It's A Taxing Time For Many

abolition of Married Couples Allowance angers reader

I get a lot of letters and emails from readers and they give me a rare insight into the financial problems that are worrying those of us who are over 50. Top of the postbag over the last few months was the abolition of the married couple's tax allowance from last April. The allowance was stopped for any couple where both partners were under age 65 on April 6 2000. In other words if you and your wife or husband were born after April 5 1935 then you would lose the allowance forever. People already aged 65 by that date will continue to get it if they are married – or marry subsequently.

The value of the allowance had been eroded over the years and last year it was only worth £197 for taxpayers under age 65. But once you reached that age, it was much higher and many people with a 65^th birthday just after the deadline felt they had been robbed of the higher amount – now worth more than £500 a year. Edith from Oldham wrote "We are now hundreds of pounds worse off. Having voted Labour all our lives needless to say we will never vote for them again. They are playing Robin Hood in reverse. This scandal needs exposing." And Mr H from north London was equally angry "I am outraged at the abolition of the Married Couples Allowance as it discriminates for life between equal human beings…in the Budget it was mentioned like an insignificant small adjustment, to mislead the elderly, who are often ignorant of these matters."

Other readers were concerned at the knock-on effects. Tax relief for maintenance payments and for widows were both linked to the married couple's allowance – so both disappeared from April this year. Leonard e-mailed me to say that he pays his ex-wife maintenance and his tax bill has risen by £2700 over the last few years as tax on maintenance has been changed. Much of that has been gained by his ex-wife, the rest has gone to the Chancellor. He points out "Treasury ministers have said it is open to both parties to come to some agreement to adjust the maintenance payments. Or invite the courts to intervene. This takes no account of the costs or difficulties of doing so. I am still reeling from the shock of this devastating action by the Government."

From April next year, the married couple's allowance will be replaced with a new children’s tax credit, worth £442 a year for a parent with one or more children. It will be reduced for higher rate taxpayers and not paid at all if either partner earns more than around £40,000 a year. Of course it will not help most married Saga readers who generally no longer have dependent children.

Many readers have asked how they can complain about this change. I can only suggest writing either to your MP or to the Rt. Hon. Gordon Brown MP, Chancellor of the Exchequer, HM Treasury, Parliament Street, London SW1P 3AG. But I do not hold out much hope that this Government will change its mind.

The extension of the winter fuel payment to everyone over the age of 60 has – on the whole – been a great success. Most of the one and a half million people now entitled have claimed. But some individuals have encountered problems. Many people were frustrated at first with the difficulties of getting through on the helpline. Those problems should now have largely disappeared. But I am still concerned that some people have been put off claiming or have been given wrong information. Mr Wilson, 78, writes from Dorset "I have no British pension having worked overseas from 1948 to 1986. My full pension is paid to me from France. I was told I was not entitled. I should point out that I am a British subject, pay income tax, and served in the British army."

In fact Mr Wilson is entitled to the payment because he lives in the UK and is aged 60 or more on the qualifying dates. He can get the payments backdated to 1997. There is no need now to be entitled to a pension or any other benefit – age and residence are sufficient. The qualifying dates are

You get the FULL payment if no-one living in your home got a payment for that year. You get the HALF payment if someone else living with you DID get a payment but you did not. The rules are slightly different if one of you gets income support. People in a residential care or nursing home get no payment if they get any income support and a half payment if they don’t. People in jail, in hospital for more than a year and asylum seekers get no payment.

Anyone who thinks they will qualify but has not claimed should do so now by ringing 08459 15 15 15.

Many older people see the retirement pension as a right. But in fact it has to be earned by paying National Insurance contributions. John writes from Gloucestershire "what would the state pension be for a male immigrant entering the UK at age 41 and working until 65?"

The working life for a man is assumed to be the 49 years from age 16 until 65. Five years contributions can be missed with no loss of pension – so 44 years of paying in will get you a full pension. If a man you has fewer than 44 he will get a pension reduced in proportion. John’s 24 years will get him 24/44ths – rounded up to 55% – of a full pension. So he should get £37.13 rather than the full £67.50 a week. A woman’s working life is 44 years as she reaches pension age five years earlier at 60. She is also allowed five blank years. So a woman in John’s position would get 24/39ths of the full pension, or £41.85.

Married women often suffer from this rule having been persuaded in the past to pay the reduced married woman’s contribution which does NOT count towards a pension. Elsie wrote from Birmingham. "When I retired at 60 I had worked from 14 continually but on marriage at 28 years had opted to pay only the married woman’s stamp. I was entitled to about £14 per week from my own contributions but when my husband retired 18 months later I got the basic married woman’s pension and lost my own money."

Elsie is correct. A married woman can get a pension either on her own contributions or on her husband’s – but not both. Because the married woman’s pension paid on her husband’s contributions is about 60% of the full pension, a married woman who has paid full contributions for up to 23 years of her life can find they are wasted because she gets as much or more on her husband’s contributions. However, she can only get the pension on his contributions when he reaches 65 and draws his own pension. So she may, like Elsie, get her own pension for a short time.

Mrs P from Shropshire was in this position but wonders if she could have paid more contributions to get a bigger pension. In fact if you are not working you can pay voluntary contributions for the current tax year and up to six previous years when you were not working. The cost is currently £340.60 for each year. But married women will gain little or nothing if their husband is already retired or will retire soon and the pension they earn is still less than they could get on his contributions.

Molly from Lincoln makes another important point about retirement pension – it has to be claimed. "My brother and his wife lost 4 months retirement pension as they did not know they had to claim. He never heard anything from social security and when he finally claimed seven months later, the retirement section could only backdate 3 months. So he has lost out on 4 months pension. I feel this is unjust. They are quite poor and the extra 4 months money would have been very useful to them."

Not many years ago the pension could be backdated for a full year – but the period was cut to three months in April 1997. Normally the Benefits Agency will contact people four months before they reach pension age. But sometimes the system does not work. So if you are a woman who is nearly 60 or a man who is nearly 65 then contact the Benefits Agency to find out if you can claim a retirement pension. If you claim more than three months after your birthday, you will lose money.

Free colour television licences have been available from 1 November for everyone aged 75 or more. But the rules have confused some people and it is possible that not everyone has taken advantage of them. If you live in your own home and your licence ran beyond 1 November, then you can get a refund for all the months from November. And if you have surplus TV licence savings stamps, you can get on them too.

If you live with younger people, perhaps your children or other relatives, then the position is more complicated. The first thing to do is to check that the licence is in the name of the person who is over 75. If it is not, then you must apply to get it changed. You can then also apply for a refund for the whole, unexpired months at the time you made the application. You can get help and advice on TV licences for people over 75 by calling 0845 602 3334.

Finally, several readers took me to task for saying in May that entry to major national museums would be free from April 1, 2000 for people over 60. That change was introduced in England and Wales. But not in Scotland, where the plan is to have free entry to the national museums for everyone by April 2001. And the Northern Ireland Executive has no plans to introduce free entry for people over 60.

January 2001

e-mail Paul Lewis on paul@paullewis.co.uk