Six groups told the Guardian that a narrative of “benefits scroungers or fakers” was making disabled people increasingly become the target of resentment, which some organisations fear could spill over into hate crimes.

The charities – Scope, Mencap, Leonard Cheshire Disability, the National Autistic Society, Royal National Institute for the Blind (RNIB) and Disability Alliance – said inflammatory media played a part, but laid the blame largely with ministers and civil servants for repeatedly highlighting supposed mass abuse of the system, it was reported.

The Government has pledged to cut the bill for disability living allowance (DLA), which is to be replaced by the personal independence payment (PIP), by 20% by 2015/16.

Last month, minister for disabled people Maria Miller said: “In the past DLA has been poorly managed so we now have a situation where there are hundreds of millions of pounds of overpayments and the vast majority of people get the benefit for life without systematic checks to see if their condition has changed.”

Last April, employment minister Chris Grayling said the “vast majority” of new claimants for sickness benefits were in fact able to go back to work, after official figures showed three-quarters of applicants for employment and support allowance (ESA) failed to qualify for assistance.

Tom Madders, head of campaigns at the National Autistic Society, told the newspaper: “The Department for Work and Pensions is certainly guilty of helping to drive this media narrative around benefits, portraying those who received benefits as workshy scroungers or abusing a system that’s really easy to cheat.”

Some disabled people avoid going out because of the hostile climate, or avoid using facilities such as designated parking bays if they “don’t look disabled”, it was claimed.

According to polling by Scope, in September two-thirds of people with disabilities said they had experienced recent hostility or taunts, up from 41% four months before.

Scope chief executive Richard Hawkes said: “Disabled people tell us that increasingly people don’t believe that they are disabled and suddenly feel empowered to question their entitlement to support.”

Guy Parckar, policy manager for Leonard Cheshire, spoke of an “incredibly strong focus on benefit fraud” within the DWP, which he said was “mentioned at all possible opportunities”.

“There is the impact of potential hate crime, and the issues around that,” he told the Guardian.

The charities’ comments come after a warning that highly vulnerable households could be harmed by the Government’s planned £26,000 annual benefit cap.

EntrepreneurEmma Harrison, who was appointed by David Cameron to get families back into work, said she was concerned parents of severely disabled children could lose out.

While she accepted the need for welfare reform, she told BBC Radio 5 Live’s Pienaar’s Politics: “I think that in all big policies that there are going to be people who are going to be trapped, and I think we need to be really, really careful we don’t catch the wrong people.”

A Department for Work and Pensions (DWP) spokeswoman said: “We are absolutely committed to supporting disabled people and whilst we already have laws in place to ensure equality, we need to work together and do more to change negative attitudes.

“That is why we have recently launched a consultation on developing a new cross-government disability strategy, with one of the key areas looking at promoting positive attitudes and behaviours towards disabled people and tackling discrimination and harassment wherever they occur.

“Our welfare reforms are designed to restore integrity into the benefits system and to ensure that everyone who needs help and support receives it.”

The insurers are the latest to declare with-profits bonuses, dictating the value of pensions, bonds and endowments.

Aviva, with two million with-profits savers, will announce its bonuses on Friday. Friends Life plans an announcement later this week. It has 600,000 with-profits plans sold under its Friends Provident and Axa Sun Life names.

But savers should not be too optimistic after a tough year for financial markets. Patrick Connolly of financial planner AWD Chase de Vere in Bath, Somerset, says: ‘Aviva has historically been one of the stronger companies. I would expect it will hold most annual bonus rates and reduce some final bonuses slightly.’

The expectation is for more bonus cuts at Friends Life.

With-profits funds hold a mix of assets, typically shares, government and corporate bonds and property. The aim is to smooth returns over time with insurers deciding how much to pay out each year.

Standard Life has been the biggest name to report so far this year, last week announcing further cuts in bonus rates affecting up to one million of its savers.

The payout on a benchmark 25-year £50-a-month endowment is now £28,439, down from £28,900 a year ago.

Who Cares has been launched by the Financial section of the Mail on Sunday to offer advice, help and support to the millions of people in Britain today who are affected by the chronic difficulties of old age, whether they are elderly themselves or helping to care for older relatives and friends.

