Sunday, 16 June 2019

FREE TV LICENCES

From 1 June 2020 the BBC has decided to restrict free TV licences to people aged 75 or more who also get a means-tested benefit called Pension Credit. Here is what you must do.


An estimated 4.6 million people over the age of 75 currently get a free TV licence. 
  • Nearly 950,000 over 75s got Pension Credit in November 2018. There are two parts to Pension Credit called 'guarantee credit' and 'savings credit'. Either qualifies for a free TV Licence. To continue to get a free licence from 1 June 2020 they will need to contact TV Licensing with proof of their entitlement. The details of when and how that is to be done have not been announced.
The rest fall into two groups. 
  • About 650,000 over 75s could get Pension Credit but do not. If they claim it before 1 June 2020 they can contact TV Licensing and their free licence will continue. If they leave the claim until after that date it will be restored. 
  • All free licences will expire on 31 May 2020. Anyone who does not get Pension Credit will have to pay from 1 June 2020. There will be more than three million people in this position. Some will not have paid for a TV Licence since the scheme began in 2000. They will all be written to by TV Licensing. There will be easy payment methods but those have not yet been announced. 
People who live with others
The free TV Licence is currently available to any household where at least one person aged 75 or more lives. So it can be claimed by younger people if a person over 75 lives with them.

From 1 June 2020 the free Licence will be available to any household where someone aged 75 who is on Pension Credit lives. The household itself will not be means-tested. So younger people will benefit from the free licence in those circumstances.

People born before 1 June 1945 
People born before 1 June 1945 who are currently 74 can still all claim a free TV licence from their 75th birthday which will last until 31 May 2020. Contact TV Licensing. You can call on 0300 790 0368.

Who can get Pension Credit

Age
Pension Credit can only be claimed by people over state pension age - currently just over 65. If they live with someone else as a couple then to claim Pension Credit in future both must be over state pension age (there are exceptions - see Couples below). If they get Pension Credit the free TV licence is given if either of them is over age 75.

Income
If you are over 75 and your income is up to £201.53 a week then you can get Pension Credit. If you live as part of a couple then your income is counted jointly and the upper limit is £293.61 a week. 

If you get Carer's Allowance you can add £36.85 to these amounts. You can count as a carer even if you do not get carer's allowance if you would be entitled to it. See 'Carers' below.

If you are severely disabled add £65.85. 'Severely disabled' normally means means you get Attendance Allowance. See 'Severely disabled' below.

If you are part of a couple the rules for adding these amounts are complex but you should still apply.

Savings
If you have savings or investments of up to £10,000 they do not affect your entitlement to Pension Credit. If they are more than £10,000 then an amount is added to your income. That amount is £1 a week for every extra £500 of savings. So savings of £15,000 mean that £10 a week is added to your income. Of course, savings of £500 will not produce an income of £1 a week. You will be lucky if you get 15p a week. But that is how the rules work. Any income the savings actually produce is ignored. For a couple, savings are added together and the limits apply to their joint savings.

There is no upper limit for savings that disqualifies you from getting Pension Credit. Some people with low incomes and tens of thousands of pounds in savings can still get Pension Credit. But if savings are very high then your entitlement to Pension Credit will be wiped out. 

Just claim!
If your head is hurting with all these complex rules (mine often is!) then just claim. You can do that easily by calling 0800 99 1234. The call will be free. Have all your details of income and state pension with you and if possible your NI number. They will tell you if you do not qualify.

Check your entitlement
You can find out how much Pension Credit you could get using one of the online calculators. All are anonymous. The average amount of unclaimed Pension Credit is around £2500 a year. So it is well worth claiming regardless of getting a free TV Licence. Even if your entitlement is just 1p a week you will still get the free TV Licence.

By far the best online calculator is from an organisation called Entitled To. It will also work out if you can get any reduction in your council tax if you are a homeowner and, if you are a tenant, your rent as well. It also suggests other places you might be able to get financial or other help. Homeowners can claim Pension Credit.

If your income is below £167.25 a week (£255.25 for a couple) then you will get some guarantee credit. If you do then your council tax will be reduced to zero. If your income is higher than that and you get only the savings credit then your council tax will normally be substantially reduced UNLESS your savings are over £16,000. In that case you will not get a council tax reduction at all. But that extra savings rule does NOT apply if you get any guarantee credit.

If you prefer the official calculator on the Government website be aware it is very long and fiddly - although you can ignore most of the boxes - and if you need to change something after you get the answer you have to start again. It does not work out entitlement to other benefits like council tax reduction or help with rent.

Another online calculator is run by the charity Turn2Us. It is a bit fiddly too but the charity also has an online search for grants and other cash help you may get. So it is worth using for that.

