Has the government got this right?

Pobby

Just been reading about pension tax credits.As it is means tested you are able to claim if you have savings of up to £6,000.Now the bit that I am having problems with is that for every £500 that you have the government assumes that is worth £1 interest a week so that will come off the credit.Think I should ask them where that rate of interest is achieved!

MarkyMarkD

You're absolutely right. This leads to an effective benefit withdrawal rate of around 200%, as £500 of extra assets yielding probably £25 a year in interest leads to £50 reduction in pension tax credit.

It's just a way of focusing the benefit on those with very low incomes and penalising anyone who has been stupid enough (their thoughts not mine) to save.

CIS

its only available at the LA LA Land bank, inhabited only by those MP's who live in their own little minds.

Pobby

It does make it all a joke really.Here I am with serps,small private pension and pretty reasonable savings and starting to think that when I draw my pension who`s the mug.Even bothered to get my own house so no housing benefit.

Oh yes,and you have to have a squillion pounds in pension funds to get a couple of hundred quid a week.

Ok then guys,give me a link to the bank of La La.gonna get an account pronto!

Andy_L

Its an asumed income not assumed intrest - obviously they must be assuming you draw down your savings (obviously until the're under the £6k limit)

MarkyMarkD

Good point, Andy. Of course, you could do that - but then you'd be increasing the government's benefit bill. Still scarcely a sensible way to encourage people to save.