The new tax year will be a welcome one for retired people on the new State Pension, who will see their payments rise by 3.9%.
That’s worth an extra £343 a year for those receiving the full amount.
Things are not going to be quite so positive for some people on the old State Pension though, particularly those who have a loved one dependent on them for income, who face seeing their income cut by as much as £70 per week.
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Doing away with dependents
The old State Pension system allowed pensioners to get a bit extra each week to help cover for adult dependents, typically their partners who are under the State Pension age but who are financially reliant on the person receiving the pension.
These payments are called an Adult Dependent Increase (ADI), with the value of those payments varying depending on what sort of old State Pension you have.
If you have a category A old State Pension ‒ which is based entirely on your National Insurance record ‒ then the payments are worth around £70 per week.
Alternatively, if you have a category C 'old' State Pension ‒ which is for those aged over 80, and isn’t based on your contribution record ‒ then the ADI payments are worth £41.90 per week.
ADI payments were scrapped for new claims from 2010 onwards thanks to the 2007 Pensions Act, but anyone who was already receiving the payments by April 2010 could continue receiving them.
However, there was a deadline for that transitional arrangement of April 2020, which is now just a couple of months away.
What happens next?
A new Freedom of Information request from Royal London has revealed that around 11,000 pensioners will be affected by the removal of these dependent payments.
They aren’t small amounts either ‒ in total around £33 million will be lost, with affected pensioners losing up to £70 a week.
That’s more than £3,500 a year, enough to make a substantial difference to the standard of living for those affected.
Steve Webb, policy director at Royal London ‒ and the former pensions minister ‒ has accused the Government of “penny-pinching”, taking this money away when the “addition is gradually working its way out of the system”.
To put it more bluntly, people that receive ADI are dying off, so it’s questionable whether it’s a good idea, let alone justifiable morally, to slash the retirement income of old and potentially vulnerable pensioners.
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Other Governmental help
The Government has defended the move, with a spokesperson for the Department for Work & Pensions noting that the removal of ADIs was part of a package of reforms introduced which “meant that overall more women received the full basic State Pension and more generous National Insurance credits for carers were introduced”.
The Government has also emphasised that people receiving the ADI may be eligible for other means-tested benefits which would top up their income, such as Universal Credit or Pension Credit.
The spokesperson pointed out that “those already in receipt of a means-tested benefit should see no change to their income as the loss of the ADI will be offset by an increase in their means-tested benefit.”
While this may be true, it does rather miss the point.
The process of applying for means-tested benefits can be taxing for young people, let alone for the elderly, who may be reliant on kindly relatives or neighbours to handle the application for them.
There can also be a pride issue. When my grandfather acted as carer for my grandmother, it wasn’t just a trial getting the paperwork sorted, it also took a while to convince him to apply in the first place.
Just because a person may be entitled to benefits ‒ and, hand on heart, need them ‒ it doesn’t mean that they will immediately jump at the chance to apply for them.
The reality is that thousands of old people, whose pensions cover not only themselves but a loved one too, face the upset and upheaval of having their State Pension payments reduced, and may not understand that alternative help could be available to them.
Surely a simpler option would be to allow the ADI to be scrapped as its recipients pass away?