So many people now find themselves plunged into the confusing world of benefits, entitlements, dementia, care homes and home care. It can be a huge battle for younger relatives and a struggle for anyone since one of the worst aspects of this world is a sense of isolation.

It is hard to know which way to turn.

In a series of articles and blogs, Who Cares will be offering hard facts and straightforward advice to help you find your way through the maelstrom.

We want to create a community that includes you and offers genuine support. This will be a place where you can share your stories and where we will be campaigning to help push all these issues up the agenda..

>>Who Cares wants to hear your questions and concerns, your thoughts and your experiences. You can contact us by posting at the end of any of our articles or blogs, or you can email us direct on whocares@fmwf.com.

For Advice on:

Benefits and Entitlements click here

Home Care click here

Dementia click here

Living and residential care click here

Important Contacts click here

Sarah Whitebloom’s blog click here.

Benefits and Entitlements

Actually managing to get the benefits and other funding to which they are entitled is a major headache for older people and carers.

Very often, they only discover what they should have been getting completely by accident. A quick look at Britain’s complex system of entitlements and you will no longer wonder why there is £5 billion a year in unclaimed benefits for the elderly.

There is actually an extensive range of benefits and entitlements for elderly people and their carers and these come from various agencies – most from national and local government.

Both cash and benefits in kind can be available, if you know where to go.

Available Help

Some cash benefits are based on your physical ability to live independently and can help you get the assistance you want and need. Others are based on your financial resources and are awarded to those on low incomes. Some are a mixture of both.

There is a raft of other grants and benefits that can come from various sources, for everything from a walk-in shower to new glasses. These are often dependent on your financial resources. A host of living aids such as hand rails, raised lavatory seats and even hospital beds can also be provided.

Unfortunately, each and every benefit and entitlement seems to be assessed in a completely different way so you could end up having to jump through numerous hoops just to get what you ought to receive.

The forms, meanwhile, are anything but easy to complete. And, since the benefits are often dependent on how you express yourself on the form, it is advisable to complete such forms with great care. The way you say something really can make the difference between whether you get a benefit or not, regardless of need.

One 86-year old woman, who clearly needed help, completed a benefit application form on her own. She was refused the extra money by return of post. When a social worker helped her to complete the same form a couple of weeks later, she was awarded the benefit at the highest payable rate.

So do not make light of your difficulties when completing forms and, if possible, get a social worker or local volunteer organisation, such as Age UK, to help you fill them in. It is not a question of giving false information but of accurately describing your needs in a way that those awarding the benefit recognise.

Government Benefits

The main Government benefits, in addition to the state pension, come from the Department of Work and Pensions. Some, but not all, are means tested.  You can download forms from the DWP website. The Age UK website gives a thorough breakdown of all the benefits available. See contact details below

The main DWP benefits are:

Attendance Allowance, payable at £73.60 or £49.30 a week, depending on need, in addition to the state pension, to a person over the age of 65.  This is widely paid to the very elderly and others who have a condition such as dementia or who have difficulty doing the everyday things of life such as bathing. It is not means tested and is completely dependent on the way you fill in the form. It allows you to buy-in help you need but how you spend the money is up to you. If you have a social worker, they will be able to advise if you are likely to qualify or you can apply for it yourself either on-line or by calling the DWP. See contact details below.

• ·         Carers Allowance of up to £55.55 can be payable to someone who spends at least 35 hours a week looking after someone who receives Attendance Allowance. So, for instance, if a woman has dementia and her husband or other relative has to care for her, they could be entitled to receive Carers Allowance on top of the Attendance Allowance received by the woman. Carers Allowance could actually be claimed by both a husband and wife, if they are caring for each other and both receiving Attendance Allowance. It is not affected by any property or savings you may have. But you cannot claim it if you are earning more than £100 a week or in full time education. And, if you are in receipt of a state pension, you may not receive the allowance but be assessed as being entitled to it, which could be important when claiming other benefits.
• ·         Pension Credit and Savings Creditare means-tested additional pension from the DWP. Pension Credit is aimed at bringing an individual’s weekly income up to £137.35 or to £209.70 for a couple. So, even if you own your own home, if your income is less than the above thresholds each week and your savings are less than £10,000, you could qualify.You don’t count Attendance Allowance as part of your income for this. Pension Credit is a key benefit because entitlement to it automatically means that you qualify for a range of other benefits and allowances. So, even if the paperwork seems daunting, it really is worth filling in the forms – with help, if possible. If you don’t qualify for Pension Credit, you may qualify for Savings Credit which is payable to people who have a low income and modest savings of more than £10,000.

