Pensions, Benefits and Care Costs
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General disclaimer

IMPORTANT  The Pensions Regulator, which oversees workplace schemes, will argue at the High Court that "pension liberation" schemes  for under 55s should be declared illegal. Currently, liberation schemes are seen as vehicles that cause pension savers to break tax rules, rather than illegal. Savers who are persuaded to transfer their pensions to liberation schemes (before the age of 55) face losing more than half of their savings in tax penalties. But the court case could see liberation operations declared "invalid" pension schemes, which would in effect ban them from operating.
If Google allows the placement of any adverts on this site which suggest taking cash from your pension BEFORE the age of 55 please let me know and do not click on them. Such adverts will be blocked forthwith.

NOTICE : I understand that the Financial Conduct Authority (0845 606 1234) do not like unqualified people giving financial advice.  I would like to state that none of the following should be considered as advice.  I just like to point people in the direction of useful information. To find an Independent Financial Adviser (IFA) try Details on this page are, to my knowledge, correct at the time of uploading but are supplied as information only and in no way implies advice and the author cannot be held responsible for any actions which you take as a result of what is written. Also, as interest rates and investment charges can change at any time, it is imperative that, before acting on the information below, you check with the organisation concerned. If you find any of the rates are inaccurate, please email me at  Links on this page change rapidly. Apologies if you get a 'Page not found' error. It is often because a web author has moved the page. Please let me know.

A useful site for pensions, benefits and savings

The variety of benefits that may be available to you if you are on a low income is very confusing. The government admits that millions have been left unclaimed.  But there is no 'back pay', so make sure you get what you are due.  It would be a good idea to make an appointment at your local Citizens Advice Bureau to see if you are missing out :

1. Attendance Allowance
Attendance Allowance is extra money you can claim if you’re over 65 and need regular help with your personal care. It is non-
means tested, so you can claim it whatever your income or savings.

2. Pension Credit
Pension Credit tops up low income if you've reached the qualifying age. Lots of people who qualify for it aren’t claiming it, so
it’s worth checking if you’re eligible.

A recent government report on this says : "Even though we have reduced pensioner poverty close to historically low levels, many older people are still not claiming the support they are entitled to."
Pension Credit is a non-taxable benefit based on a person's income. The benefit tops up pensioners' weekly income to 159.35 for single people or 243.25 for couples.
Additional amounts may be payable for people with caring responsibilities, severe disabilities or certain housing costs.
Many recent new pensioners who receive the flat-rate state pension have the benefit wrapped into their regular pension.
Caroline Abrahams, charity director at Age UK, said: "It is extremely worrying that there has been no progress in the benefit take up figures despit

3. Carer's Allowance
Carer’s Allowance is a benefit for carers. If you spend time looking after a partner, relative or friend who has an illness or
disability, you may be able to claim it.

4. Personal Independence Payment and Disability Living Allowance
If you’re under 65 and have ill health or disability, you could be eligible for extra money to help with additional costs, through

5. Working age benefits
If you’re of working age, there are various benefits you may be able to claim if you’re on a low income, or have no money
coming in

6. Bereavement benefits
We all need support after the death of someone close. Bereavement benefits provide extra money to ease the financial strain after
the death of a spouse or civil partner. You can get support even if you’re not on a low income.

7. Help with your Council Tax
Council Tax Support can help you if you’re on a low income and responsible for paying the Council Tax on your home.

8. Help with health costs
There’s a variety of help with health costs available for over-60s. Some of it depends on your income and savings, and some of
it is available to everyone.

9. Help in cold weather
Fuel bills can be a worry in winter, but it’s important for your health that your home stays warm. Find out if you’re eligible for
extra money to help with the cost of heating your home when the weather gets colder. Most fuel suppliers have a fund to help people who are having difficulty keeping warm.

10. Help with housing costs
If you are on a low income and finding it difficult to pay your rent or your mortgage, you may be able to apply for support.

11. Universal Credit
Universal Credit does not currently affect people of pension age. If you are of pension age and your partner is not, you can
currently claim Pension Credit, but the rules are changing in 2018.

12. Benefits in hospital and care homes
If you're going into hospital or a care home, your benefits may be affected. You must tell the appropriate benefit office about
any changes in your circumstances.

