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Spending review

Today the Chancellor George Osborne announced government spending plans for 2015-16.  Some of the plans will have an effect on the pensions landscape.

Welfare cap

The Chancellor said that a welfare cap will be set each year at the Budget and will apply from 2015.  The Office for Budget Responsibility will be able to issue public warnings to the government if it is on course to breach the cap.  Housing benefit, tax credits, disability benefits and pensioner benefits will be subject to the cap; however, the government will not include the basic state pension or the additional state pension in the welfare spending cap. 

Mr Osborne said:

“I have had representations that we should include the basic state pension in the Welfare Cap.

“That would mean that a future government could offset a rise in working age benefits by cutting the pensions of older people.

“That penalises those who've worked hard all their lives.

“Cutting pensions to pay for working age benefits is a choice this government is certainly not prepared to make.

“It is unfair.”

Labour has, however, committed to introducing an overall welfare spending cap of its own. Shadow chancellor Ed Balls has previously suggested state pension spending would be included in Labour's cap.

Winter fuel payment

Mr Osborne said that the payment of winter fuel payments for people living abroad will be linked to a 'temperature test' from Autumn 2015 to ensure pensioners in hot countries do not get it.

At the moment, people born on or before 5 January 1952 can get between £100 and £300 tax-free to help pay their heating bills. They usually get a winter fuel payment automatically if they get the state pension.

Read more about the winter fuel allowance here. 

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