Other Benefits 

• ·         Council Tax rebates. If you get Pension Credit, you will probably get a Council Tax rebate as well. But you could be entitled to some money off Council Tax even if you do not get Pension Credit. If your partner has dementia or a disability, regardless of your income, you can claim to pay the single person’s council tax rate. Your social worker or the local authority will advise. But be prepared, if you apply for Council Tax Benefit it will result in more means testing and unbelievably huge forms and demands for proofs of identity and financial resources. But councils will provide help with the forms, if required.
• ·         Other Pension Credit consequential benefits. In addition to Council Tax Benefit, if you are receiving Pension Credit, then you could also be entitled to numerous other benefits. Housing benefit is likely to be payable to help with rent. You are likely also to qualify for cold weather payments, if the temperature falls below a set level for a certain period of time. This is in addition to the winter fuel allowance, which is paid to all pensioners.

You may also get a grant to help insulate your home. And people on Pension Credit can get help with funeral costs and various other free services in their local area.  For instance, you can have a free Digital Switchover visit, if you’re on Pension Credit. You could also get free NHS dental treatment, free eye tests, money towards spectacles and financial help with travel to NHS appointments.

This funding comes from the NHS and you can find out more from their website. See contact details below.

Living Aids. On top of all this, you may also be able to get help adapting your home, such as putting in a walk-in shower if you have trouble bathing. Your local occupational therapists can advise and provide you with any living aids such as commodes that you may need. You can get in touch with them either through your doctor or social worker. People report that Occupational Therapists are very helpful and, for most things, there will be no forms to fill in. You will only need to complete paperwork if they agree to major work on your house – not just for a handrail or wheelchair but for a new bathroom – which would be means-tested.

Contacts

Department of Work and Pensions – All the Department of Work and Pensions’ benefits are set out on the direct.gov.uk website. For advice on Attendance Allowance you can call 08457 123 456

Age UK – Age UK is Britain’s leading charity for the elderly and it offers help on a local level. Their website is ageuk.org.uk. Or you can phone them on 0800 169 6565

The NHS – The website nhs.uk/carersdirect also provides excellent advice and guidance on available help. To call Carers Direct ring 0808 802 0202

[Press Association] The Government’s controversial public sector pension reforms are unlikely to save money in the long term, according to a report by a research group.

The Institute for Fiscal Studies (IFS) said savings from higher pension ages were offset by other elements of pensions becoming more generous, with lower earners generally becoming better off.

Higher earners were likely to lose out, with the move from final salary to career average schemes penalising workers who have big pay increases over time, said the report.

The IFS study also found that the current pay freeze in the public sector and plans to peg future rises to 1% will leave public pay as it was in 2008, before the recession.

The Government’s decision to move indexation of public sector pensions from RPI to the generally lower CPI measure of inflation “substantially” reduces costs and generosity, said the report.

Carl Emmerson, deputy director of the IFS, said: “The reforms to public service pensions implemented by the last Labour government and this Government’s decision to switch from RPI to CPI indexation of pension benefits will in the long run reduce the generosity and therefore the cost of these schemes to the taxpayer.

“But the consequence of the long, drawn-out negotiations over the latest reform appears to be little or no long-term saving to the taxpayer or reduction in generosity, on average, of pensions for public service workers.”

Wenchao Jin, a research economist at the IFS, added: “There is evidence of considerable variation in the estimated public sector pay premium across the regions of the UK. This suggests that, on average, more generous pay awards in, for example, the South East and less generous pay awards in, for example, Wales and Northern Ireland might be appropriate.

“But the analysis also suggests that the regional pattern varies across public sector occupations. So while a shift to centrally set, but regionally varied, pay awards might be appropriate, these should be carefully implemented.”

:: The Association of Teachers and Lecturers, which represents 160,000 teachers, has decided to accept the pension reforms following the results of a poll of members in which 91.6% of respondents voted in favour of the proposals.

