Money News

Are Premium Bonds fair?
Since the lowest premium bond prize was cut from £50 to £25 in 2009 I have been getting a lot of letters from readers who are winning less and raise the age old question: is the distribution of premium bond prizes fair? In one sense it undoubtedly is. Every month each bond has an equal chance of winning. There is no bias by region, between new or old, between those with lots and those with one, favouring men over women, or anything else. I am confident of that because the physics used in the random number generator is well understood and tested. Every month before prizes are paid the Government Actuaries Department analyses the results to check there is no bias. In more than 50 years there never has been.

The problem is our brains do not cope well with randomness and tend to confuse it with ‘fair’ or ‘evenly distributed’. My computer just produced ten random digits 7499090186. If ten people had a number and each was drawn at random for a prize it would seem very unfair that number 9 won three times and 0 won twice – especially to 2, 3, and 5 who won nothing. But that is what random can do.

Premium bonds are a gamble. Not with your capital – which is safe – but with your interest. That rate is currently set at 1.5% a year. Each bond has a 1 in 24,000 chance of winning something in each monthly draw. Almost all prizes are £25 and 80% of the money is set aside for them. So the interest rate for most people is in fact 1.2%. And even tax-free that is not a good deal. But the allocation of it is fair or, at least, random.

Taxman gets tougher
New penalties start this year for people who file their self-assessment tax returns late. One day late and the penalty will be £100. In the past that was waived if no tax was due and could never be more than the tax owed. But now you will be fined £100 even if you owe less than £100 or no tax at all. If you are three months late with the form there is now an automatic daily penalty of £10, though this will be capped at £900. After six months you will be fined another £300 or 5% of the tax owed if that is greater. After a year you will get that fine again. Filing dates are 31 October 2011 for the paper form. If you miss that you can file electronically by 31 January 2012.

All those penalties are just for late filing of the form. There are also higher penalties for not paying the tax which is due on 31 January and 31 July 2012. They are 5% of the tax unpaid at 30 days, again at six months and again at one year. They are on top of the late filing penalties. Ouch.

Can NHS pay care fees?
A lot of firms are springing up claiming to help people in nursing homes get their fees paid in full by the NHS. These firms simply fill in the forms and make the application you could make yourself but they can charge a third of the fees saved. As the savings can be backdated their fee can by thousands of pounds for doing something you or your relatives can do yourself free.

The NHS will pay nursing home fees if the person in the home has a high level of what are called ‘primary health needs’ as opposed to social care needs. And with fees easily reaching £30,000 a year getting the NHS to pay is clearly tempting.  It is hard to define what ‘health needs’ are. If you need help eating and using the toilet you will not last long if no one does that for you. But to qualify you need a primary need for medical rather than social care.

The decision about whether you are eligible is made using two questionnaires which take account of the types of need you have, the extent and severity of those needs, the skills needed to deal with them and how unpredictable they may be. If you are in a nursing home your needs should be re-assessed at least once a year and you can ask for a re-assessment at any time if your condition deteriorates or seems to be terminal. Talk to the staff at your care home and ask them to use what is called the ‘continuing care checklist tool’ available from the NHS to assess your needs. If that indicates you may be eligible for the NHS to pay for your care then you should apply to your local Primary Care Trust. It will use a more thorough ‘decision making tool’ to assess your eligibility. If refused you can appeal. It may take a while but it could save you – and your heirs - £30,000 a year.

More information: www.nhs.uk and http://bit.ly/lZtFVR for ‘continuing care checklist tool’.
AgeUK: http://bit.ly/joXqHr
Carers Direct 0808 802 0202
Rules in Scotland and Wales are similar but terminology may differ.

Clarification on Inheritance Tax.
My piece on Inheritance Tax in the June Saga Magazine has bee misunderstood by many readers who have contacted me. I wrote “when a widow or widower (including civil partners) dies the heirs can normally benefit from the unused tax free allowance of the first to die. This change, which applies to all deaths from 9 October 2007, can double the starting point for IHT.”

Some readers thought 9 October 2007 referred to the date of the first death and if their spouse died earlier than that believed their heirs would not benefit from the change. In fact the date refers to the second death. So the heirs of someone alive today who is widowed can take advantage of the double allowance when the widowed person dies in the future. If their late spouse left everything to the widow the heirs will benefit from a double nil rate band – a total of £650,000. However, if the first to die left some of their estate to other heirs then on the second death only a portion of the nil rate band can be inherited.

Survey on Retirement Age
When do you want to retire? More than two million people already work beyond state pension age and the Government intends to raise that to 66 for men and women born 6 April 1954 or later. Further increases will happen for younger people with a target at the moment to increase state pension age eventually to 68. But when should we stop working?

A survey for Scottish Widows asked people over 50 three questions. At what age would you like to retire? When do you expect to be able to afford to retire? What is the maximum age you would be willing to work to if you had to? The pollsters added ”at what point do you think you would actually angry if you still had to work?” Answer the questions yourself before turning to pxxx to see what others said!

Source: YouGov poll of 2300 adults aged 50 or more 4-11 March 2011

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