This piece first appeared in The Daily Telegraph on 8 June 2002
The text here may not be identical to the published text

How the means-test works and how to beat it

 

By October 2003 half the pensioner population will be entitled to a means-tested benefit on income grounds. But some will still be excluded because they have too much capital. At the moment, 12,000 of capital excludes you from any help from the state and if the total exceeds 6000 help is reduced. For example 10,000 capital results in a 16 reduction in the weekly MIG. From October 2003 those rules will be more generous but it will still be important to keep capital down.

Cash at home or in the bank, including money in an ISA, premium bonds, shares, gilts, unit trusts, National Savings certificates all count as capital and if the total exceeds 6000, they reduce entitlement to means-tested benefits. However, any income these investments produce is ignored completely. So if the whole 6000 is in an ISA that can boost income by 5 a week which, as long as it is spent, does not affect entitlement to benefits.

Some valuable possessions do not count as capital. For example, the value of the house you live in is ignored completely as is any land it stands on - though if it has a lot of land which is more than a garden and could be sold off separately, the value of that may count as capital.

The value of a second home also counts as capital and you cannot just give it away. For example, suppose you had a holiday flat worth 45,000 and, as you approached 60, you gave it to your daughter. If one purpose of the gift was to increase your entitlement to benefit then you could still be counted as if you owned the flat and benefit would be denied.

Personal possessions do not count as capital. So jewellery, paintings, antiques, furniture, even money in a coin collection, are all ignored completely when capital is assessed. So are vehicles, including caravans or valuable cars. One way to avoid the means-test is to save up for your retirement by buying goods, and then using them as a pension fund, selling them one by one, never realising more than 6000, and spending the proceeds.

 

8 June 2002


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