Leaders of other unions are discussing further walkouts because of continued opposition to the Government’s reforms.

TUC general secretary Brendan Barber said: “This report examines only one of the three major changes to public sector pensions. As its analysis concedes, the switch to CPI indexation has had a huge impact on future pensions. Similarly the big increase in contributions immediately reduces the cost of public sector pensions by taking a big chunk out of most public servants’ pay.

“The IFS draws its conclusions only from changes in scheme design, where union negotiators – aided by the great support for the TUC’s day of action on November 30 – were able to win concessions. But if you take the package as a whole there can be no doubt that many public sector workers may have to pay more, work longer and get a pension that will not keep up with the proper measure of the cost of living.”

Unite assistant general secretary Gail Cartmail said: “Overall, the majority of public sector workers will pay more, work longer, and get less. The report reinforces what Unite has repeatedly argued on the pensions issue.”

Brian Strutton, national officer of the GMB, said: “Only a week ago the Prime Minister said at Davos that public sector pension reform will save 50% of the costs while now the IFS says the savings are zero.

“What is clear is that future costs are pure guesswork, but what is real is the impact on public sector workers – higher contributions, lower benefits and later retirement.”

The GMB executive will meet next month and is likely to refer the final proposals to members, said Mr Strutton, adding: “The negative impact on them may be why they may well say no and instead opt for further action.”

Dave Prentis, Unison general secretary, said: “Ask any low-paid public sector worker and they’ll tell you how much their families are struggling financially.

“Those on low incomes spend the vast majority of their wages on the bare essentials. A recent Unison survey revealed that many of our members are even cutting back on basics such as food, fuel or clothes for their children.

“It is in everyone’s interest for there to be decent public sector pensions schemes that are sustainable and that people want to join. The alternative is a massive means-tested benefits bill for the taxpayer later on down the line.”

A Treasury spokesman said: “Reforms to public service pensions will save the taxpayer tens of billions of pounds over the next few decades and significantly improve the long-term fiscal sustainability of this country.

“As Lord Hutton has made clear ‘the status quo is untenable’.

“These savings are achieved by a number of changes, including asking people to work longer, pay higher contributions and changing the way pensions keep pace with inflation in retirement. These have to be seen as a whole package and were negotiated as such.

“This analysis only looks at one of these elements and as such is partial and misleading.

“Asking people to work to state pension age will, as the IFS acknowledge, deliver savings to the taxpayer. This is because people people working longer will pay more tax and contributions and receive pensions for less time in retirement.”

[Press Association] The Government has been urged not to make further delays to its scheme to help tackle the “pensions savings crisis” by automatically enrolling workers into workplace pensions, as it set out its revised timetable for the initiative.

The new system to encourage people to build up a retirement pot starts this October with larger employers, but the Government announced last November that it was delaying enrolment for smaller businessesto allow them more time to adjust.

Under the new timetable, all existing firms will have enrolled their staff by April 2017, followed by all new employers by February 2018.

The Government said the new timeline meant that 70% of people would be automatically enrolled before the next general election.

Workers would automatically be placed into a pension scheme unless they decided to opt out.

Joanne Segars, chief executive of the National Association of Pension Funds (NAPF), said: “The Government needs to stick to the new timetable and avoid last-minute changes that will undermine the success of the reforms. There have been too many delays already.

“These reforms are a once in a generation opportunity to help tackle the UK’s pensions savings crisis. But they require a lot of preparation.”

Age UK’s charity director, Michelle Mitchell, also welcomed the clear schedule, but added: “The timetable must not be allowed to slip further and the Government must now encourage employers to start putting arrangements in place.”

TUC general secretary Brendan Barber described the delays as “deeply disappointing”, adding: “Everyone agrees that we face a pensions crisis, with two out of three private sector workers not in any kind of workplace pension.

“Yet successive governments have delayed the introduction of auto-enrolment and the new system will not now be fully in place until three years after the next general election.”

The level of pension contributions will be phased in over time to help employers and individuals adjust, with full contributions having to be paid from October 1 2018.

Minister for pensions Steve Webb said: “Automatic enrolment will begin on time this October, taking up to 10 million people into pension saving, many for the first time ever, and all employers will be part of it.