Fiddly Bits

Extra information about some of the complex rules that surround Pension Credit

Younger people
There is some confusion about income limits for Pension Credit. That is because it is in two parts - guarantee credit and savings credit. Guarantee credit will raise your income to £167.25 a week (£255.25 for a couple). But if your income is higher than £144.38 a week (£229.67 couple) then you are also given an extra bit of pension credit called 'savings credit'. Entitlement to that runs out as your income exceeds £201.53 a week (£293.61 for a couple) though you will not see those two figures in any official publication.

The savings credit is not paid to people who reached state pension age from 6 April 2016. They are men born from 6 April 1951 and women born from 6 April 1953. At the moment they cannot get free TV licences as they are under age 75. When they can in 2026 and 2028 there will be discrimination between men and women and the scheme may have to change. See also 'Younger People' below.

Couples
A new rule for couples began on 15 May 2019. From that date they can only get Pension Credit if they are BOTH over state pension age. Before that date they could claim Pension Credit if EITHER of them had reached state pension age. So a man of 76 with a partner aged 64 will not now be entitled to get Pension Credit. However, there are two important exceptions.
  1. No-one will have their pension credit taken away. So if you are a mixed age couple (as the DWP calls them) and you already got Pension Credit or Housing Benefit before 15 May 2019 you will still qualify for Pension Credit.
  2. If you successfully claim Pension Credit by 13 August 2019 it will be backdated up to three months which means you were entitled to it before the new rule began. So if you are claiming now and were a couple who would have qualified before 15 May 2019 you will still be able to get Pension Credit. You must claim by 13 August 2019.
The DWP does not care if a couple is married, civil partnered, or neither. If they live together as a couple then they count as a couple.

Carers
You qualify for Carer's Allowance if you spend at least 35 hours a week caring for someone else who is severely disabled. That normally means they get 
  • Attendance Allowance, or
  • One of the two higher rates of Disabled Living Allowance (DLA) or, 
  • Either rate of Personal Independence Payment (PIP). 
If you are over state pension age you may not have claimed Carer's Allowance as it will not be paid on top of your state pension. But it is important to claim it as it will entitle you to more Pension Credit. 

Severely Disabled
For people over 75, severely disabled normally means you get 
  • Attendance Allowance, or
  • Constant Attendance Allowance paid to ex-service personnel
Numbers
DWP statistics for November 2018 show that 943,954 people aged 75 or more get Pension Credit.
DWP take up figures for 2016/17 - published in November 2018 - show that 650,000 over 75s who could claim Pension Credit do not do so which is a take-up rate of 59%. The average amount unclaimed by them is £48 a week or £2496 a year.

Why the BBC changed the rules

Origins
The free TV Licence for people over 75 was introduced by Gordon Brown when he was Chancellor of the Exchequer. It was announced in the pre-Budget Report on 9 November 1999 and confirmed in the Budget on 21 March 2000. It began on 1 November 2000, a few months before the June 2001 election which Labour won comfortably. The cost - around £350 million a year then - was paid by the DWP and it has continued to pay the BBC for the cost of the free licences. So the free Licenses did not cost the BBC anything.

People now aged 94 and younger will not have paid for a TV licence since they reached 75, for nearly 20 years in some cases. 

Change
As part of the renewal of the BBC Charter in 2015 the Government insisted that the BBC bear the whole cost of the free licences from April 2020. The BBC estimates the cost at £745 million in 2021/22 rising to £1 billion a year by 2030. The cost is around 15% of its current £5 billion a year budget and is more than the total cost of all its radio stations and almost as much as all its TV stations apart from BBC One. The BBC says it cannot afford to pay that it without major cuts affecting programmes enjoyed by all licence fee payers. The cost of the means-tested Free Licence scheme will cost the BBC an estimated £250 million a year.

As part of the Charter deal the BBC was allowed to raise the licence fee by inflation from April 2017. It had been frozen since 2010 as part of the previous Charter deal when the BBC had refused to take over the cost of free TV Licences. It rose from April 2017 and in April 2019 it went up by £4 to £154.50. There are around 26 million licences so the rise brought in just over £100 million this year. 

Which over 75s will the BBC free licence exclude from 1 June 2020?
  • People over 75 who get pension credit but who do not claim the free TV licence.
  • Anyone aged 75 or more on an income low enough to claim pension credit but who does not claim Pension Credit. They may have very low incomes - on average the income of non-claimers is around £120 a week.
  • Couples where one partner is below state pension age even if their income as a couple is very low. They can no longer claim Pension Credit for the first time, though many will continue to get it and of course be eligible for a free TV Licence. See 'Couples' above. 
  • People with low incomes just above the limit to get Pensions Credit for example an income as low as £202 a week for a single person or £294 a week for a couple. They will have to pay in full for the Licence. Currently it is £154.50 but from April 2020 it is expected to rise with inflation to around £158. It will cost up to 1.5% of their income. 
People outside the UK
The change in the rules applies throughout the UK. People living in the Channel Islands and the Isle of Man - which are not in the UK - also pay for a TV Licence and get a free one if they are aged over 75. It is not clear yet how their entitlement will change.

