June 20, 2010

UK: The scandal of older people becoming second-class citizens

LONDON, England / The Independent On Sunday / Money / Spend and Save / June 20, 2010

Simon Read

Older people seem to be being hit from all angles at the moment. For starters, The Government's proposed spending cuts will put thousands of older people's lives at risk, according to charity Age UK. It has calculated that a 13 per cent cut in social care budgets would mean councils would be able to afford home care services for fewer people leaving around a million in need of care services receiving no support at all.

The charity warns that the cuts would mainly hit older people who live independently in their own homes. The net effect could actually be much worse if the Budget cuts are higher than 13 per cent, the figure proposed by the Institute for Fiscal Studies in the Spring, before the Government revealed that the deficit was larger than anticipated.

"Our care system is in utter crisis – it's already starved of funding, service provision is patchy and when people do receive help, it is often of poor quality," says Michelle Mitchell, charity director for Age UK. "If ministers introduce cuts which deny support to half the older people assessed as needing care at home, quite simply, lives will be put at risk."

It's one reason why older people will be looking towards next Tuesday's Budget with some trepidation. There are plenty of reasons for us all to be wary, not least an expected increase in VAT and the returning of capital gains tax to its previous level of 40 per cent. But it could be the scale of the cuts that prove the most disastrous for millions.

"The Chancellor has said he will limit the impact of cuts on the most vulnerable in our society," says Mitchell. "He should put his money where his mouth is and promise right now that care in old age will be protected in his spending review." In other words, Osborne must make sure the axe does not fall on the services older people rely on most.

Pensioners are also being hit by huge insurance premiums. According to a report by Which? Money published on Friday, the over-65s are getting a raw deal when it comes to insurance simply because of their age.

The consumer body accuses insurers of penalising pensioners by making steep increases in the cost of cover when people pass through different age brackets. For example, a 74-year-old would pay £383 for an annual worldwide policy with Rias. Yet a year later, aged 75, this would cost £707 – a price hike of £324.

Of the 98 annual worldwide travel policies that Which? looked at, only five covered people aged 80 plus. The same problem happens with car insurance. Which? found that three-fifths of policies are not available to people aged 81 and over.

There are also huge differences in price between age ranges. An annual policy with Saga for a 75-year-old woman cost £702, but soars by 74 per cent to £1,224 at 85 years of age, Which? says.

This sort of pricing really is unfair. Insurers have to take people's age into account when setting premiums and if older people are more likely to claim on cover, then it's fair enough they should expect to pay more for premiums. But that doesn't explain these huge jumps in the cost simply because people reach certain age limits.

Insurance companies tell me they use sophisticated methods to work out premiums. Among the relevant factors determing car insurance premiums, for instance, is the car you drive, mileage, the use of car, your gender, other driver details, claims history and any driving convictions/penalty points.

Your age is also relevant, of course, but for premiums to almost double simply because you're a year older is not acceptable. It's time insurers made their premium pricing even more sophisticated so people aren't overly penalised just for celebrating another birthday.

Finally there's bad news for anyone retiring this year, especially if you're female. More than a third of women, 35 per cent, planning to retire in 2010 will receive an income below the poverty line. Meanwhile, only 29 per cent of men will face the problem.

According to the Joseph Rowntree Foundation, a single person in Britain needs to earn at least £13,900 a year before tax in order to afford a basic, but acceptable standard of living. But research from Prudential found that women's mean expected retirement income is £12,169 a year, or 12 per cent below the poverty line, while men retiring this year expect to receive a mean income of £19,593, or 41 per cent above the poverty line.

All in all, a third of people – men and women – retiring this year will end up with an income below the poverty line. That raises two issues. First is one the Government must deal with: the need to ensure retired people have an adequate income. But the second is an issue all working people need to face: the importance of building up a decent retirement fund.


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