“We have done all we can to ease any burden on business the reforms will bring and employers of all sizes now know the date they need to start enrolling their staff.”

That means there are only ten weeks left from today (Thursday 26th Januayr) for you to claim valuable savings allowances and protect pensions against new penalties.

FMWF.com’s parent Financial Mail has drawn together a panel of experts and distilled their ten top recommendations for saving tax over the next ten weeks.

The panel comprised Sarah Lord, the managing director of Killik Chartered Financial Planners in Mayfair, central London; Helen Kanolik, of HelenK Financial Advice in Wimborne, Dorset; Mark Butterworth, technical manager at national adviser Skipton Financial Services; and Philippa Gee, who runs Philippa Gee Wealth Management in Church Stretton, Shropshire.

SHUFFLE YOUR ASSETS

HUSBANDS and wives should consider switching assets between each other wherever possible.

Aim to put income in the name of the person with the lowest income tax rate or who has some unused personal allowance – the portion of income on which you pay no tax.

Mark Butterworth says: ‘It pays to rebalance deposit accounts and other income-producing assets.

‘If one spouse is a non-taxpayer or lower-rate taxpayer, then transfer money into their name to save on total tax paid.’

MAXIMISE CASH ISAS

CASH Isas are the starting point for tax-free saving. They are deposit accounts where all interest is paid free from tax. Savers can contribute a maximum of £5,340 this tax year, rising to £5,640 from April 6. Advisers say it pays to put every penny you can afford into a cash Isa.

Sam Hatfield, 32, is using a cash Isa to shelter an inheritance from his grandmother. He received £12,500 last year and expects a second payment once her house is sold.

Sam, who runs a Cancer Research charity shop in Burgess Hill, West Sussex, has put the money into savings accounts with Yorkshire Building Society. This month he paid the maximum £5,340 into a cash Isa.

Sam, who is single and lives in Chailey, East Sussex, says: ‘You need to make your money work for you.

‘I don’t want to take any risks investing it in the stock market or to tie up money for the long term. A cash Isa seemed to be the best option.’

CLAIM WHAT IS DUE

THE payment of tax credits – Government help for working couples and families – depends on your income each tax year.

It is worth telling Revenue & Customs promptly if that income changes. The value of the credits can rise if your income has gone down if, for example, your working hours have been cut or you have been made redundant.

Philippa Gee says: ‘There is no need to wait for the end of the tax year or to be sent a renewal form.

‘It is one of the rare occasions where it is worth getting in touch quickly.’

Gee also says it is worth reporting any increase in income. Rises of less than £10,000 will not affect your credits in the current tax year.

But prompt notification makes any overpayment of credits next tax year less likely. The tax credits helpline is 0345 300 3900.

EQUITY ISAS

FOR those willing to take on more risk, stocks and shares Isas are the next logical step. These can be used to shelter funds investing in shares, bonds and property.

There is no further income tax to pay on any dividends or payments from funds held in an Isa. And any profits when the investments are eventually sold are free from capital gains tax.

The maximum that can be saved into a stocks and shares Isa is £10,680 this tax year, rising to £11,280 from April 6. These allowances are reduced by anything that is already saved into a cash Isa.

Jonathan Chilton has got into the habit of paying as much as he can afford into an equity Isa.

Jonathan, 30, who works in marketing for a legal publisher, saves each month into a series of investment funds through online broker Fidelity FundsNetwork.

‘As you get older, you start thinking more about the future and saving becomes important and I’ve tried to do what I can each year,’ he says.

His payments are invested in four different funds – Invesco Perpetual’s Global Smaller Companies and High Income funds, M&G Global Basics and Fidelity South East Asia.

Jonathan lives in West Hampstead, north-west London, with girlfriend Nicola Benford. In his spare time, Jonathan plays and is a coach for the London Blitz American football team. He says: ‘As my career has progressed, the tax-efficiency of the Isa has become more important.’

REDUNDANCY?

IT is a depressing sign of these tough economic times that dealing with the financial implications of a redundancy makes it into this year’s tax top ten.

The first £30,000 of any redundancy settlement is tax-free, but the rest is taxed as income. And if you lose your job towards the end of the tax year, a redundancy lump sum on top of salary already earned could trigger a big tax bill.

