Benefit Options for Carers - Elderly Client Adviser

Feature

posted 1 Nov 1999 in Volume 5 Issue 1

Benefit Options for Carers

The welfare benefits system is now so complex that claimants will not infrequently be presented with more than one option. Although the wrong choice may involve loss of income, the Benefits Agency is no longer able to give specific advice on a 'better off' problem. Advice lines, such as the disability advice line (0800 882200) provide general advice about claiming, but do not purport to assist individuals. If the wrong benefit is claimed there is no guarantee that the claimant will ever subsequently be put on the right track.

One problem area is the interrelationship between invalid care allowance and the state retirement pension. Let us consider the position of Mrs X, a married woman who will shortly reach the age of 60. Her husband is 62. At 60 Mrs X will be able to claim the category A retirement pension, based on her own contributions. The full pension will be £66.75, assuming that she has an adequate contribution record.

At present Mrs X claims invalid care allowance of £39.95 per week in respect of her daughter who is disabled. ICA carries a £50 per week earnings restriction, so that, to retain benefit, Mrs X is only permitted to do limited part time work. Like retirement pension, ICA is taxable as income.

If Mrs A receives state retirement pension, her ICA will be adjusted in accordance with the overlapping benefit rules. The manner of this adjustment will depend on the amount of retirement pension which she receives. If the pension is the same as, or higher than her ICA, her entitlement to ICA will cease. If her pension is less than her ICA, the latter benefit will be paid in part to bring her income up to the normal ICA level.

The following examples illustrate how this rule operates in different circumstances:

i) If Mrs X has a full contribution record her retirement pension will amount to considerably more than her ICA, and she will receive £66.75 per week. She should also receive the (non-taxable) Christmas bonus of ?, and would be eligible for winter fuel payments, if granted to pensioners.

ii) If Mrs X is entitled only to, say, £25 a week retirement pension either because she has not paid sufficient NI contributions, or because she has not acquired sufficient home responsibilities protection, she will be paid an additional £14.95 per week by way of ICA, to bring her income up to the prescribed level for ICA, which is £39.95 per week. Again she should also receive the Christmas bonus and would be eligible for fuel payments.

iii) If Mrs X elects not to claim her state retirement pension at the age of 60, she will continue to receive ICA of £39.95 per week, together with the Christmas bonus, but she will not be entitled to winter fuel payments. However by deferring entitlement to her pension Mrs X would make herself eligible for a higher rate of pension at a later date. If, for example, she defers entitlement for 5 years, until she is 65 (the maximum period allowed at present), she will then receive 37% extra pension each week.

iv) When Mrs X's husband reaches 65, and becomes entitled to his pension, she will be able to claim the category B pension of £39.95 per week, based on his contributions. Obviously she might elect to do so if her own pension were less than this. Her pension entitlement and her ICA entitlement would then be at the same level, and the overlapping benefit rules would give precedence to the pension payment. Accordingly Mrs X would lose entitlement to ICA.

v) Loss of ICA for Mrs X would mean that her daughter might benefit financially. If she were claiming income support she would become entitled to the severe disability premium (at present £39.75 per week) when her mother ceased to claim ICA. In effect, therefore, there would be a trade-off between mother and daughter. By extension, the position would be the same if Mrs X were to claim a full pension at age 60, because the overlapping benefit rules prevent payment of ICA, although underlying entitlement continues.

One overriding consideration is the fact that during the whole period of entitlement to ICA before the age of 65, National Insurance credits are awarded. Consequently, if at present Mrs X has a contributions deficit, she will be able to build up her pension by continuing to claim ECA.

John Newth FCA, FTII, FIIT, ATT, Deputy Editor, Taxation Magazine