TV Licence
Version 1.10
24 June 2019





Monday, 6 May 2019

DWP CANNOT ENFORCE DEMANDS TO REPAY PENSIONS PAID AFTER DEATH

When someone dies the Department for Work and Pensions routinely sends out letters to relatives demanding they return money which the Department has paid after the person died. 

It has no powers to enforce these payments.

After someone dies, the death has to be reported within five days (eight in Scotland) by a relative or someone present at the death. They are normally asked to use the official service called ‘Tell us Once’ which informs all government and local government offices about the death. That service will then cancel benefits, passports, driving licences, disabled badges, council tax and so on. 

Although Tell us Once is run by the Department for Work and Pensions it still takes a little while to stop state pension and benefit payments. So it is common for one or two payments to be credited after the death to the bank account of the person who has died. 

The Department automatically writes to relatives and executors asking them to refund these after death payments. Often the letter will go to the relative who registered the death. These letters imply that the money has to be repaid.

"when public funds are incorrectly paid we are obliged to ask for them to be refunded…We recommend you use the Bank Giro Credit slip enclosed.”

Each year the Department sends letters to hundreds of thousands of relatives and they send back more tens of millions of pounds even though it has no power to force them to do so.

No power
When asked directly the Department is very clear that it has no power to enforce these repayments. So such letters can safely be ignored (but see DO NOT IGNORE below for when you should not ignore a letter).

Here is what the Department said in an official statement by email to me on 8 March 2019

"There is no legal obligation to repay a debt of this type."

And here is what the Department section that sends out the letters said to me personally when I asked for the legal provision under which it was asking me to refund pension payments made to my mother. 

"We cannot however enforce recovery of overpaid benefit."

Only once
The Department also told me that only one letter seeking to recover this money is sent. If it is ignored then no others are sent. A Freedom of Information response of 23 April 2019 makes this procedure clear

"If payment is not received no further action is taken and the debts are automatically written off."

So the safest thing to do with such a letter is to ignore it.

If you are not happy doing that then write back asking what statutory power the DWP is relying on to recover the money. It will then respond to say it has no power. You can then confidently ignore the payment demand.

The Freedom of Information response reveals that in 2017/18 the Department sent 392,000 letters to 282,000 people (more than one benefit is often involved). And it recovered £53,295,000 from them even though it has no power to do so and they have no obligation to repay the money.

As the FoI says "we do ask for these funds to be repaid on a voluntary basis".

It is important to use the Tell Us Once service when the death is registered. In areas where that is not used, then inform the DWP directly of the death as soon as you can. 

I must stress that this lack of recovery powers only applies to payments made after the death. 

Common law
It is unfortunate that solicitors who act as executors seem to give in to the DWP and repay the sums demanded. Some seem to think that the DWP can recover the money using the common law power of restitution. However that was considered by the Supreme Court in a different case and on 8 December 2010 the Court held unanimously that common law could not be used to recover money paid by official error - which this is. 

The case is [2010] UKSC54 and para.2 sets the context 

"This question arises, for example, where a claimant has notified a change of circumstances...and by mistake the Department overlooks (or delays actioning) the notification and continues making benefit payments" 

The judgement is in para.15 

"For better or for worse those benefiting from official errors are not subject to recovery proceedings. I am persuaded that section 71 [of the Social Security Administration Act 1992] does indeed necessarily exclude whatever common law restitution rights the Secretary of State might otherwise have."

Since this case the Department has not claimed it has common law rights to such money. 

If you use a solicitor as an executor it may be worth pointing this out to them before they send the Department money which it has no legal right to. And if they do repay it then you could ask the solicitor to pay that sum to the heirs.

DO NOT IGNORE
There are some benefit and pension payments that the DWP does have the power to recover.

It has powers to recover money that has been overpaid in the individual's lifetime which was not due to official error. Those letters should not be ignored but the money may still not have to be paid.

There are two common scenarios.

First, the deceased may already have a debt to pay to the DWP due to a benefit being overpaid while they were alive.

Second, information that emerges as part of the probate process may indicate that the deceased was not entitled to a benefit which they claimed and received while they were alive. For example, they may have more savings than they had informed the DWP about which would have reduced or wiped out their entitlement to means-tested pension credit. 

In those cases the DWP will try to find the information about their savings going back many years. 

These demands are always worth challenging initially. Ask the DWP under what legal powers it is asking for the information and under what legal powers it is seeking to recover the money. If the answer is it has no legal power then you can probably ignore the demands.

Even where the DWP has the power to recover money the debt can only be recovered from the estate of the deceased. If the individual has died with little and there is nothing left after funeral expenses have been paid then their estate is insolvent and the debt should be written off. It cannot be recovered from relatives.

However, if there was money in the estate then the DWP can still make a claim against the estate, even if it has been distributed to relatives. That claim should only be made against the executors, who may be relatives or who may be solicitors. If a solicitor or other executor has distributed the estate to the heirs before the DWP enquiry then they may be liable to pay the money. 