Helen Kanolik says: ‘If you are a higher-rate taxpayer, or the redundancy payment pushes you into a higher tax band, see if you can get the payoff deal structured so that part of the payment is deferred into the next tax year.’

Gee says: ‘Depending on your age and future work plans, it may also be beneficial to have a portion of any redundancy paid into your pension.’ This could be the works pension or a private pension.

LOCK IN GAINS

CAPITAL gains tax is charged when you sell assets, including shares and property, for a profit.

It is levied at 18 per cent for basic rate taxpayers, rising to 28 per cent if you pay income tax at 40 or 50 per cent. Fortunately, an annual allowance means the first £10,600 of any profits is free of tax.

Sarah Lord says: ‘The CGT exemption is one of the things people forget or fail to use fully.’ But those who hold substantial portfolios outside an Isa, for example as a result of funds recently inherited, should think about selling a portion every tax year to bank profits and use up the CGT allowance.

Another strategy is to invest in growth funds that pay no income. Then you can sell a small slice each year, using the CGT allowance to take the equivalent of tax-free income.

BOOST THE PENSION

HAVE you done all you can to bolster pension savings? Contributions into a pension qualify for tax relief.

This boosts the value of every £1 of taxed income that you pay in by 25p for basic-rate taxpayers. Higherrate taxpayers can claim back even more. There is a £50,000 annual limit for pension contributions, though you need to have earned at least this sum during the year.

However, big earners, or perhaps those who have been made redundant, may be able to invest more. You can now carry forward any unused allowances from the three previous tax years.

Kanolik says: ‘If you are self-employed or running your own business, check to see whether it is worthwhile drawing some cash from the business before the year end as pension contributions.’

With rumours swirling that tax relief could be targeted in March’s Budget, advisers recommend topping up pensions sooner rather than later.

CHILDREN

THIS is the first tax season when the whole family can top up their Isas. The Junior Isa, launched in November, allows family or friends to save up to £3,600 each tax year into a tax-free account on behalf of children. Like the adult Isa, the ‘Jisa’ can be held in cash or invested in stocks and shares.

The account is open to anyone aged 17 or under who does not already have a Child Trust Fund (CTF). But once paid in, cash cannot be withdrawn until the child turns 18.

And those with a CTF – effectively anyone born between September 2002 and January 2 last year – also benefit from higher contributions this year.

The CTF rules have been revised to increase the maximum payment to £3,600.

INHERITANCE TAX

THE first £325,000 of any legacy is tax-free. Beyond this, IHT can be levied at 40 per cent, taking a large bite out of a lifetime’s work.

However, making annual gifts to family or friends can reduce the potential for an IHT bill. Each person can give up to £3,000 per tax year, plus as many gifts as they like worth up to £250 to different individuals.

None of these will affect the £325,000 nil-rate band. You can still give away bigger sums, however if you die within seven years of making these gifts they can reduce the nil-rate band.

Graham Flack, 74, and his wife, Marion, 78, use the gifting rules to pass down money to help their son, Andrew, and his children. The couple, from Yelvertoft, Northamptonshire, capitalise on the annual allowances to pay, between them, £300 a month to Andrew, 47, their only child. They take advice from Skipton Financial Services.

Graham, who served with the RAF Regiment before working as a development manager with British Aerospace in Saudi Arabia, says: ‘We want to run down our resources in a modest sort of way. It is about striking the right balance so that we have enough for our needs too.’ Marion has Parkinson’s Disease and Graham wants to ensure that they can cover any of her future care needs.

PROTECT SAVINGS

THOSE who already have big pension funds, or have earned the right to a big final salary pension, may need to act to protect themselves from future taxation.

The Government is reducing the pension lifetime allowance on April 6 from £1.8million to £1.5million.

Final salary pensions are valued at the rate of 20 times annual income. This means that someone who is already entitled to a pension of £75,000 a year or more could hit the new barrier.

Pensions are tested at retirement. Anything over this limit will be taxed at 55 per cent, but anyone who thinks they might break through the new allowance can protect their fund if they register with the Revenue before the end of the current tax year.

Lord says: ‘There is no flexibility on deadlines and it may well affect more people than the Government has realised.

