Dear Listener

Pensions Minister Steve Webb had the unenviable task on Tuesday of admitting to Parliament that his Department had got some calculations wrong. Worse still they were figures given to the Treasury which printed them in the ‘Green Book’ which set out the details of the Autumn Statement made by the Chancellor on 29 November. The result is that the pension credit paid from April to more than two million poorer people aged 65 or more will be less than the figures published on 29 November indicated. The reduction will be 42p a week for single pensioners and 69p for those who claim as a couple. They will get a rise in their weekly income of barely half the 5.2% rate of inflation used for other benefits.

The mistake seems to have happened because of a difficult balancing act which the Treasury wanted to do. Pension Credit normally rises with earnings while the state pension goes up in line with prices. That would have meant the pension credit paid to the poorest million pensioners rising by less than the £5.30 rise in the state pension. To avoid that the Government decided to raise that element of pension credit by £5.35. To pay the £180mn cost of that extra rise they cut the amount paid to the two million slightly less poor pensioners on pension credit, all aged at least 65. It seems that working out what that cut would have to be proved tricky and the figures had to be revised at a very late stage leaving the DWP – and the Treasury – with free-range egg on their face (42p is about the price of two free-range eggs).

The result is that a single person aged 65 or more on pension credit who gets a full basic state pension and has a fixed rate annuity of £30 will now get a total benefit rise of just £3.34 a week, which is 2.2% of their total weekly income. And someone with SERPS of £30 on top of a full basic state pension will get an increase of £4.28 or 2.8% of their weekly income. Under the figures published with the Autumn Statement the rises would have been £3.76 (2.4%) and £4.70 (3%). Inflation is currently more than 5% and expected to be around 4% in April 2012.

***IN MONEY BOX THIS WEEK***

We talk to the boss of a car hire company which has been accused of hanging onto customers’ deposits. Two ex-customers finally get their money back after 6 weeks and 6 months. But what does he say to the accusations?

HSBC was fined £10.5 million this week for mis-selling long term investments to 2485 people with an average age of 83. Compensation will cost it another £29.3 million. What went wrong? And is it still happening?

Consumer Affairs Minister Ed Davey responds to this week’s reports criticising pay day loans and calling for a cap on the interest rates they charge. And following our revelations last week of the fees charged by banks on unapproved overdrafts we also ask him if he will extend his research to them.

And a new investment fund is launched – heads we both win, tails you don’t lose. But why is it called by the Latin name Vinculum – which means chain?

That’s the four pints we hope to squeeze into our quart pot which is still only 24 minutes long. And there is a fifth and sixth crying in the dressing room and others clamouring at the doors. Find out our final agenda on Radio 4, Saturday at midday. Or catch the repeat at 9pm on Sunday or of course listen online anytime www.bbc.co.uk/podcasts/series/moneybox - or download the most popular business podcast through iTunes.

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Best wishes,

Paul

PS I will be on BBC One Breakfast on Saturday trailing one of our stories. And back on Breakfast later in the week, probably on Thursday and usually around 0640 and 0820 talking about a money story and answering emails and tweets. But the time, and occasionally the day, can vary.

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