Confusion over AIP on Savings Credit and Council Tax Benefit

[Far]

Hi,

There's some slight confusion over a friend who is on Pension Credit Savings
Credit and Council Tax Benefit. She is on an AIP until 2011 however they
have underestimated a rise in her employer's pension by a few pounds a month
(it is paid monthly). She sent in a letter showing the correct amount of the
rise in May and has been told there is a backlog which means no answer will
be given until June at the earliest but a call to the Pension Service has
resulted in some confusion which I wonder if anyone can help clear up. They
say since she is on an AIP, changes of circumstance relating to income or
capital are irrelevant unless someone is in receipt of Council Tax or
Housing Benefit in which case any changes where capital rises above £16,000
must be reported. All other changes of circumstance are ignored unless the
composition of the household changes. Is this true? In which case what will
happen to this underestimated increase in Employer's Pension? Will it affect
Savings Credit or not and likewise will it affect her Council Tax Benefit?
Any change should be very small (the Employer's pension is in the order of
£2 a month higher than their calculations) but I am curious and confused -
can anyone shed any light on this?

Regards,
Far

 

[Zargon]

Hi,

There's some slight confusion over a friend who is on Pension Credit Savings
Credit and Council Tax Benefit. She is on an AIP until 2011 however they
have underestimated a rise in her employer's pension by a few pounds a month
(it is paid monthly). She sent in a letter showing the correct amount of the
rise in May and has been told there is a backlog which means no answer will
be given until June at the earliest but a call to the Pension Service has
resulted in some confusion which I wonder if anyone can help clear up. They
say since she is on an AIP, changes of circumstance relating to income or
capital are irrelevant unless someone is in receipt of Council Tax or
Housing Benefit in which case any changes where capital rises above £16,000
must be reported. All other changes of circumstance are ignored unless the
composition of the household changes. Is this true? In which case what will
happen to this underestimated increase in Employer's Pension? Will it affect
Savings Credit or not and likewise will it affect her Council Tax Benefit?
Any change should be very small (the Employer's pension is in the order of
£2 a month higher than their calculations) but I am curious and confused -
can anyone shed any light on this?

Regards,
Far

Hi Far

AIP stands for Assessed Income Period. Pension Credit takes the view
that Pensioners' incomes are generally very stable. In the case of
Pensioners who don't work (the norm) they take a snapshot of their
income at a particular point in time and then don't inquire about
income changes for (up to) the next five years. This is to reduce work
for the department and to avoid badgering pensioners about small
changes in income which can generally be predicted fairly accurately
by applying known rules about increases through inflation etc.

If the Pensioner's income changes then the theory is that it will only
be by a small amount and if there are any slight errors (like in the
case you quote) the overall it is more cost-effective to ignore them.
This is probably true, as to keep an exact track of changes means
admin costs and extra staffing levels and so forth. Plus it would also
have an impact on the number of pensioners who would get their benefit
suspended for no keeping up with the constant checking.

So - long story short - they don't want to know. They are quite happy
with the AIP figures they have.

Now - onto Housing Benefit and Council Tax Benefit. HB and CTB offices
are not allowed to enquire about pensioners incomes if they are
Pension Credit. They are "forced" to use the figures about income etc
that are supplied to them automatically by the Pension Service. Even
in cases where they know that the figures are incorrect they have no
option but to use the AIF (Assessed Income Figure). This is to reduce
the amount of intrusive enquiries that a pensioner must face when
claiming benefits. The Pension Service collect the info once and then
the same figures are supplied to anyone else who needs to know. Again
the idea is that it avoids badgering pensioners and in any case any
errors are likely to be small. The only exception to this is if the
pensioner receives only the Savings Credit element of Pension Credit.
(i.e. they do not receive Guarantee Credit element). In those cases
the £16,000 capital limit still applies.

In 2011, when the AIP ends, the Pension Service will take a new
"snapshot" and use the figures obtained for the next five years - a
new AIP. Any discrepancies are sorted out then. However, any
unexpected increases in income are NOT backdated - so do not affect
any benefits paid in the past.

Tell your friend not to worry.

Zargon

 

[Far]

Thank you very much Zargon - that's helped clear things up and put our minds
at ease - the main worry was over the Council Tax Benefit as it was
especially unclear how an AIP affected that but that's all clear now.

Regards,
Far

 

[Mike]

Thank you very much Zargon - that's helped clear things up and put our minds
at ease - the main worry was over the Council Tax Benefit as it was
especially unclear how an AIP affected that but that's all clear now.

Regards,
Far

Zargon's reply was not entirely accurate; the AIP and the assumptions
about income and capital only relates to what the DWP regards as
retirment provisions. These are annuities, occupational and private
pensions and deemed income from savings. Earnings, income from
property, benefits and allowances (both from the UK and overseas) are
not included and so changes must be declared.

Also the AIP can be terminated early if a couple seperate (including
one going into permanent residential care), the customer going into
residential care or the death of one of a couple. At that point a
full reveiw of the PC application is undertaken.

Mike