‘We’ve recently seen three longserving police officers who all needed to register.’

If that is the case, it will be another disgrace inflicted on older people (now or in the future) who are already suffering the consequences of low interest rates and rampant inflation – 5.5 per cent for the over-50s, not the official inflation rate of 4.8 per cent – while having to listen to Ministers suggest they leave their mansions and live in smaller homes to relieve the nation’s acute housing shortage (Read our story here).

Last summer, Andrew Dilnot, a distinguished economist, published a report commissioned by the Government into the future funding of long-term care in England.

It was radical in its thinking, and rightly so.

Dilnot proposed an end to the current system where people with assets above £23,250 (different levels apply in Wales and Scotland) must pay their own nursing care costs, albeit tempered by the availability of benefits such as Attendance Allowance. This often leaves families with no choice but to sell their parents’ home to pay care bills.

The new long-term care world envisaged by Dilnot was both kinder and fairer. He suggested a £35,000 lifetime cap on the care costs any person should have to meet from their own pocket.

At the same time, he said the £23,250 threshold above which financial assistance towards care costs is not available, should be raised to £100,000. So, anyone down to their last £100,000 would pay nothing towards their care costs (in a nursing home or their own home), although those in a nursing home would still have to pay towards their accommodation costs, capped at £10,000 a year.

Dilnot said his reforms would lead to a fairer deal for those currently excluded from any help – someone whose care bills hit £150,000 would pay about 30 per cent under his proposed regime compared with the 90 per cent they need now.

Unfortunately, it appears the Government now believes his proposals are too generous.

Dilnot admitted his funding model would cost the Government an extra £1.8 billion a year from 2015, rising to £3 billion a year by 2025 as demographic changes filter through the system (we all live longer and the nation gets older).

But to put this into perspective, Dilnot said it would represent only 1/400th of public spending – a ‘price worth paying’. Reports last week, however, suggested the Government would replace Dilnot’s £35,000 lifetime cap with one at £60,000, meaning a couple in need of care would end up paying £120,000 plus accommodation costs.

I hope this was only political posturing ahead of the White Paper due to be published in April or May. The current funding system is an ‘embarrassment’, according to Dilnot, but it would be even more embarrassing if it were replaced with one that still discriminated against those who instead of frittering away their wealth have scrimped and saved for their retirement.

Middle England is already paying a disproportionately heavy price for the banking crisis that brought Britain to its knees in 2008. It should not be burdened again.
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NOT all readers have supported Financial Mail’s plea for banks to offer current account customers a more transparent deal than they are getting at present – even if it means the introduction of monthly account fees. But surely the findings of a Which? report into the baffling way banks apply overdraft charges provide overwhelming evidence that what we have at the moment is neither fair, nor transparent. Which? asked a dozen individuals, including a maths PhD student, to work out the cost of an unauthorised overdraft by giving them each four mock bank statements on which the rules and charges were set out.

Between them, the volunteers got the costs right only seven times out of 48.

Bank customers, especially those who are financially stretched as the bank-fuelled economic crisis impinges on them personally, deserve a better deal.

Is it too much to ask for a current account where charges are explicit, transparent and customers do not require the assistance of Professor Stephen Hawking to calculate how much it will cost them for having the temerity to step into unauthorised overdraft territory?

Rather than altering complaints files to make themselves look good in the eyes of the regulator – Royal Bank of Scotland was fined £2.17 million last week for carrying out this scandalous practice – RBS et al should start altering their current account models. NOW.

Meanwhile, the Government is keen to help pensioners trade down to smaller homes and free up much-needed accommodation for young families. Financial Mail reviews the latest developments and asks whether they will benefit homeowners.

What is equity release and who is buying it?

EQUITY release allows older property owners to free the wealth tied up in their homes while retaining the right to continue living there.

In the last quarter of 2011 borrowers withdrew £216 million through equity release. This is the highest level of withdrawals for two years, according to trade body SHIP.

Andrea Rozario, SHIP’s director general, says: ‘There is more confidence coming back into the market.

‘We’ve seen lenders, including Partnership and Stonehaven, launching products with new features, such as enhanced terms for those with medical conditions.’

