Means-testing fails a million pensioners

Government says means-testing Pension Credit isn't working, but Age UK tell ministers to try harder (see below).


A government attempt to try to persuade more older people to claim means-tested pension credit has had little impact, the Pensions Minister Steve Webb has admitted.


A million pensioners on low incomes are entitled to the top-up payment - which raises the state pension from £102.15 to £137.35 a week - but don't put in claims.


But when the Department for Work and Pensions selected 2,000 of them, paid them automatically for 12 weeks and then encouraged them to claim, only 8 per cent did so.


A further 2,000 were visited by DWP staff, but only 13 per cent of this second group put in successful claims.


"Despite our best efforts, mass means-testing has failed pensioners," Steve Webb said, "Pension Credit is not getting to over a million people who are entitled to it."


The minister said a a new flat rate pension of around £140, to be introduced in the next Parliament - after 2015 - would ensure pensioners "have a decent and secure income in retirement".

Michelle Mitchell, Charity Director General at Age UK says:

“While we welcome the flat rate pension for future pensioners it is still vital that the Government continues to work proactively on ways of getting money to older people who are in desperate need.

“Too many older people have had negative experiences when making claims or still think they are not entitled to the money. The result of this study confirms just how many barrier there are for older people when it comes to claiming benefits

As the study and our work with older people shows pension credit can make a significant difference to a person’s quality of life. The Government must continue to work proactively on ways of getting money to older people who are in desperate need and ensure we move more towards a system where the DWP pay entitlements rather than an individual having to work their way through the benefits maze.

"We would urge any older person who is struggling or worried about money to contact to call our free advice line on 0800 169 6565 or speak to their local Age UK."

Lucky the dog gets pet payout

The Halifax has been rebuked by the Financial Ombudsman Service for making a "significant error" in promising life-long insurance to pet owners.

The bank, now part of Lloyds, could find itself having to compensate thousands of customers, after the Ombudsman, Tony Boorman, found that it had misled them into thinking that cover for ongoing illnesses would continue indefinitely.

The case centred on a complaint about a dog called "Lucky" who has a skin condition costing £500 a year to treat.

The Halifax pulled out of the pet insurance business last year but has now been told that it should provide Lucky's owner with another 3 years of cover plus £200 in compensation.

The "life-long" policy cost £6 a month initially, rising to £10 a month later on, providing cover for vets bills of up to £1,000 a year.

When it was bought in 2005, Halifax congratulated Lucky's owner, know only as Ms W, on choosing "the right cover, no matter what the future brings".

The policy was particularly valuable because once Lucky's condition worsened, Mrs W was able to make claims year after year, as long as she renewed every 12 months.

However, when the bank decided to exit the business the dog's cover came to an end, because other insurers would have excluded pre-existing conditions from a new policy.

In his provisional finding Tony Boorman said:

"The description of the policy as "life-long" seems to me to be a significant error by Halifax. The policy was not life-long...and it was clearly misleading to suggest that it was."

He decided that the Halifax should provide "top-up" cover for Lucky's skin condition, if Ms W paid for a policy with another provider.

Although Lloyds and the Halifax had 30,000 pet insurance customers between them, it is thought that only a few thousand had policies which covered them for pre-existing conditions over an indefinite number of years.

A Lloyds Banking Group spokesman suggested that it would provide further help for any pet owners affected by the problem, saying "We are committed to continuing to support our customers and are sorry for the inconvenience we may have caused."

So Lucky's compensation could open the way to generous deals for thousands of other pets once covered by the Halifax.

Full text of the Lloyds statement to the BBC:
‪
"Lloyds Banking Group withdrew from the pet insurance market last year. We acknowledge that this decision has caused concern among some customers whose pets have pre-existing medical conditions and are having difficulty finding a new insurer.

"We are urgently working on a solution for customers with pets who have pre-existing conditions and will be contacting them in the next few weeks with our proposals.