Anyone in this position needs to get legal advice. If local solicitors are too expensive there may be a law centre nearby - use the Law Centres Network website to find one. If there is not one nearby the website also has useful links to other sources of free legal advice.

Other debts and overpayments
Requests for tax from HMRC or from a private or company pension provider should not be ignored. However, it is always worth writing to ask under what power the demand for repayment is made. And if necessary seeking legal advice.

Paul Lewis
6 May 2019
v. 1.50

Monday, 8 April 2019

TARGET 168 - BOOST YOUR NEW STATE PENSION

UPDATED for the 2019/20 tax year


More than a million people who reach state pension age in the years from 6 April 2016 will not get the full amount of the new ‘flat-rate’ state pension - currently £168.60 from 8 April 2019.

But many of them could boost their pension towards or up to the full flat rate amount.

This guide is for men born 6 April 1952 or later and women born 6 July 1953 or later who paid into a good pension at work or, in some cases, into a personal pension.

There are other groups who can boost their state pension. Separate links for them are listed at the end of this guide.

NEW STATE PENSION
The new state pension was supposed to be simple. A flat-rate amount for everyone who had at least 35 years of National Insurance contributions. This year 2019/20 that amount is £168.60 a week (£8767 a year) and is taxable. However, there are around one and a half million people who will reach pension age in the before 2027 who will get less than that even if they have 35 years or more National Insurance contributions.

That is because an amount is deducted from the pension for every year they paid into a good pension at work. I call it a contracted out deduction because they were ‘contracted out’ of part of the state pension called SERPS or State Second Pension (S2P). They paid lower National Insurance contributions and instead of that additional state pension they get a pension from their job which was supposed to replace it. The Government prefers to call it 'Contracted Out Pension Equivalent' or COPE. It is that COPE amount that is deducted from your new state pension.

This group includes most people who worked in the public sector, such as

  • nurses, doctors, and others in the NHS
  • teachers in schools and universities
  • police officers and fire brigade staff
  • civil servants
  • local government workers
  • armed forces
  • Post Office workers
It also includes many people who worked for one of the privatised industries such as British Airways, British Rail, British Steel, and Royal Mail.

Another large group affected are people who worked for a private sector employer who paid into a good scheme at work that promised them a pension related to their salary. They used to be called ‘final salary’ schemes and nowadays are called Defined Benefit or DB schemes. In the past many large firms ran such schemes. There are still nearly 6000 of them and if you paid into one at any time from 1978 your new state pension will be reduced.

Also included are some people who paid into a personal pension and who were persuaded to contract out of part of the state scheme – at the time it was normally called ‘contracting out of SERPS’.

For all these people their new state pension will be reduced for the years they paid into a contracted out pension scheme. That deduction applies even if they have paid the 35 years which is needed to get a full pension – the deduction is made after the full pension is worked out. It can also apply even if they were contracted out for a short period and paid in 35 years or more when they were not contracted out. These deductions can be very large but normally can never leave you with less than £129.20 a week of the old or 'basic' state pension.

Please do not ask me why that is fair! It may not be fair, but it is the law. The good news is that you can reduce that deduction and, depending on your age, you may be able to get your pension up to the full flat-rate £168.60.

THE DEDUCTION
If your new state pension has an amount deducted from it because you spent some time paying into a good pension scheme at work then you can reduce that deduction or even wipe it out. This guide is of most use to people who are currently aged at least 56. It will help even if you already have 35 years National Insurance contributions or more.

If your new state pension is reduced because you paid into a good pension scheme at work then every year of National Insurance contributions from 2016/17 to the year before the tax year you reach state pension age will mean that deduction is less.

If you work and earn more than £118 a week you will get contributions credited or paid to your account (you start actually paying for them when you earn above £166 a week; under that they are credited). If you get child benefit for a child who is less than 12 then you will also get a credit for each week. If you get jobseeker’s allowance, employment and support allowance, or working tax credit then you will get a credit for each week you get that benefit. You can also get credits if you are a carer in some circumstances. Check here for more details of who can get credits. Some are given automatically, others have to be claimed.

Men can get credits for years between women’s state pension age and 65. They get a credit for the tax year in which they reach women's state pension age (unless they also reach 65 in that tax year) and any subsequent tax year before the tax year they reach 65. So these man credits are only available to men born before 6 October 1953. See footnote.

If you are self-employed then you must pay what are called Class 2 National Insurance contributions if your profits are £6365 or more. They are called Class 2 and are £3 a week (£156.60 a year). Self-employed people can also pay these contributions voluntarily even if their profits are below £6365 - but only for years in which the were genuinely self-employed. The Government planned to phase out Class 2 contributions but that has been deferred. 

