Brexit debate provided perfect cover for new rules that will leave some households more than £7k worse off.
The Government has been accused of sneaking out a significant pension change during the build-up to today’s ‘meaningful vote’ in parliament on the proposed EU withdrawal agreement.
Last night it announced new rules for the benefits available to mixed-age couples, which will come into force from 15th May.
But this change is not exactly minor, with experts warning it could leave affected couples worse off by more than £7,000 a year.
What’s changing?
Under the current system, when the older member of a mixed age couple reaches State Pension age, both partners can opt to transition from working age benefits to pension age benefits.
However, this is now being adapted so that the transition will only occur when the younger partner reaches state pension age.
Way back in 2012 Parliament voted in favour of ‘modernising the system’ in this way, but it has taken until now the Government to actually act on that result. In the words of the Government statement: “This will ensure the younger partner is in the same circumstances as other people of the same age, regardless of the age of their partner.”
The Government confirmed that mixed age couples with a partner under State Pension age, who are already receiving pension credit or pension-age housing benefit, will be unaffected so long as their circumstances don’t change.
Common mistakes to avoid when you’re about to retire
Why this matters
So what does this mean in practice?
The big issue is likely to be over Pension Credit. This is a form of benefit paid to the least well off pensioners, and currently it can be claimed by a household if at least one partner is over the state pension age.
It’s worth noting that in most cases the rate of Pension Credit is significantly more generous than those on offer to working age claimants.
To put that into context, former pension minister Steve Webb - currently director of policy at Royal London - said that this change could leave affected couples more than £7,000 per year worse off, such is the difference between the rate of Pension Credit for couples and Universal Credit.
Yes, there’s a huge difference in means-tested benefit rates between pension credit and universal credit (on basis that latter is seen as temporary). New ‘mixed age’ couples claiming after May will get much less.
— Steve Webb (@stevewebb1) January 14, 2019
Webb told the FT that this change would put further pressure on the younger member of a mixed-age couple to find work, adding: "People who may be affected deserve to know about this change and not have it sneaked out on a day when ministers were no doubt hoping that everyone's attention was directed somewhere else."
I find it very difficult to argue with Webb’s view here. The Brexit meaningful vote is understandably dominating the headlines, and so presents a pretty attractive cover if you’re looking to bury some bad news.
And make no mistake about it, slashing the annual income of some of the poorest pensioner households by £7,000 a year is bad news.
Sticking this story out at 7.22pm, in the hope that people wouldn’t notice it - including those couples who are going to be adversely affected by the change - is dreadful.
Pension Credit: what it is, eligible age, what it pays and how to claim
Who can claim pension credit?
Pension Credit is made up of two parts - the guarantee credit and the savings credit.
The guarantee credit tops up your income if it worth less than £163 per week for single people, or £248.80 per week for couples.
Savings credit is an additional payment to help people who have saved some money towards their retirement, and is worth up to £13.40 per week for single people and £14.99 per week for couples.
Claimants may be able to get more if they are a carer, disabled or have certain additional housing costs.
When working out your income, the government will include things like the state pension, any personal pensions you may have, most social security benefits (like carer’s allowance) and any savings and investments you have.
It won’t, however, include the following:
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Attendance Allowance
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Christmas Bonus
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Disability Living Allowance
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Personal Independence Payment
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Housing Benefit
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Council Tax Reduction
You can claim it over the phone on 0800 99 1234 or ask for a paper application.