NEW STATE PENSION - FOI DATA IN FULL

This blogpost is the full data from FOI 2015-4147 and 2015-4344 dated 29 October 2015. The data is analysed in my blogpost NEW STATE PENSION CONTINUES TO DISCRIMINATE AGAINST WOMEN.

GET £140 OFF YOUR WINTER ELECTRICITY BILL

UPDATED 30 OCTOBER 2015

Two million people can get £140 off one electricity bill this winter. It's called the Warm Home Discount. Some will be paid automatically. Others have to claim or they will not get it. And the sooner they claim the better. Some who should be eligible are excluded. And some who switch to a smaller supplier will lose the right to claim it.

Low income pensioners

The biggest group – called the ‘core group’ – are more than one and a half million older people who get pension credit. They must get the guarantee part of pension credit - which means their income is no more than £151.20 a week (single) or £230.85 for a couple. Pension credit guarantee credit will make their income up to that amount. They must have received it on 12 July 2015. which means they must have been born on 5 December 1952 or earlier. They qualify even if they also get the savings credit part of pension credit. But not if the ONLY get the savings credit. 

Most people in the core group should not have to claim. Suppliers will use information from the Department for Work and Pensions to pay them automatically. However, some who qualify may not be identified. If you have heard nothing by Christmas and you get pension credit guarantee credit contact your energy supplier. Some of the smaller suppliers do not pay the discount and if your energy is supplied by one of them you will not get it. Supplier details below.

In past years some pensioners who did not qualify automatically could qualify under the broader group described below. That is less likely to happen in 2015/16.

Younger people

The broader group who qualify are low income households where there is a young child or someone with a disability. People in this group have to make a claim.

The energy suppliers now all have the same rules for what is a low income, what age of child counts, and what counts as a disability. In the past they set their own rules. This year some who qualified last time may not qualify this year. 

The rules are complex. But if your income is low and there are young or disabled children or disabled adults in the household you may be entitled to the discount.

If you think you may qualify contact your supplier using the phone number on your bill and say you are asking about the Warm Home Discount. Or look online on your supplier's website and search for Warm Home Discount. This list of suppliers has links to their websites. Almost all take you direct to the Warm Home Discount page. With one or two you may have to do a search.

Claims should be made as soon as possible. Suppliers have a fixed amount of money for this group and when that runs out the supplier will close its scheme for the broader group. Some may close by the end of December.

People in the broader group should not switch supplier until the discount is made. They could lose it if they do. 

Payment

The discount is normally taken off your winter electricity bill which could mean waiting until March 2016. People in the core group who have moved supplier since 12 July 2015 will be sent a cheque by their old supplier. Broader group customers who move supplier before the discount is made will probably lose it. People on prepayment meters will have the credit added to their key. Some will be sent a voucher to take to the Post Office to credit the key. Other suppliers will update the key automatically. All discounts should be made by the end of March 2016. 

Supplier

The bigger electricity suppliers are legally obliged to offer the Warm Home Discount and some others do so. Twenty brands offer it.

Atlantic Energy (SSE)
British Gas
Co-operative Energy
EDF Energy
E.on
Ebico (Equipower and Equigas operated by SSE)
First Utility
Manweb (Scottish Power)
M&S Energy (operated by SSE)
Npower
OVO Energy
Sainsbury's Energy (British Gas)
Scottish Gas (British Gas)
Scottish Hydro (SSE)
Scottish Power (SSE)
Southern Electric (SSE)
SSE
Swalec (SSE)
Utilita
Utility Warehouse

Twenty smaller suppliers do not give the Warm Home Discount. Some of these are in the top ten for cheap tariffs. But switching to them will mean you will not get the warm home discount in future years and will not be able to claim it this year. 

Better Energy
Daligas
Ecotricity
Extra Energy
Fairerpower Energy
Flow Energy
GB Energy
GnErgy
GoEffortless Energy
Good Energy
Green Energy UK
Green Star Energy
iSupply Energy
LoCO2 Energy
Peterborough Energy
Robin Hood Energy
Southend Energy
Spark Energy
Woodland Trust Energy
Zog Energy

The Warm Home Discount applies in England, Wales, and Scotland. It does not apply in Northern Ireland.