If you will not pay National Insurance contributions at work or as self-employed or get credits for them you can pay voluntary contributions, called ‘Class 3’. They will cost you £15 a week (£780 for a year). For each extra year of contributions your pension will be boosted by £4.82 a week (£250 a year) so the payback is rapid – just over three years for non-taxpayers; almost four if you pay basic rate tax; just over five for higher rate taxpayers, and almost six for top rate 45% taxpayers. Contributions for earlier years are less: 2018/19 - £772, 2017/18 - £740, and 2016/17 £733.20 making them even better value for money.

The new state pension up to £168.60 a week comes under the ‘triple lock’ promise and will rise each April by prices, earnings, or 2.5% whichever is the highest, at least until April 2022.

If you have paid some contributions at work or as self-employed during the tax year but you are short of a full year you can pay individual weeks through Class 3 (or Class 2) to make your record up to a full year.

You can only pay Class 3 contributions for the years before the tax year in which you reach state pension age. That limits the number of years you can pay to boost your pension. The table show which years you can pay Class 3 contributions for to set against the contracted out deduction and the maximum boost that may give to your pension. Your pension cannot be boosted to more than £168.60 a week and it cannot be less than £129.20 so the maximum boost is £39.40.

BOOSTING A NEW STATE PENSION THAT IS SUBJECT TO A CONTRACTED OUT PENSION EQUIVALENT (COPE) DEDUCTION
Reach State Pension Age in
Men born
Women born
Years you can pay
Maximum pension boost (2018/19 rates)
2016/17
6 April 1951
5 April 1952
6 April 1953
5 July 1953
0
£0.00
2017/18
6 April 1952
5 April 1953
6 July 1953
5 Oct 1953
1
£4.82
2018/19
6 April 1953
5 Jan 1954
6 Oct 1953
5 Jan 1954
2
£9.64

Men and women born


2019/20
from 6 January 1954
to 5 July 1954
3
£14.46
2020/21
from 6 July 1954
to 5 April 1955
4
£19.28
2021/22
from 6 April 1955
to 5 April 1956
5
£24.10
2022/23
from 6 April 1956
to 5 April 1957
6
     £28.92
2023/24
from 6 April 1957
to 5 April 1958
7
     £33.74
2024/25
from 6 April 1958
to 5 April 1959
8
     £38.56
2025/26
from 6 April 1959
to 5 April 1960
9
     £39.40 (max)


NEXT STEPS
There is no hurry to do anything. You can pay voluntary Class 3 contributions in the tax year they are due or up to six years after that. You cannot pay them in advance. The price may rise as time passes so it will be cheaper to pay them as soon as you can.

If you will reach state pension age in 2019/20 you may want to act soon to see if you can boost your pension by paying National Insurance contributions for 2016/17, 2017/18, and 2018/19. Otherwise it is probably best to wait.

You can phone the DWP’s Future Pension Centre on 0800 731 0175 and ask for help. Ask them what your ‘starting amount’ is and ask if there is a deduction for being contracted out. If your starting amount is less than £168.60 and there is a contracted out deduction then you may be able to boost it using the information in this guide. 'Starting amount' is explained in the notes below. If you have a deduction for a pension which you cannot trace use the Government's free Pension Tracing Service.

Many people have contacted the DWP and been told they cannot boost their pension because they have 35 years of contributions. That is incorrect. Some officials seem to be confusing this scheme with one to fill gaps in your contribution record. There is a separate guide about that – see Filling Gaps below. Others have been told that they need more than 35 years to get a full pension. That can be true in the circumstances in this blogpost. 

You may get more sense from the free and excellent Pensions AdvisoryService or call on 0800 011 3797. Beware of similar sounding commercial organisations.

You can check your starting amount at this Government website. You will have to go through security procedures which can be a pain. Make sure it includes your 2015/16 contributions. In future this website may let you see how you can boost your pension by paying extra National Insurance contributions. It will be a lot easier to check these things when the website is fully operational, probably in a year or so.

NOTES
1. All the rates in this guide are correct in 2019/20. 

2. If your income is low then you may get extra money from pension credit or help with your council tax or rent (rent or rates in Northern Ireland). If you buy Class 3 contributions to boost your pension those benefits will be reduced but it will almost always still be worthwhile.

3. Your ‘starting amount’ is the calculation of how much state pension you have built up at 6 April 2016 under the old and the new rules. Your starting amount is the one that is bigger. It will take account of National Insurance contributions paid up to 2015/16 and will also make a deduction for years you have been ‘contracted out’ of part of the state pension system called SERPS. If it shows you have fewer than 35 years of National Insurance contributions then you may be able to pay more to boost that number towards 35. See ‘other groups’ guides link below.

4. SERPS, the State Earnings Related Pension Scheme, was an earnings-related supplement to the basic state pension. People paid into it as part of their National Insurance contributions from April 1978 to April 2016. From April 2002 it was changed and renamed State Second Pension (S2P). It was SERPS and S2P – sometimes called ‘additional pension’ – which people ‘contracted out’ of if they paid into a good pension at work or in some cases into a personal pension which they chose to ‘contract out’. They paid lower National Insurance contributions. The pension they paid into was supposed to replace the SERPS or S2P but it does not always do so in full.