Vanessa Owen, head of equity release at insurer LV=, says: ‘People are also turning to equity release for debt consolidation. They are using the money to repay existing loans and credit card bills.’

What has happened to interest rates?

THE most popular type of equity release product is a lifetime mortgage. Interest is not levied monthly but rolls up and is added to the outstanding loan. This is repaid only after the homeowner dies or goes into care.

Several lenders have reduced their interest rates this month. Aviva is down from 6.82 per cent to 6.72 per cent while LV= has cut the rate for borrowers aged between 60 and 80 from 6.69 per cent to 6.59 per cent. Just Retirement has also trimmed its rate by one tenth of a percentage point to 6.4 per cent.

These rates still seem expensive

RATES for lifetime mortgages are fixed for the loan’s duration, which might be 20, 30 or even 40 years.

So they are not priced in the same way as conventional mortgages. Lenders also have to build in the cost of guarantees such as the promise that the mortgage debt will never be bigger than the value of your property.

Why are rates falling?

LENDERS are competing for new business. Steve Lowe, director at Just Retirement, says: ‘There has been no change in the economic fundamentals. We are responding to what rivals are doing.’ Owen at LV= says: ‘There is healthy competition out there and advisers would be knocking on our door and asking why if we weren’t offering good rates.’

Will lower rates encourage more equity release sales?

THE decision to draw on property wealth is a complex one and interest rates are just one part of the equation. Rozario expects steady growth this year rather than a rush.

Can I gain if I remortgage?

FALLING rates may help borrowers who already have an equity release loan to remortgage to a better deal. This would result in their debt growing more slowly in future.

Dean Mirfin, director at equity release adviser Key Retirement Solutions, says: ‘There were thousands of mortgages taken out five to ten years ago with Northern Rock at rates above eight per cent.

‘These borrowers could now switch to take advantage of a more competitive rate.’

Take the example of a couple who borrowed £50,000 from Northern Rock at 8.29 per cent six years ago and now owe £80,000.

By switching to Key’s best rate of 6.1 per cent, their debt would be £8,200 smaller after five years and £28,250 smaller after ten years. The calculations assume that the £2,500 costs of switching are added to the new mortgage.

Stewart Moffat and Beryl Blood are seeing their interest bill grow more slowly thanks to a remortgage. The couple, from Solihull, West Midlands, had a long-standing equity release loan with Aviva at 8.25 per cent. But they were able to switch to one with Saffron Building Society at 6.3 per cent.

Stewart, a former design consultant who is 86 today, says: ‘Interest on the loan was piling up a bit, but switching to Saffron will cut almost £60,000 off the bill if we survive another ten years.’

Sorting out the mortgage has allowed the couple to concentrate on their passion for Hawaiian music. They regularly attend gatherings across Britain, with Stewart playing the ukulele.

So there are charges with remortgaging?

YES. Some lifetime mortgages have early repayment charges for a set period, for example within the first five years.

With others, the redemption fee depends on the prevailing income paid by Government bonds. And if this is below a target level, which varies with each loan, there can be big charges to pay it off early.

This is because the lender wants compensation for the income it loses if a loan is redeemed early and today’s market cannot match the existing returns.

There will also be application and legal fees to pay if you remortgage.

The scheme could provide an alternative to traditional equity release products.

Housing Minister Grant Shapps said last week councils should be more active in offering assistance to those wanting to move into smaller properties or sheltered housing. The local authority would then let the former home to a family that needs more space.

The council would take on responsibility for letting and maintaining the pensioner’s former home. Rent from the property would be used to cover the costs of the owner renting a smaller home, with any surplus potentially added to their estate after death.

Many pensioners currently use the proceeds of equity release to help with the costs of heating and maintaining their existing home, which can become a financial burden. Shapps says: ‘Older people, who should be enjoying their homes, have watched helplessly as their properties have become prisons.’

But there are fears that pensioners living in a two or three-bedroom property could feel under pressure to give up what may have been a family home through the generations.

Andrea Rozario of trade body SHIP says: ‘There are likely to be huge costs and high levels of administrative work attached to the scheme. And it begs the question of how many older people will choose to leave their family homes and move into a smaller property potentially away from family and friends.’

Downsizing, in the process releasing equity, is another obvious alternative.