Calculator shows state pension £140pw makes some thousands worse off?

dougz_2

Just been playing with various "what if" numbers in this calculator
https://www.turn2us.entitledto.co.uk/entitlementcalculator.aspx

A simple example:
Single
Children under 20 = None
Council Tax = £1000
Tenant - private
England
Age 66
Not working
State pension the full basic £97.65pw
Local Housing allowance £100pw
£20k life savings (in a cash ISA earning 3%=£600pa)
No other income or capital
Total entitlements = £7,595.63 pa
So including state pension and interest gives total income £13,273.43 pa

Now if you go back and see what happens if you just increase state pension to the proposed £140pw:
Total entitlements = £498.48 pa
Which makes a total income of £8,378.48 pa

So increasing the state pension has made them £4,895 worse off every year. Is that right?

B.E.N

Afraid calculation appears to be wrong.....AFAIK, She wouldn't be eligible for LHA with savings over £16,000

dougz_2

B.E.N wrote: »

Afraid calculation appears to be wrong.....AFAIK, She wouldn't be eligible for LHA with savings over £16,000

But it seems to agree with other sites i.e:
You can't usually get Housing Benefit if... you have savings of over £16,000, unless you are getting the 'guarantee credit' of Pension Credit
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/BenefitsTaxCreditsAndOtherSupport/On_a_low_income/DG_10018926

So it basically seems that the £140pw would cancel out the 'guarantee credit' part of 'pension credit', and thus the poor pensioner automatically loses all other benefits including housing.

Crazily, they would have a much higher income with a broken NIC record so they did not qualify for all the £140, or had squandered their life savings.

property.advert

This calculator is not functioning perfectly at present. I have ploughed a number of scenarios into it over the last week and sometimes it just screws up massively. I am totally familiar with it and use it regularly but at the moment, it cannot be trusted.

dougz_2

But is the result actually wrong for the 2 simple examples I used?

moonrakerz

As all the details issued about this £140 pension would barely fill the back of a second class stamp, you really are wasting your time.................

datostar

The proposed change to a flat-rate pension will not affect existing state pensioners.

dougz_2

datostar wrote: »

The proposed change to a flat-rate pension will not affect existing state pensioners.

I know that. I was trying to work out "what if" they brought it in tommorrow, and someone retired next week.

It seems, from my example above, that a £140 state pension actually makes the means-test savings trap even worse, for those that can only afford to make modest savings for their retirement. Which is the opposite effect of what it is being proposed for.

dougz_2

So the calculation in the first post seems correct, apart from a new detail in the consultation document, which makes the situation even worse for the example pensioner:

The government suggests abolishing Savings Credit.
This deducts the £498.48 that they would currently still get in benefits despite losing qualification for Guarantee Credit.
The example pensioner thus becomes £5,393 a year worse off under the new state pension, which is a 41% drop in income.

SnowMan

dougz makes an interesting point. To give another example:

A single pensioner currently receiving means tested benefits, and with no savings or private pension at all may currently be receiving £137.35 pw (made up of basic state pension and guaranteed pension credit) together with housing benefit (HB) and council tax benefit (CTB).

Under the flat rate system after it it is in full operation for someone with 30 years contributions but no savings and no other pension provision as they have opted-out of NEST say, receives a slightly flat rate pension of about £140 pw (which will be slightly higher than the current £137.35pw above). The question is as well as the flat rate pension will they then be entitled to housing benefit and council tax benefit (or their equivalents under a single benefit system or whatever) on top.

If they are not going to get any HB or CTB they will be considerably worse off (due to the loss of housing benefit and council tax benefit).

If they do get HB and CTB in addition to the flat rate pension, then there is still the issue that saving in a pension may reduce their entitlement to benefits (i.e HB and CTB). So there is no incentive to save.