The Warm Home Discount scheme does not apply to people in park homes (static mobile homes) though for the first time this year suppliers do have the discretion to extend it to them or to offer other help.

More information

The official Government guide to the Warm Home Discount.

The Home Heat Helpline 0800 33 66 99 can give advice about the Warm Home Discount and other schemes to help with heating bills. You could also contact the Energy Saving Trust or the Centre forSustainable Energy  They can give advice about local help with insulation as well as national schemes.

30 October 2015 

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FROZEN PENSIONS ABROAD

When the state pension rises in April by £3.35 a week to £119.30 more than half a million state pensioners who paid for their pension for all or most of their working lives will get no increase. 

They live in more than 150 countries around the world where the UK pension is paid but is frozen - it never increases with inflation.

Unequal abroad
UK pensioners living abroad fall into two groups.

• About 660,000 UK pensioners who live in the EU or one of 20 or so other countries get their UK pension increased each year as it is back home.
• Ex-pats living in the other 156 sovereign states of the world do not get this rise. Their state pension is frozen at the rate it was first paid abroad. So 560,000 UK pensioners who live in these countries are locked out from any rise even though they have paid their taxes here, often for all their working life.

Nine out of ten of these ‘frozen’ pensioners live in four countries - Australia, Canada, New Zealand, and South Africa. People in their nineties may be living on a UK basic state pension first paid to them abroad in 1985 which is just £21.50 a week instead of the £115.95 which would they would get in 2015/16 if they lived in the UK. In 2013 the record was said to be held by Annie Carr, aged 100, who got a pension of just £6.12 a week, first paid to her in 1970 when she moved to be with her daughter in Australia.

But another 55,000 live in more than 100 countries around the world. 

John Markham, the Director of UK Parliamentary Affairs for the International Consortium of British Pensioners, is trying to gather support among people in the UK aged 45 to 65 who may plan to retire to a frozen country without realising it. 

"A lot of people of that age consider emigrating and they don't know their pension will be frozen. Also true of a lot of ethnic minorities. People from India and Bangladesh, for example, simply don't know that if they return to their birth countries their UK pension will be frozen." 

The reasons for this odd division between frozen countries and the rest are historical. After World War II the UK entered into agreements with a number of countries where it had interests or a special relationship to pay full pensions to UK citizens living there. Joining the EU added more countries to the list as no discrimination is allowed against citizens of member state and EU enlargement has brought more in.

Border anomalies

The result is that UK pensioners living in the USA get their pensions uprated each year as if they were back home. Across the border in Canada they are frozen. In the Philippines UK pensions are raised each year with inflation. In nearby Australia they are not. Other anomalous pairs of neighbours where UK ex-pats live include Barbados, uprated; Trinidad frozen. France uprated; Andorra frozen. Israel, uprated; Lebanon, frozen. Mauritius uprated, Madagascar frozen.

Cost

The latest estimate for paying all ex-pats the same pension as they would get in the UK this year is £655 million. 

John Markham recognises that cost is a key issue.

"We want to discuss an age-tiered solution. This year index the pensions of the over 85s. Next year, 80-85s. Then those 75 to 80. And so on. That would cost around £100m in the first year, a figure they could slip through without anyone noticing. An alternative suggestion is just to do it for new retirees from, say, next year. That would cost nothing. Once it is done for one group it's a foot in the door and harder to defend doing for others."

He also says that every UK pensioner who chooses to live abroad saves the country a lot of money by not relying on the state support they would get at home.  - they don't use the NHS or care services. The campaign puts that figure at £7,700 per year in health care, age related benefits and miscellaneous pension credits for each 'frozen pensioner' a total of £3 billion a year. 

The Campaign believes that unfreezing pensions would encourage more people to retire overseas, potentially saving UK taxpayers more money over future years.

Government view

Many politicians have taken up the cause of frozen pensions over their years in opposition. But once in Government they look at that cost and decide they prefer to uphold the status quo. As a result governments of all colours have ignored parliamentary motions and whipped their MPs to win every vote in Parliament. 