"If any customer wants to check if they are affected, they can contact us. We are committed to continuing to support our customers and are sorry for the inconvenience we may have caused." ‪ ‬

Royal Mail boss's pay

In the light of the hike in the price of a First Class stamp to 60p, you might be wondering about the pay packet awarded to Royal Mail's Canadian chief executive, Moya Greene.

Last year she took home £637,000.

Her basic was £498,000 but she arrived during the year so she only received £350,000.

Then there was a performance bonus of £142,000.

And £145,000 for extras, including the cost of moving to the UK.

Moya Greene used to run Canada Post and she had a hand in privatising Canada's railways and deregulating the airline business.

£2bn for BT pensioners

330,000 current and former employees of BT have been reassured that their pensions are safe after the company said it would pump £2bn into its pension scheme.

BT says a significant improvement in cash coming in had enabled it to tackle the huge shortfall in the scheme more quickly.

A lot of these big salary-linked pensions schemes have enormous shortfalls - that means there's not enough money in there to pay off all the people who are owed pensions.

In BT's case, it was a colossal £9bn short at the previous count in 2008 and the good news is that the deficit has come down to £4bn.

One reason is that the stockmarket's gone up since the recession - by 50%.

Now BT's putting in another £2bn, its scheme is getting closer to being fully funded and with more payments the company expects to get there 4 years earlier than planned.

Unfortunately this doesn't mean pensions linked to employees' salaries are getting a new lease of life. Companies are closing them down as fast as they can because they're so expensive to run.

In fact, BT closed its scheme to new staff ten years ago.

However, it is one of the biggest private sector pension schemes and what BT's saying today shows how they've all benefited from a bit of recovery in the stockmarket.

So if you're lucky enough to be in one of these high quality pensions, that's a bit of good news.

Looking ahead, the picture isn't quite so rosy.

Pension funds invest a lot in gilts (government bonds or IOUs), which have a large bearing on valuations.

The Bank of England's policy of Quantitative Easing - a process of buying back huge amounts of gilts while still issuing more - has distorted the market and cut the returns the funds can forecast.

BT says "it is very difficult to assess the underlying position...due to the dislocation in the gilts market".

It's a predicament which is making the whole pension fund industry squeal.

Pensioner tax - the details

Tax change for pensioners

Special pensioners' tax-free allowance frozen at £10,500 (£10,660 for 75s and over) if you're on it before the end of the 2012-13 tax year, abolished if you turn 65 from 6th April next year.

4.41m pensioners lose out in first year, losing £83 on average - compared with what they would have expected if the system had carried on as normal.

360,000 turning 65 next year will lose £285 on average and up to £322 over the year.

230,000 pensioners will be drawn into tax - they'll have to pay it on the new £9,205 personal allowance, but wouldn't have had to pay tax if they'd qualified for the age related allowance.

40% of pensioners lose out.
50% don't pay tax so aren't affected.
10% aren't affected because their incomes are too high (because the age related allowance was removed above £29,110).

These figures are from HMRC and the Treasury.

Taxing child benefit

Three million taxpayers will be sent letters in the autumn asking if they or anyone in their household receives child benefit - so that it be taxed from January 2013.

The tax authorities will be targeting those earning around £50,000 a year and above. They will have to fill in self-assessment tax forms so that the benefit can be clawed back.

Those earning between £50,000 and £60,000 will lose a gradually increasing share of the benefit. Higher earners will lose it entirely.

The income tax charge could be levied from monthly pay cheques, via people's personal tax codes. Otherwise, the first tax bills for child benefit will have to be settled by the end of January 2014.

Taxing child benefit

The government will be taxing child benefit -- that's the effect of the new approach to removing it for higher earners.

This autumn HMRC will be writing to people it thinks are earning over £50,000 and have a child benefit claimant in the household.

From January 2013, when the change comes into effect, they will pay an income tax charge which will rise gradually so that all the benefit is removed once income reaches £60,000.

What it means is that all these people will need to fill in a self-assessment tax form so that the tax charge can be worked out.

If their tax affairs are very simple, it's possible that the need to fill in the form will be removed in future. The adjustment will be included in their tax codes.