Money News

Council tax benefit to be scrapped
A benefit claimed by more than five million people in England, Wales and Scotland is to be scrapped. Council Tax Benefit reduces – sometimes to nothing – the amount due for low income households. But from April 2013 it will be replaced by a local discount scheme run by each of the 380 council tax authorities in Great Britain. The plan is to cut nearly £500 million off the annual cost – a saving of about 10%.

Nearly half the households receiving council tax benefit are over pension age. The Government says the amount of help given to them will be no lower under the new system. So the whole cut in costs will fall on households under state pension age and that will reduce the amount they get on average by 15% to 20%. But it could be worse than that. Some councils may decide to protect other groups – such as those with a severe disability or very young children. That could mean other groups losing the help they get altogether.

Another major problem with the change is that instead of one national scheme with one set of rules applying throughout Great Britain there could be 380 separate schemes. So it will be impossible for welfare rights organisations – or Saga Magazine – to give general advice about what people are entitled to as it could be different in each area, especially for those under pension age.  Already there are up to three million people who fail to claim as much as £2 billion a year in council tax benefit. In future it will be much harder to encourage or advise them. And councils will have no incentive to do so as they will have to fund every extra claim out of the same fixed budget.

Existing discounts such as the 25% off for those who live alone are not part of the changes. But some experts say reducing that concession would be an easy way to meet the savings target while leaving intact the benefit for households on a low income.

Consultation on the details of how the cut may be implemented is open until 14 October.  http://www.communities.gov.uk/publications/localgovernment/localisingcounciltaxconsult

My guide to council tax benefit and other means-tested help Can You Claim It is available free. You can check your own entitlement to council tax benefit claim using the benefits checker at www.turn2us.org.uk

October tax deadline
October sees two important income tax deadlines for the nine million people who pay tax through self-assessment. If you have a new source of taxable income – such as a new pension or a job – you have to inform HM Revenue & Customs by 5 October in the tax year after the income is first paid. So if you got a new pension, say, last November – which is in the 2010/11 tax year – you must tell HMRC by 5 October this year. If you become self-employed or get a new income from an investment ditto. If you do not then you could be fined. If you pay tax under PAYE then you can rely on your pension provider or employer to inform HMRC.

Second, if you were sent a paper form this year then it has to be returned by 31 October. If you do miss the deadline you can still do your return online by 31 January 2012 and avoid a fine of £100. Find out more about making your tax return online at www.hmrc.gov.uk/online/index.htm

Coach concession scrapped
A Government subsidy which allowed long distance coach companies to offer half price fares to people who are over 60 or disabled will end this month in England.  The £17.5 million subsidy helps hundreds of thousands of people buy more than three million half price tickets each year to visit family or friends or go on holiday. Those cheap fares will end this month in England. The biggest coach operator National Express told Saga Magazine it is hoping to announce its own replacement scheme shortly, though it will be less generous. Tickets bought before 1 November at half price can be used until August 2012. The schemes Wales, Scotland and Northern Ireland will not change. And free local buses are not being ended anywhere.

NEST eggs people on to join
A year from now several million people at work will have to join a pension scheme through their job. Although they will be free to leave, the Government hopes that because this scheme is one you have to opt out of rather than opt in to will mean that most of the ten million or so who work but are not in a pension scheme will join one. The new rules will be phased in over several years but several million people with the biggest employers will be obliged to join next October under what is called ‘auto-enrolment’ and by October 2016 all employees will have to join a pension scheme. Employers will have to pay in at least 1% of their employees’ pay into the pension at first but that will rise to 3% by October 2017. And employees’ contributions will rise from 1% to 5% at the same time.

Employers will be free to select any pension provider they like. Though most are expected to choose the new National Employment Savings Trust (NEST) set up by the Government. Its costs will be very low and it will have a very easy to use online interface for both employers and members. Although it will have an upfront charge of 1.8% of every contribution made the annual charge will be very low – just 0.3% a year. Overall the cost will be far lower than most pension schemes run by the insurance industry.

Cheques but not mate
Now that the cheque has been saved (see Money News last month) a powerful parliamentary committee is campaigning to make sure the banks do not try to get rid of them by the back door. In a highly critical report on the original plans to scrap cheques altogether by 2018 the Treasury Select Committee says it is “concerned that it may be in banks’ own interests to discourage customers from using the cheque”. For example, banks might start charging for cheques or make cheque books more difficult to get hold of or contain fewer cheques. The Committee wants the Payments Council – which is the body that oversees the plumbing our money runs through – to vet the material banks send their customers about cheques. It also wants the banks to write to all customers saying that cheques are here to stay.

The Committee also wants the Council to “examine re-introducing the cheque guarantee card” which disappeared at the end of June. It allowed cheques up to £100 (or £250 in some cases) to be guaranteed and many small traders relied on them to make sure payments were good. Some large institutions such as the Post Office have refused to take cheques at all since the card went.

However, Sandra Quinn of the Payments Council told Saga Magazine “The reasons we closed the scheme remain valid. We are doing research into the effects of the closure and will see if anything needs to be done. But even if we set up another scheme we can’t oblige banks to join.”

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