Spending Review reveals Government intentions for the State Pension age, auto-enrolment and real-time informationThursday, October 21st, 2010
The Chancellor presented his four-year Comprehensive Spending Review to Parliament on 20 October. There were three matters of note to report.
State Pension age
One of the Coalition government’s policy announcements in its Emergency Budget in June was to review the date at which the State Pension age (SPa) would rise to 66, and a commitment was made that the increase would not occur earlier than 2016 for men and 2020 for women. Current legislation provides for the SPa for women to move from 60 to 65 in monthly increments between 2010 and 2020, followed by a similar staged rise to age 66 for both men and women between 2024 and 2026. Further rises are also planned; to age 67 by 2036 and to age 68 by 2046.
The decision, announced by the Chancellor, is to accelerate the rise to age 65 for women so that it is completed by November 2018, and then to move to 66 for both men and women by April 2020. The later increases to age 67 and 68 will be reviewed and are likely to be brought forward as well.
The change will affect around 5.1 million people. Over the period 2015 to 2025, savings of around £30 billion are expected through a reduction in State Pension payments and pensioner benefits, and additional PAYE tax and NICs income of around £13 billion from the additional years of work.
The reduction in the period for achieving parity for men and women at age 65, from 10 years to 8½ years, will happen in two stages:
- The existing timetable for the first six years will continue unchanged. Month by month, the State Pension date advances by two months, thereby increasing the State Pension age for those affected by one month. By April 2016, the SPa for women will have reached 63.
- From April 2016, the rate at which the SPa increases will accelerate so that, month by month, the State Pension date advances by four months, thereby increasing the State Pension age by three months. By November 2018, the SPa for women will have reached 65.
At that point, the SPa continues to increase at the same rate for both men and women and, by April 2020, it will have reached 66 – six years earlier than it is due to do under the existing legislation.
The following chart is based on the explanation provided by the Chancellor and in supporting documents, but the detail is subject to confirmation.
|Born between||SP Date||SP Age||Born between||SP Date||SP Age|
|6/4/50 – 5/5/50||6/5/10||60-1||6/4/52 – 5/5/52||6/5/14||62-1|
|6/5/50 – 5/6/50||6/7/10||60-2||6/5/52 – 5/6/52||6/7/14||62-2|
|6/6/50 – 5/7/50||6/9/10||60-3||6/6/52 – 5/7/52||6/9/14||62-3|
|6/7/50 – 5/8/50||6/11/10||60-4||6/7/52 – 5/8/52||6/11/14||62-4|
|6/8/50 – 5/9/50||6/1/11||60-5||6/8/52 – 5/9/52||6/1/15||62-5|
|6/9/50 – 5/10/50||6/3/11||60-6||6/9/52 – 5/10/52||6/3/15||62-6|
|6/10/50 – 5/11/50||6/5/11||60-7||6/10/52 – 5/11/52||6/5/15||62-7|
|6/11/50 – 5/12/50||6/7/11||60-8||6/11/52 – 5/12/52||6/7/15||62-8|
|6/12/50 – 5/1/51||6/9/11||60-9||6/12/52 – 5/1/53||6/9/15||62-9|
|6/1/51 – 5/2/51||6/11/11||60-10||6/1/53 – 5/2/53||6/11/15||62-10|
|6/2/51 – 5/3/51||6/1/12||60-11||6/2/53 – 5/3/53||6/1/16||62-11|
|6/3/51 – 5/4/51||6/3/12||61||6/3/53 – 5/4/53||6/3/16||63|
|6/4/51 – 5/5/51||6/5/12||61-1||6/4/53 – 5/5/53||6/7/16||63-3|
|6/5/51 – 5/6/51||6/7/12||61-2||6/5/53 – 5/6/53||6/11/16||63-6|
|6/6/51 – 5/7/51||6/9/12||61-3||6/6/53 – 5/7/53||6/3/17||63-9|
|6/7/51 – 5/8/51||6/11/12||61-4||6/7/53 – 5/8/53||6/7/17||64|
|6/8/51 – 5/9/51||6/1/13||61-5||6/8/53 – 5/9/53||6/11/17||64-3|
|6/9/51 – 5/10/51||6/3/13||61-6||6/9/53 – 5/10/53||6/3/18||64-6|
|6/10/51 – 5/11/51||6/5/13||61-7||6/10/53 – 5/11/53||6/7/18||64-9|
|6/11/51 – 5/12/51||6/7/13||61-8||6/11/53 – 5/12/53||6/11/18||65|
|6/12/51 – 5/1/52||6/9/13||61-9||6/12/53 – 5/1/54||6/3/19||65-3|
|6/1/52 – 5/2/52||6/11/13||61-10||6/1/54 – 5/2/54||6/7/19||65-6|
|6/2/52 – 5/3/52||6/1/14||61-11||6/2/54 – 5/3/54||6/11/19||65-9|
|6/3/52 – 5/4/52||6/3/14||62||6/3/54 – 5/4/54||6/3/20||66|
Pension personal accounts and auto-enrolment
Although the budget for the Department of Work and Pensions (DWP) is being reduced by 26% by 2014/15, there is confirmation that the settlement will fund the introduction of pension personal accounts and auto-enrolment from 2012 and the establishment of the National Employment Savings Trust (NEST). There are no changes to the timetable for the introduction of the new workplace pension schemes.
HM Revenue & Customs
The following is an extract from the summary provided after the Spending Review details were announced about the effect on HMRC. Specific mention is made of the coming consultation into the Real-Time Information proposals, and it is interesting to note that the government has already included savings of £300 million in the welfare budget for 2014/15 from the use of real-time information in the administration of Child and Working Tax Credits.
Over the course of the Spending Review period, HM Revenue and Customs (HMRC) will make savings to reduce resource spending by 15% in real terms, and capital spending by 44% in real terms, with £900 million of those savings then being recycled into additional work against tax avoidance, evasion and criminal attack. The Department’s Administration budget will be reduced by 33%.
The department will manage these reductions by reducing the costs of administering tax, targeting customer services more effectively and collecting the right amount of revenue, including;
- Restructuring HMRC’s Enquiry Centre network so that face to face service is provided to those that need it most
- Improving on-line support to reduce the need for manual processing.
- Applying benchmarks to reduce administration costs by 33% by 2014-15.
In addition, the department will be adopting the following ideas, suggested through the Spending Challenge process:
- Replacing National Insurance Number (NINO) cards with letters, saving up to £1 million a year.**
- Exploring increased use of Magistrates Courts for recovering uncollected debts, freeing up resources.
By taking these very tough decisions the department is able to focus on reducing the tax gap while modernising and improving services for customers, including:
- Investing £900million over the Spending Review period to transform HMRC’s work against avoidance, evasion and criminal attack to bring in extra tax revenue of £7 billion a year by 2014/15. This includes a more robust criminal deterrent against tax evasion – HMRC will increase the number of criminal prosecutions fivefold – and a crackdown on offshore evasion with the creation of a new dedicated team of investigators to catch those hiding money offshore.
- Initiating a joint HMRC and DWP strategy for fraud and error, setting out that over the Spending Review period HMRC will reduce fraud and error within the tax credit system by £2 billion a year by 2014/15.
- Improving capacity and skills in key areas to offer improved services to customers and redesigning education products and processes that cause the most error and rework such as VAT registrations.
- Clearing the backlog of PAYE cases by 2012 and stabilising the PAYE service in order to recover and improve customer service;
- Undertaking the next stage of consultation on improving PAYE through the use of real time information which will bring improvements to employers and taxpayers.
** The DWP is also claiming to make the same savings from this idea!