5. Tax years run from 6 April one year to 5 April the next. So 2019/20 runs from 6 April 2019 to 5 April 2020.

6. If you have an old pension you cannot trace, use the Government's free Pension Tracing Service.

7. Contacted Out Pension Equivalent is the amount deducted from your new state pension to take account of the time you were contracted out of SERPS/S2P. In theory the amount deducted should be paid to you by the pension scheme you paid into as part of being contracted out. But that will not always happen especially if you were contracted out into a personal pension. This government guide to contracting out sort of explains it.

8. Man credits. These man credits - called auto-credits - are only awarded for whole tax years, not individual weeks. Men born 6 April 1952 to 5 April 1953 can get a year of contributions credited for 2016/17. They may also get earlier years credit but they do not help with reducing their contracted out deduction. Men born 6 April 1953 to 5 October 1953 can get a year credited for 2017/18.

The credit is given for the tax year in which they reach women's state pension age (unless they also reach 65 in that tax year) and for any subsequent tax year before the tax year they reach 65.

BOOST YOUR PENSION GUIDES FOR OTHER GROUPS
Men born 6 April 1951 or later and women born 6 April 1953 or later.
·         Filling gaps in your National Insurance record – new state pension 

Men born before 6 April 1951 and women born before 6 April 1953
·        Filling gaps in your National Insurance record – old state pension 
·        
There is also a comprehensive guide to what you can do to top up your state pension available as a download from the mutual insurance company Royal London written by former Pensions Minister Steve Webb it is well worth a couple of hours study.

Version: 3.0
4 May 2019
Previously: Target 155 and Target 164
62191

Monday, 18 March 2019

HMRC LOAN CHARGE BRIEFING PACK

HMRC publishes briefing pack on the loan charge.


On 18 March 2019 HMRC published this Loan Charge Briefing Pack for journalists to set out is position as 5 April approaches explaining its view that the Loan Charge is fair and necessary.

It is not available online yet so it is published here for the benefit of everyone who wants to see it.

Publishing it is not an endorsement of its contents on which I make no other comment.

It is Crown Copyright © 2019.

Paul Lewis
18 March 2019


Sunday, 21 October 2018

SMART METERS - DO THEY THINK WE'RE DUMB?

UPDATED 21 October 2018

Over the next two years or so every home and small business in the UK should have their electricity and gas meters replaced with new 'smart' meters. The plan is to put 53 million meters into 30 million homes and small businesses in England, Scotland, and Wales by the end of 2020. It is a challenging target. By the first half of 2018 just 12 million smart meters had been installed in homes, split about 57:43 between electricity and gas. The number of installations has plateaued at around 1.3m a quarter so it is a near impossible task to replace the remaining 41 million by the end of 2020. That would require one and a quarter million meters a month between now and then - three times the present rate.

The meters already fitted - and being fitted in 2018 - are an early model called SMETS1. Under plans confirmed in October upgraded meters called SMETS2 will not become the standard to be fitted until 5 December 2018 - a deadline that has been put off four times. A later deadline of 15 March 2019 will apply to prepayment meters. At the end of June 2018 there were 2000 SMETS2 meters installed but it was not clear how many were still under test conditions. However, the most recent letter to industry bosses says that "47,000 SMETS2 meters [have] been installed as at the end of September 2018". The Department of Business, Energy, and Industrial Strategy (BEIS) confirmed both figures were accurate but may not be comparable and could not confirm how many of these were in domestic premises.

SMETS1 meters use the existing mobile phone network for communications and each supplier has its own way of using it and transmitting data. People who have them will usually find that if they switch supplier their meter becomes dumb and has to be read manually. That is more difficult to do with 'smart' meters than it was with old meters designed for reading by a supple human with a torch.

There are plans to upgrade SMETS1 meters to operate with any supplier. They will still not be SMETS2 meters but the workaround will at least mean they can support switching supplier. This process is known as enrolment into the DCC network (described below) and is planned for 2019. However, the Government's latest assessment indicates that enrolment is currently only possible for two thirds of SMETS1 meters. The Government tells me "negotiations for the final third are making good progress." However, its latest papers indicate that some SMETS1 meters may have to be replaced by SMETS2 meters to ensure they are fully operational by the end of 2020. See enrolment of SMETS1 meter cohorts and maximising interoperability published in October 2018. Earlier papers are here Maximising Interoperability and Enrolment of SMETS1 cohorts.

Voluntary
Customers are free to choose whether or not to have a smart meter fitted. But the large companies are more and more trying to make it seem inevitable. Some are even booking appointments without agreement others are cold-calling and sending texts to customers. This hyperactivity is because if they miss the 31 December 2020 target they could be fined. EDF was fined £350,000 for missing its 'milestone target' for fitting meters. These milestone targets are secret and Ofgem refuses to reveal them despite an FOI request.

