On April 12th, the basic state pension will rise by £2.15 a week for a single pensioner and £3.45 for a couple - an extra 2.8 per cent, in line with the increase in prices but not a penny more.
The means-tested Minimum Income Guarantee (now part of the Pension Credit) will rise by £3.35 for a single pensioner and £5.15 for a couple, in line with the increase in earnings, which as usual have risen more than prices.
The difference is not enormous, but in the long run, if the basic pension rises only in line with prices while the minimum rises in line with earnings, the number of pensioners dependent on means-testing for part of their income will rise dramatically. Official estimates published in January 2002 showed that, by 2040, two out of three pensioners would have to go through a means test to claim the Pension Credit.
The Government claims that the Pension Credit means test is entirely different from the hated means tests of the past, because once you have qualified for the benefit you won’t have to declare every minor change in weekly income. But while this may help those already receiving Pension Credit, anyone claiming for the first time will still have to give details of all their income and savings. It remains to be seen whether people will be more willing to do that than they were in the past.
A more sensible policy, as we have pointed out month after month, would be to increase the basic pension to the minimum income level and tie it to the rise in earnings for future years, thus reducing, instead of increasing, the numbers having to go through a means test.
The Government says this is unaffordable but - as we have pointed out month after month - there is a massive surplus in the National Insurance Fund, despite the efforts of both Tory and Labour Governments to reduce its income by abolishing the annual Treasury contribution and cutting employers’ contributions. The Government Actuary’s latest report shows that, by March 2005, the balance in the Fund will be over £27 billion, which is £20 billion more than the recommended safety margin.
The truth is that it is not the money but the political will that is lacking. If we can afford wars (legal or illegal), we can afford decent pensions.