In 2014 Parliament passed the Pensions Act which introduced the new State Pension. It also set in legislative stone the discrimination between frozen and uprated countries.

A DWP spokeswoman told me "People who are considering emigrating abroad should always consider the impact the move could have on their future State Pension entitlement.”

Court action

Governments have also defended the current rules in court. A key legal challenge was brought by a campaigner living in South Africa, Annette Carson. Her case was finally rejected in 2005 by the House of Lords. 

Twelve years ago the ex-pat campaigners began a parallel case in the European Court of Human Rights to try to find some fresh lever to move the Government. Thirteen pensioners argued that under the European Convention of Human Rights the UK government had to protect their property and was prohibited from discrimination. The state pension was property, paid for by National Insurance contributions. So by paying increases in some countries but not others the UK Government was discriminating against their enjoyment of their property according to where they chose to live.

It was a clever argument but in March 2010 the Grand Chamber of the European Court of Human Rights rejected it by 11 votes to 6, ruling that freezing the state pensions paid to people in 150 overseas countries was not a violation of their human rights because the circumstances of people were different depending where they lived and therefore discrimination in their treatment did not breach the convention.

Countries where the UK state pension is uprated 

Only in the 51 countries listed here does the UK state pension rise each year as it does in the UK.

Alderney, Austria, Barbados, Belgium, Bermuda, Bosnia Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Falkland Islands (frozen but Falklands Legislative Assembly tops up to UK level), Finland, France, Germany, Gibraltar, Greece, Guernsey (includes Herm, Jethou, Lihou), Hungary, Iceland, Ireland, Isle of Man, Israel, Italy, Jamaica, Jersey, Kosovo, Latvia, Liechtenstein, Lithuania, Luxembourg, Macedonia, Malta, Mauritius, Montenegro, Netherlands, Norway, Philippines, Poland, Portugal, Romania, Sark (includes Brecqhou), Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, United States of America.

Background with links to official documents up to the start of 2014 are contained in this House of Commons Library note. 

The Pension Justice website contains a lot of useful information and case studies. The campaign also has a Facebook page and is on twitter @pensionjustice. 

21 November 2015

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GAD paper on the Triple Lock

This paper, "Triple Lock" increases to state pension - Background, effects, and risks was prepared by the Government Actuary's Department and published on its website on Friday 9 October 2015. Within a very short time it was taken down and replaced with a page saying it had been published in error. Later the Treasury said it was a 'discussion paper' which had been uploaded by the IT department by mistake.

Its finding that the triple lock cost £6 billion in 2015/16 and would eventually take nearly a quarter of the National Insurance Fund will be controversial. As will the implicit conclusion that the triple lock is unsustainable in the long-term. That is a view which I understand the Government Actuary himself holds. 

Personally I think the triple lock will last for this Parliament but not beyond. How pensions will be uprated after that will be a major political issue at a time when benefits for younger age groups will have been frozen for four years and those for others linked to CPI - which is currently around zero - or cut sharply.

The paper is published here in the interests of open government. 

19 October 2015

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FILL THAT GAP - if you reach pension age before 6 April 2016

These rules apply to men born before 6 April 1951 and women born before 6 April 1953. There are different rules for younger people. 

You need 30 years of National Insurance contributions to get a full state pension. If you have fewer than 30 years National Insurance contributions you will get a reduced pension. So if you have 20 years you will get 2/3rds of a full pension. 

It is now no longer possible to pay extra contributions to fill any gaps. 

That is because you can only fill a gap which is up to six years old. So now, in 2022/23, you could only fill gaps back to and including the tax year 2016/17. But by then you would have reached state pension age and cannot pay earlier contributions. 

4 May 2022

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BIGGER PENSION FROM DEFERRING

One of the best ways to boost your state pension is to defer it - just don't claim it and it will be increased for every few weeks you put it off. Needless to say the rules are complex. And they are different for existing pensioners and those who reach pension age from 6 April 2016. 

The rules depend on when you were born. Men born 5 April 1951 or earlier and women born 5 April 1953 or earlier reach pension age before 6 April 2016 and come under what I will call the ‘old rules’. Men and women born later than those dates will come under the new rules when they reach pension age on 6 April 2016 or later.