EDF now has at least one tariff where agreeing to a smart meter is part of the terms and conditions, though it tells me it is not enforcing this if customers do not want one. Regulator Ofgem says such terms are within its rules as long as "communications are transparent and accurate, including around any smart meter only tariffs they are offering." Other firms are offering cheaper prices to customers who have a smart meter. That will undoubtedly become more common as the roll out proceeds.

What 'smart' meters do
I put 'smart' in inverted commas because these meters are not in fact very clever. They simply report back to the supplier how much electricity and gas the customer uses each day and, with the customer's permission, every half hour. More frequent reporting may be available in future.

The meter also feeds some information about current use to what is called an 'In Home Display' or IHD. There will be one IHD which will cover both electricity and gas if you have it. It will normally be mains-powered and fixed in position but there will be an option for a separate portable battery powered unit. The IHD can show how much fuel is currently being used and can display the cost in £.p. Some of them will have a traffic light system - glowing green when consumption is low through amber to red when it is high. They can also do calculations of past and future use. Some reports suggest that if the IHD is switched off for any reason it is difficult or impossible to get it back online and recording usage accurately.

Costs
The costs of the smart meter programme are certain, though it is inevitable now that they will increase above their current estimates. The latest cost/benefit analysis was published in August 2016. It estimates that manufacturing and installing 53 million meters, communication devices, and IHDs in 30 million premises will cost £5.44bn. There is also a new communications infrastructure network called DCC which will cost £3.13bn. That was due to be completed late in 2015 but was in fact not switched on until November 2016 and in 2018 is still being tested. Some older smart meters may never be able to use it. The cost/benefit analysis puts the total costs of the programme over 18 years at £11bn. That figure is in 2011 pounds; even without cost overruns to deal with delays and incompatibility issues, that would be about £13 billion in today's pounds. That cost is about £400 per household and is paid through higher electricity and gas bills.

Those payments are beginning. In 2017 all major suppliers and some smaller ones have put up the cost of electricity by 10% to 15% and each of them blames that rise in part on smart meters. That process continued in 2018.

Savings
Estimates of the savings are more speculative.

Customers will save money because they will use the information from the IHD to cut their energy consumption. That is the theory and the saving from that is put at £5.3bn over 18 years based on a 2.8% cut in electricity use and 2% in gas use.

Achieving those savings requires active engagement by customers. But many will not be engaged and will end up paying more. A report by the old Department for Energy and Climate Change on some pilot smart meter installations found that initially 96% used their IHD but about four out of ten disconnected them during the research. None were able to identify any clear savings due to the IHD. The Public Accounts Committee estimated in 2014 that customers would save on average about £26 a year. A survey by a price comparison site in July 2018 (on a small and perhaps not representative sample) found that less than half (49%) of its sample of 678 people with a smart meter had reduced energy usage. And as standing charges grow - they currently account for 13.5% of the typical bill - the scope for reducing bills by cutting energy use decreases.

Customers will also gain, if they choose to, by faster switching from one supplier to another. The process can take weeks now but a 24 hour service is promised. They will also benefit from suppliers sending an accurate monthly bill of energy used rather than sending out estimated bills.

Energy suppliers will save an estimated £8.25 billion. The biggest chunk - £3bn - will be from ending meter reading and other home visits. Reduced customer enquiries and complaints will save £1.2bn. Another £1bn will be saved by managing pre-payment customers better and there is a big saving of £1.4bn from reducing the cost of customers switching supplier. A further £1.2bn is saved by managing debt better and reducing theft.

Networks and the generators will save £1.8bn between them from smoothing the peaks and troughs of demand and generating less power.

Finally, carbon related benefits and air quality improvements will add £1.4bn to bring total savings to £16.7bn.

These figures are from the 2016 cost/benefit analysis and the technical annex and are in 2011 pounds. Actual costs in today's pounds will be 20% higher.

The Government has said its next cost benefit analysis will be published in 2019. However, the National Audit Office is expected to publish its own assessment before the end of 2018.

Who gains?
Less than a third of the savings will be made directly by consumers, and only by those who engage with the energy saving opportunities. Nearly 70% of the savings will go to the industry. The hope is, of course, that suppliers, generators, and transmitters of electricity and gas will pass some of those savings on. They may. But some of their savings - on debt management and prepayment meters for example - will come at a direct cost to the customers affected though they may be passed on to others. The savings from carbon reduction and air quality improvements will not be felt directly in the pocket by consumers.

So while the customers will pay for the £11 billion cost of the smart meter programme through their bills, the savings of £5.4 billion will be felt only by those who adjust their behaviour and and only some of the remaining £11.3 billion will be felt even if the industry passes on its own savings to customers in lower prices. It is not at all clear that the rather speculative carbon related and air quality savings will ever reach consumers' pockets.

