2022
Poverty in the UK: statistics (pensioner poverty is discussed in Section 2.3), 26 October 2021
Health and Social Care Levy Bill 2021-22 16 November 2021
Building a living pension, Resolution Foundation, 23 January 2021
What is an adequate retirement income?, Pensions Policy Institute, June 2021
Retirement Living Standards, Pensions and Lifetime Savings Association (last report October 2021)
Automatic enrolment review 2017: Maintaining the momentum, Department for Work and Pensions, 18 December 2017
GDP International Comparisons: data and forecasts for the UK and the world's largest economies.
A summary of the announcements in the Chancellor's September 2022 fiscal statement and links to analysis and further reading.