The old rules

You can claim your state pension as soon as you reach state pension age – 65 for men and just over 62½ for women at the moment. But if you do not claim it that is called ‘deferring’. You do not have to do anything special to defer, just not claim your pension. When you eventually do claim it the amount you get will be increased. For each five weeks delay the whole of your state pension is increased by 1% which works out at a 10.4% increase for a year’s delay. So a pension of £120 a week would become £132. If you delay by five years it will be 52% higher – turning a £120 pension into £182. The actual amount you get will be more as the basic state pension rises each year with the so-called ‘triple lock’ of at least 2.5% a year

As an alternative to the higher weekly pension you can choose to be paid a lump-sum equal to the pension you have not received. The Government adds interest to it at a good rate of 2.5% a year. The lump-sum also gets favourable tax treatment. It is taxed at the same rate as the rest of your income that year. So if you were a non-taxpayer the lump-sum would be tax-free and if you pay basic rate tax the lump-sum can never push you into paying a higher rate of tax. 

The new rules

If you reach pension age from 6 April 2016 the rules for deferring your state pension are far less generous. You get an extra 1% added to your pension for each nine weeks you defer rather than five weeks. So each year’s delay enhances your pension by a shade under 5.8%. A one year delay will increase a £120 a week pension to £127 and a five year delay to less than £155 – much lower amounts than people get under the old rules. The new rules do not allow you to take a lump-sum.

Is it worth it?

During those years of deferring you do not get your pension. If you defer a year and give up £120 a week you will have lost £6,240 in pension you did not draw. So you will have to live quite a while to get that amount back from the higher pension – in fact under the old rules it is about 11 years to show a profit. But as life expectancy at 65 is around 20 years most people will gain from deferring for a year. Women retire at a younger age and live a couple of years longer than men so it is even more worthwhile for them.

The arithmetic is much the same for a five year delay. You need another ten years of life to make a profit under the old rules. Most men will live longer than that, and most women will live longer still. On the other hand if you defer until you are 90 you will get an enormous weekly pension but you probably won’t draw it for very long if at all. So you will end up with less pension over your lifetime.

That raises the question ‘what is the ideal time to defer for?’ When will you make the most money from the state pension?

That was the question that statistician John Dagpunar unleashed his maths on in a recent article in the statistics magazine Significance.

He found that for an average man the optimum time to defer is five years. By doing that he will get the equivalent of an extra two years of state pension before he dies. In fact the gain is almost as high for deferring for four years and not much less for three. So if you do not want to delay five years then four or even three is almost as good.

For an average woman the calculation is more complex because of rising state pension age. But John’s calculations show that the optimum deferment is around seven years for those reaching pension age now and around eight years for older women.

For younger people who will get the new state pension, men should not defer at all – they will on average not make a profit. A woman may find a short deferment worthwhile especially if expects to live beyond the average age. But the new rules were designed to be cost neutral for the government, and John’s calculations show they pretty much are.

Life expectancy

These figures assume you will live the average length of time for someone of your age. If you live a shorter time than the average you will not gain as much or may even lose money. If you live longer than average you will do better.

If you defer under the old rules John has a simple rule to decide when to stop deferring. Add ten to the number of years you have deferred. If that is the same as your life expectancy then stop deferring. Under the new rules John doesn’t recommend deferring at all. But if you do then use 17 instead of ten in the calculation.

The ONS has published this handy way to check your life expectancy. It uses more optimistic projections than John did and shows a man of 65 can expect to live to 87 and a woman to 89.

If you expect to live longer you can defer for longer. If you expect to live a shorter time then start claiming your pension. If you have deferred and then discover you are unwell, claim your pension and take the extra as a lump-sum.

De-retiring

If you have already drawn your pension you can give it up temporarily. It is called ‘de-retiring’ and you will get your pension enhanced by 1% for every five weeks you give it up, or nine weeks if you come under the new rules. You can then reclaim your pension when you want to.

Once you have drawn your pension, the extra amount you earned by deferring will rise each April with inflation, currently measured by the Consumer Prices Index, not by the triple lock. So in April 2016 with inflation negative it will not go up at all.