The energy industry has a very poor record in passing on savings. In 2014 they took many months to pass any of the gains from the fall in the wholesale price of gas and none reduced electricity prices even though much of that is generated by burning gas.

Extra costs.
The impact assessment does not take account of one significant extra cost.

Bills will no longer be estimated as they will be based on actual usage over a month. That is promoted by the Government as good news for consumers. But it will be expensive for gas and electricity suppliers. For many years they have encouraged customers to agree to pay estimated bills monthly by direct debit rather than quarterly based on meter readings. The result is that the firms have kept hundreds of millions of pounds on their books belonging to customers. The value of that is shown by the fact that customers who pay a more accurate quarterly bill can be charged 7% extra or more more than monthly direct debit customers. If they no longer make that saving then prices will inevitably rise. Some customers may prefer to keep estimated bills. They are at least constant and that can help with budgeting.

This money the suppliers routinely hang onto is separate from the £400m that Ofgem found they had wrongly kept when customers switched to another supplier. In February 2014 it ordered firms to refund this money. That event does not bode well for hopes that the industry would voluntarily return to customers the savings it makes from smart meters.

Time of use
The report also makes no assessment of the costs or savings to be made from what are called Time of Use tariffs. Once the smart meter network is rolled out suppliers will start making customers manage the load, especially in electricity supply. In other words when demand is high the price goes up. When demand is low the price comes down. And with half hour reporting - and it may be more frequent in future - time of use tariffs could be very specific.

For example, energy could be more expensive between 7am and 9 am when most people are getting up, putting on the kettle, and making breakfast. Or between 5pm and 8pm when evening meals are being cooked. The result would be that poorer families could not afford to eat dinner at dinner time.

Ultimately the cost of power could rise during the adverts in TV soaps or the interval in football matches when millions put the kettle on make a cup of tea.

Time of use tariffs mean that the customer is being drafted in to manage the national power load. By pricing people out of energy use at peak times the peaks and troughs of usage - so irksome to the engineers managing the grid - are smoothed out.

Time of use tariffs are particularly being touted for charging electric vehicles overnight for those drivers who have a drive or garage at home where they can charge them up.

Debt and disconnection
Smart meters will also enable energy suppliers to manage debt and disconnection remotely. Customers can be switched from credit payment to prepayment by the supplier without changing the meter. It also means that if someone has not paid their bill then the supplier will be able to disconnect them remotely. There are currently safeguards about who can be disconnected and when. But once the conditions are met the process of doing so will be much simpler.

Organisation
The delivery of this programme is in the hands of the six large and dozens of smaller energy suppliers. They will each fit the meters for their own customers. Which could mean dozens of different engineers visiting the same street or block of flats to do the same job in neighbouring homes.

The central Data & Communication Company (DCC) is run by Capita. It will be responsible for collecting the data sent back by smart meters and forwarding it to the right energy supplier, the networks and energy services companies. Others may also get access to it. In 2014 the Information Commissioner expressed concerns about the security and use of this data. There is currently no provision to let customers know specifically who has access to it.

The data network will be run by two companies - Arqiva will cover northern England and Scotland using a long-range radio network and Telefonica UK will cover the rest of England and Wales using standard cellular telephone technology with what it calls 'mesh technology' to fill the gaps in the cellular network. The target is to cover 99.25% of dwellings - which if achieved will leave 225,000 premises unconnected. However, remote dwellings, tall buildings, and multi-occupied premises are problems that have not been solved. Some in the industry have said that 30% of homes cannot be integrated into the DCC grid. The Department for Business, Energy, and Industrial Strategy has not denied that figure.

Meanwhile Smart Energy GB will spend £40m in 2018 to persuade us all that the smart meter programme is a good thing. What it calls building consumer awareness and understanding of smart meters and encouraging consumer engagement. It includes advertising, much of it using the Gas and Leccy characters but also a Smarter Britain bus tour with daytime TV housing gurus Kirstie Allsopp and Phil Spencer - who admitted he didn't have a smart meter before he was paid to promote them. His current smart meter status is unknown.

Criticisms
On 15 October 2018 a revised House of Commons Library briefing set out the difficult task of meeting the 31 December 2020 deadline and has a lot of useful background information.

In July 2018 the British Infrastructure Group of MPs and Peers published their report Not So Smart which said that the saving per household would probably be only £11 a year and that the 2020 deadline was not achievable - it recommended a two year extension. It also raised concerns about whether the savings by the energy suppliers and the networks would be passed on to consumers. It was concerned that customers would not know what was happening to their data.

On 7 March 2015 the Energy and Climate Change Select Committee expressed concerns about delays and unresolved challenges in the smart meter programme. "Without significant and immediate changes to the present policy, the programme runs the risk of falling far short of expectations. At worst it could prove to be a costly failure."

In December 2014 the Ontario auditor general Bonnie Lysyk said that the state's smart meter programme had cost twice its estimate and made few if any savings for customers or suppliers and failed to reduce energy consumption.

26 October 2018
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