Campaigner for the rights of older people, Paul Burstow, MP for Sutton and Cheam will introduce a Bill into Parliament on Tuesday 24th March to force the Government to address two injustices in the current benefit rules.

These are rules that:

1.  penalise over half a million thrifty pensioners by assuming effective interest on savings of 8 per cent when calculating entitlement to Pension Credit.

2.  leave over a quarter of a million frail pensioners in care homes who are reliant on state support with just £21.15 a week to cover their personal living costs.

Pension credit

Under current benefit rules (tariff income rules) pensioners with savings over £6,000, who qualify for pension credit, are assumed to be earning anything up to 8% interest on their savings. This rate is significantly higher than any savings or investment account currently available.

The Pension Credit was introduced in October 2003 and is the main means-tested benefit for pensioners.  The tariff rules and capital limits were set at that time and have not been changed since.

Benefit entitlement is calculated on an assumed rate of return that pensioners receive from their savings. Any savings below £6000 are disregarded, but for every £500 above that a saver is assumed to earn £1 per week from their investment.

The Bill would place a duty on the Secretary of State for Work and Pensions to review the tariff income rules and the level of capital.

By placing a duty on the Secretary of State to consult widely about the rules and limits Mr Burstow hopes his Bill will force the Government to address a growing anomaly which discriminates against thrifty pensioners.

The "half million swindle"

The Government argues that the tariff income rules do not represent a rate of return for investing capital but are there to "provide a simple method of calculating the weekly contribution that people with capital in excess of £6,000 (or £10,000 if in a care home) are expected to make from those resources."
However, the rules imply that pensioners with savings over £6,000 are receiving up to 8% interest on their savings. However an ISA with Government backed

National Savings and Investments is currently only offering 1.62-2.16% interest .
Over half a million pensioners are having their income over-estimated and missing out on benefits they are entitled to.

The Government is calculating that a pensioner with savings of £16,000 earns £1,080pa in interest, when in a National Savings ISA they would be receiving between £259.20 and £345.60; thereby costing them at least £734 per year, because the interest rate is unrealistic.

Personal Expense Allowance

The Personal Expense Allowance (PEA) is the only source of income for care home residents whose care is funded by the local authority. Currently 250,000 residents receive this support.

Means-testing rules require those entering care homes with savings of less than £22,250 to surrender to the state their income (including the state pension) and assets to cover the costs of their care. The PEA is the amount that residents are allowed to keep for personal expenditure each week and is currently £21.15, just £3 per day.

This amount is the only source of income for local authority funded care home residents and is intended to pay for toiletries, clothes, gifts for family and friends, travel, hobbies, hairdressing and any leisure activities.  It is even used in some cases to pay for services such as chiropody, physiotherapy.  PEA has even been used to pay top up fees.

The PEA, which is indexed to earnings, will rise by 75 pence per week on the 1st April.

Independence, choice and dignity

Paul Burstow MP, who co-chairs the All Party Parliamentary Group on Ageing and Older People, alongside various older people’s charities, is calling for a significant increase in the allowance because it is vital for ensuring the dignity and self-respect of residents, and giving them a certain amount of independence.  The PEA is indexed to earnings.

Age Concern, Help the Aged and the Joseph Rowntree Foundation (JRF) have all published reports demonstrating that the PEA is crucial to the dignity of older people and therefore must be raised because currently many elderly people are living in poverty or relatives are supplementing the allowance themselves .
JRF conducted research among pensioners and concluded that £42 per week is the minimum amount which a single pensioner needs in order to maintain an acceptable standard of living .

The Royal British Legion in their campaign A Return to Rationing is also calling for a higher level of PEA .

In 2005, the Work and Pensions Select Committee stated: "The Committee remains concerned at the low level of the Personal Expenses Allowance and repeats the recommendation of the Social Security Committee that the Government should ‘conduct research to establish the amount necessary to enable pensioners in institutional care to live their lives with dignity."

Three years later Ivan Lewis MP, the then Minister of State for Care Services, twice gave an undertaking to Parliament that a public consultation would be carried which included the rate of the PEA.

However current Minister for Care Services, Phil Hope, issued a written statement in January 2009 in which he refused to initiate a consultation on the level of the PEA. He said that to increase the PEA to £40 would cost £250 million and that ‘none of this extra expenditure would increase the availability, choice or quality of care services or support the transformation of adult social care provision which must be our priority for the future.’

'Inconsistency'

The Department of Health’s ‘Dignity in Care’ campaign was launched in November 2006 to ensure that older people were shown dignity and respect at all stages of their care. One ‘dignity test’ is ‘to enable people to maintain the maximum possible level of independence, choice and control.’

This is despite Age Concern’s research and campaign of more than a decade demonstrating that the low level of the PEA compromises the quality of life and dignity of older people by restricting their ability to meet essential physical and social wellbeing needs which simply cannot all be covered by £21.15.

The Bill would place a duty on the Secretary of State for Health to undertake an annual review of the level of PEA including public consultation, so that it can be increased to a level which does guarantee a decent, minimum standard of living