Money

Winter Fuel payments
For the first time July is the qualifying month to get the Winter Fuel Payment. In the past people who reached 60 in the third week in September became eligible for the payment. But from this year the age to qualify for the payment will rise slowly alongside the rise in the age for women to get the state pension. To qualify this winter you must be born on or before 5 July 1950. Qualifying dates for the next five winters are in the table below.

to qualify for the first time you also have to be living in the UK in the week of 20-26 September 2010. But once you have had a winter fuel payment you can continue to receive it if you go to live anywhere in the European Economic Area or Switzerland. The payment is per household. So a couple will normally get half each. People in care homes only get the payment if they support themselves and it is paid to them at half the full rate.

Although the entitlement to a winter fuel payment is personal, about 34,000 payments are made to a person who does not qualify but whose partner does. That happens if one partner is under 60 and gets an income related benefit and the other partner is over the qualifying age.

The coalition government has promised to ‘protect’ Winter Fuel Payments so the payment is expected to be £250 for those aged under 80 and £400 for those born on 26 September 1930 or earlier. Liberal Democrat plans to take the payment away from people aged 60 to 64 and use the money to extend the payment to some younger disabled people have been scrapped. The Treasury is thought to have considered taxing or means-testing the payment but so far no change has been announced.

£4 billion – yes £4,000,000,000 – to share.
Are you due a share of £4 billion in redress which the insurance industry may have to pay to more than two million people? If you have ever taken out a loan, a credit card, a mortgage or any other form of credit you may be. Since at least 2005 (and probably before) loan companies, banks, insurers, and advisers have been systematically mis-selling insurance which is supposed to meet some of the repayments if the borrower falls sick or loses their job. But the insurance frequently does not pay out as promised, has been sold to people who were excluded from claiming by age, illness or personal circumstances, or does not cover a sufficient amount of the repayments to be worthwhile.

I reported these concerns here in December 2006 and after years of complaints by the Office of Fair Trading, consumer bodies and the Competition Commission the Financial Services Authority has finally produced its plan for redress. The financial services industry may have to pay out more than £4 billion in compensation and administrative costs.

Look at any loan you have taken out in the last few years, see if you paid insurance on it to protect the payments, and if you did, write to the provider asking if you are due redress. If you are not given compensation by the firm you can take your case to the Financial Ombudsman Service.

State pension boost
The coalition government has decided to increase the basic state pension from April next year in line with prices or earnings whichever is the higher. And there will always be a minimum rise of 2.5% even if both prices and earnings rise by less than that. The government has promised to implement what it calls this triple guarantee (the highest of prices, earnings or 2.5%) from April 2011 and then to pass a law to make sure it happens in future. This rule will apply to the ‘basic state pension’. It is not clear how SERPS or the other parts of the pension will be increased.

After briefly rising in line with earnings in the late 1970s the pension has been increased each year in line with prices as measured by the Retail Prices Index. However it has risen slightly above the retail prices index. If it had gone up strictly with prices since 1980 it would be £85 a week not £97.65. But if it had gone up with earnings it would be almost £140 a week now.

Helping grandchildren
Now that the Child Trust Fund is to be scrapped grandparents must think of alternative ways to give money to children. From 1 August the payment for new babies is to be slashed from £250 to £50 for most children and from £500 to £100 for those whose parental income is below £16,190 a year. The payments made at age seven will stop from the same date. So children born on 1 August 2003 and later will not get that extra payment. Babies born or due from 1 January 2011 will not get any payment and it is not clear if parents will be able to open a child trust fund account for them at all or how long the existing child trust funds will last.

One alternative is to pay into a pension for a grandchild. Under current rules they cannot touch that until they are 55. But the coalition government is proposing that in future people should have access to at least part of their fund before that age as long as it is used for specific needs – such as a deposit on a first home.

The Treasury adds 25% tax relief to what you pay in but there is an upper limit of £2,880 – which is worth £3600 with the tax relief. Because the money will be there for up to 55 years a stockmarket investment is generally thought to be best. A fund with very low charges that tracks the FTSE All Share index is most likely to show the best growth over that time.

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