Couples lose out with new reform

8 December 2011

Low income couples where one partner is of working age and the other has reached Pension Credit Age in future could end up with an income of up to a £100 less a week than those currently in an identical position because of changes in the Welfare Reform Bill. Under the proposed Universal Credit system a pensioner could be better off living alone receiving Pension Credit rather than receiving Universal Credit as a couple.

In the future couples, where one partner is under Pension Credit age, will have to claim Universal Credit. The Government wants to ensure that the younger person has greater incentives to work and in certain situations couples in work could benefit from the changes. However many will lose out. Unemployed people approaching pension age can find it hard to return to employment and those unable to work through sickness or being a carer could also lose out.

Age UK has produced a policy paper looking into the impact of the proposed reforms also reveals that older people with younger partners who receive the Universal Credit could lose other benefits related to Pension Credit such as cold weather payments and he Warm Homes Discount as well as any local concessions.

Michelle Mitchell, Charity Director of Age UK said:

“Pension Credit currently brings a couple's income to being just the right side of the poverty line Just because one half of a couple is below Pension Credit age does not mean that their income needs drop and for those suffering unable to work through sickness or caring for others there is no opportunity to supplement their partner's income. Many of those nearing the State Pension Age can find it difficult to find work no matter how hard they try.

“We are extremely concerned that there has been no consultation on such a major policy change and full details of the system are not yet available even though the Welfare Reform Bill has been considered by the House of Commons and is entering its last stages in the House of Lords. There are just too many questions that have been left unanswered.”

There are currently 93,000 couples receiving Pension Credit where one partner is aged below 60. While those already in receipt of Pension Credit will continue to be able to receive this, new claimants will have to claim Universal Credit instead. As well as lower benefit rates the savings rules are much harsher. Currently there is no savings limit for Pension Credit but in the future those with a low income but over £16,000 savings will not be entitled to Universal Credit and any savings over £6,000 will result in a steep withdrawal of support.. This could result in older people having to spend their retirement savings so they will be able to support their younger partner.

Notes:

1. The Welfare Reform Bill has its report stage in the House of Lords on the 12 & 14 December 2011.

2. Pension credit age is linked to the women's State Pension Age.

3.How it might work

Entitlements will depend on a couple's exact circumstances. Here are two examples of the types of couples who will be particularly adversely affected by the changes. If one or both partners are working they are likely to lose less due to the more generous treatment of earnings in Universal Credit and in some situations could be even better off. All figures are in terms of 2011 benefit rates.

A couple	Pension Credit – current system	Universal Credit – if claim after October 2013
Jane is aged 58, she is unemployed and looking for work. Mike is 70 and has full basic state pension of £102.15.	State Pension - £102.15 Pension Credit £107.55 Total income £209.70	State pension £102.15 Universal Credit £3.80 Total income £105.95

A single person	Pension Credit – current system	Universal Credit – if claim after introduced
Mike is 70 and lives alone – he has full basic state pension of £102.15.	State Pension - £102.15 Pension Credit £ 35.20 Total income £137.35	Not applicable

If they pay rent and/or council tax they will get help further help

· Under both systems they could get full help with their rent

· At present Jane and Mike will get Council Tax Benefit to cover all their council tax payment. The Government plans to replace this national entitlement with localised support but has said that pensioners will be protected. They have not said whether couples getting Universal Credit will also get protection if one partner is a pensioner.

If Jane gets a job

· Under Pension Credit just £10 of a couple's earnings is ignored. After that Pension Credit will be reduced £1 for £1.

· Universal Credit will treat earnings more generously. It is proposed that the first £37 a week of a couple's earnings will be disregarded and after that there will be a 65% taper so for every £1 over this threshold the individual will keep 35 pence.

A couple where one is a carer	Pension Credit – current system	Universal Credit – if claim after October 2013
Susan is 55 and not in paid work because she is caring for her mother. She gets Carer's Allowance. Jack is 68 and has full basic state pension of £102.15.	State Pension £102.15 Carer's Allowance £55.55 Pension Credit £83.00 (Pension Credit includes a carer addition or £31) Total income £240.70	State pension £102.15 Carer's Allowance £55.00 (No Universal Credit as income above £136.95) standard rates plus care element) Total income £157.15

As above:

· In both systems if the couple pays rent and/or council tax they may get additional support

· If either Jack or Susan has earnings then this would reduce any Pension Credit payable over and above a disregard of up to £20 (a higher rate than above as one is a carer). Earnings up to £100 a week do not affect Carer's Allowance.

Caring for a partner

A couple where the carer is looking after his or her partner will get the same amount of Pension Credit as Susan and Jack. However under Universal Credit it is proposed there will be additional elements for people who have limited capability for work or to carry out activities relating to work so the maximum amount of Universal Credit could be higher.

Age UK believes it is essential that if couples have to claim Universal Credit in the future the benefit levels must reflect the fact that one partner is a pensioner. .Otherwise, couples with very similar circumstances will receive very different support simply because they need to claim before or after the introduction on Universal Credit. As the date for the start of Universal Credit approaches the revised policy could act as a disincentive for younger partners to seek employment as if their partner stops being entitled to pension credit, they may not be able to claim it in the future under Universal Credit.

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