Joia Shillingford: Delayed retirement will benefit us all, not just over-60s
Sunday 11 September 2011
The Organisation for Economic Co-operation and Development says the UK government should encourage workers to delay retirement as this would help boost the economy.
This sounds like an excellent idea as high inflation and low interest rates are making it harder for older people to live comfortably. Moreover, some older people have experience and skills that younger workers do not have and enjoy the companionship of being around others.
There are also state pension benefits to retiring later. For every five weeks you delay claiming your state pension, when you do begin taking the benefit, your payment is 1 per cent higher, or 10.4 per cent higher for every year of deferment. If you delay it for a year, you can take it as a lump sum with interest.
As an example, a pension of £105 a week deferred for five years (ignoring inflation and assuming a higher interest rate) could lead to a lump sum of £32,000.
But there is one major obstacle. Employers. Age discrimination is rife in Britain and a simpler, faster system of penalties is needed to make them keep on competent staff whose only failing is to have another birthday. I hope the Government is working on this now. It has already ditched the Default Retirement Age, so employers can no longer dismiss staff simply because they have reached 65.
One of the most energising sights is arriving in New York and seeing 60 to 80-year olds, who are still movers and shakers, hanging out in the Oak Room and doing deals because they want to and still can.
Another way of boosting the economy is to lower taxes. This is something Barack Obama has proposed in his $447bn (£281bn) job-creation stimulus package. He will cut payroll taxes for employers who hire new workers and also cut tax for workers.
It is hard to understand why the Conservatives – the party of the tax cut – have not done more in this area. It is not just about the absolute levels of tax but also about the psychological levels. VAT at 20 per cent is a problem, not only because it is very high but because it is easy to work out how much it is costing you.
Likewise the 50p tax rate for higher earners, which the Confederation of British Industry is opposed to, is not only high. It also tells the usually hard-working higher earners that they are knocking themselves out to give half their money to the government. Or that they should go and work in a lower-tax country.
So I have some sympathy for Tim Martin, boss of pub chain Wetherspoons. He is complaining that he has to pay 20 per cent VAT on food, whereas supermarkets pay nothing. And that he has to pay a higher tax on beer than they do.
To drive the point home, he has itemised the amount he pays in tax. This tax burden on pubs, he says, is a factor in the many pub closures and loss of pub jobs around the country.
However, the cost of eating in pubs is more transparent than in restaurants. Though no doubt many restaurants are having a hard time, it is partly because it is almost impossible to work out how much you are going to end up spending.
Even when buying a set-price meal, there are usually extras. VAT is often added to the prices in the menu, along with a charge for service of 12.5 to 15 per cent – and then there are the drinks and sometimes a cover charge.
One way of avoiding unpleasant surprises in restaurants is just not to eat out – and this is the policy many cash-strapped consumers are adopting. The first mid-to-upmarket restaurant chain to market itself as having completely transparent pricing – "Our £20 two-course meal with drinks costs £20" – should do very well.
Julian Knight is away
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