Further information

·         ‘Deferring a state pension – is it worthwhile?’ John Dagpunar Significance, April 2015, pp 30-35.

·         Go to gov.uk and search ‘deferring state pension’ 

This blogpost is based on an article I wrote in Saga Magazine 'Delaying Tactics' July 2015.

THE UPRATING OF BENEFITS APRIL 2016

UPDATED 20 NOVEMBER 2015

PENSION RATES ANNOUNCED

Figures revealed by the Office for National Statistics on 13 and 14 October will be used to set the level of the state pension and other benefits from the week of Monday 11 April 2016.

State pension

Under the current triple lock rules the basic state pension - paid to those who reach pension age before 6 April 2016 - will rise by prices, earnings, or 2.5% whichever is the highest. Prices are measured by the September CPI which was published on 13 October. It was -0.1%.

The earnings rise is measured by the annual increase in pay across the whole economy from May to July 2014 to the same period in 2015. The final revised figure was published on 14 October and confirmed an annual rise of 2.9%. As that is above 2.5% then under the triple lock that earnings figure will be used to increase the basic state pension from April 2016.

A 2.9% rise means the basic state pension will increase by £3.35 from £115.95 to £119.30 a week. The same 2.9% rise will apply to the basic pension even for those who get less than that - married women who still get the Category B pension or those who basic pension is reduced because of lower contributions.

However, all the extra bits of the state pension - SERPS, State Second Pension, Graduated Retirement Benefit, extra pension from deferring, and the additional pension from purchasing the new Class 3A contributions - are linked to the CPI. It was -0.1% so they will not rise in April. A negative CPI means there is no rise, rather than a reduction.

Pension Credit

The means-tested benefit Pension Credit guarantees that no-one over pension age will have an income below a set amount known as the standard minimum guarantee (SMG). In 2015/16 that was £151.20 a week. Under existing law that also be increased by the rise in earnings over the previous 12 months. So that 2.9% rise will take the SMG to £155.60 a week. The Government has now confirmed that amount.

The government had already decided that other means-tested benefits would be frozen for the next four years 2016/17 to 2019/20. But it has has gone ahead with the full rise for pension credit. To do anything else would have meant changing the law.

New State Pension

The Government is committed to setting the full rate of the new State Pension above the SMG. That is achieved by setting it at least 5p a week more (the standard amounts of all these benefits are rounded to the nearest 5p). And it's announcement late on 20 November means that the new State Pension will be £155.65. Theoretically it could be set at more than that. But the poor economic datat also published on 20 November make that very unlikely.

Only a minority of those reaching pension age in 2016/17 will get that full amount. My latest estimate based on DWP figures is that less than one in four women (22%) and half of men who reach state pension age from 6 April 2016 will get the full new State Pension or above in 2016/17. 180,000 of the rest will get a pension which is at the same level as they would have got under the old pension system. In most cases, the balance of £36.35 is supposed to be made up by the company or private pension they paid into. That will not be true for everyone.

Pension Credit Savings Credit

The savings credit of pension credit is not available to anyone who reaches state pension age from 6 April 2016. For older people who already get it, the rates are likely to be frozen as they have been in previous years, meaning that many will see very small rises in their weekly income as the extra £3.35 on their state pension will be largely offset by a cut in their pension credit. Those rates will be announced in the first week of December.

Other benefits and tax credits

The government has already decided that most benefits would be frozen for the next four years 2016/17 to 2019/20. Now the CPI has come in at -0.1% that freeze will in effect apply to all benefits bar the basic state pension and pension credit. So benefits for disabled people, carers, war veterans, and widows will all stay the same in April.

Tax credits may be subject to a series of cuts in April which would reduce the amount paid considerably. The final decision on that is expected to be announced on 25 November. If those cuts are made less severe than planned, cuts in housing benefit may be used to save the money instead.

Official confirmation

The Government announced the 2016/17 pension rates at 2200 on 20 November 2015. Changes to tax credits will be announced in the Autumn Statement on 25 November. Details of other benefit rates - which will probably all be frozen - should be formally announced in the first few days of December.

21 November 2015

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