13. Help from your local council
Each council has funds available to help people on a low income with emergency costs who have no other way to pay. What’s
on offer varies, so check what’s available in your area. For a list of these Local Welfare Assistance schemes, go to the Child
Poverty Action Group website: You’re not automatically entitled to this help, so contact your local council to check who’s eligible and what’s available – check the telephone directory or go to You won’t usually be able to get cash, but you might get a grant, loan, or vouchers, or certain essential goods, such as beds or fridges.

14. Short-term benefit advances
If you’re waiting to receive your first benefit payment, you could get a short-term advance to tide you over if you are experiencing financial difficulties. If you’re eligible, you’ll usually receive the advance by the next working day after you request it. How much you receive will depend on your circumstances and you’ll normally need to repay it within three months.
To arrange an advance, contact:

Pension Credit (0345 606 0265)
State Pension (0345 606 0265)
Carer’s Allowance (0345 608 4321)
Income Support, Employment and Support Allowance, Jobseeker’s Allowance (0345 608 8545)

Benefit Cap
There may be a limit on the total amount of benefit your household can receive.  If your income goes above this amount, your
Housing Benefit or Universal Credit is reduced until it drops below the limit again.  This is called a benefit cap.


The Spring Budget 2017
Click the link to see the government page

The next budget will be in November 2017.  The Spring Budget is being dropped

Broadly the Spring budget or 2016 ...
Increased the duty of stronger alcohol and cigarettes
Increased car tax
Increased the Gaming tax
Increased the amount of contribution to National Insurance of the self employed. This suffered a rapid u-turn due to the affect it would have had on the support of the government !
Reduced the tax free allowance (MPAA) given to those who cash in part of their private pension.

However, there have been a number of other austerity cuts, including a cap on benefits, a restriction of the Disability Allowance and a reduction in the numbers getting free school meals for the 5 - 7 age group.
The so-called 'Dementia Tax' means that people who have local authority care in their own homes will be charged until their remaining funds become less than 100,000.
The minimum wage fro those over 25 has been raised to 7.50 an hour.  But several well known companies have been found to be paying less (and will now receive back pay)
However, it is still possible for wealthy people to have their pension funds topped up by the taxpayer !

I was pleased to read that BT have launched a much cheaper Basic phone and broadband scheme for people who qualify (on benefits). See HERE

The government admits that people have missed hundreds of millions in benefits.  But there will be no payment after the payment dates have gone.  It is very much up to YOU or your carer to be aware of the benefits to which you are due.  If in doubt, consult the Citizens Advice Bureau. But If you want to try to work out the very complex rules about Carers Allowance, Pension Credit and Guaranteed Pension Credit do have a look at this explanation :

Oct 2016 The government has done a rapid u-turn on the possibility of allowing people to sell their annuities (the so-called second-hand annuity market).  Whilst some people would have welcomed getting some ready cash for poor paying annuities they were forced to buy, the government have realised that it would likely result in pensioners being ripped off for a second time.

The triple lock Pension. Things have changed  since the 2016 Budget. George Osborne is no longer Chancellor and Baroness Altman is no longer chief honcho on pensions,  Since leaving the position she has indicated that the Triple Lock Pension guarantee may not be sustainable in the long term,  Since 2010, the "triple-lock" policy has meant state pensions rise by the inflation rate, average earnings or 2.5% - whichever is highest.
Although Downing Street has reiterated its commitment to the Triple Lock, Baroness Altman pointed out that in a low, nil or negative inflation rate, promising a 2.5% increase will cost billions, which might not be justifiable.  However, for now (Dec 16) it is still alive.   An excellent site that covers a wide range of benefits.  Thanks Claire

Article by Hargreaves Lansdowne. What happens to your pension when you die

Age UK's CareHome Checklist  (video)

AgeUK's Befriending Scheme (video)

Christmas 2015
.  Changes afoot in the Attendance Allowance 
Ministers plan to give local councils responsibility for a 5bn benefit paid to older people who need help with daily living in one of the biggest shifts of resources within the welfare state for 25 years.  The move, expected to be signaled by Christmas, when councils in England get news of their grant allocation for next year, has also raised fears that the benefit – called attendance allowance (AA) – could be restricted or capped.
At present, AA is paid to 1.5 million people aged 65 or over in the UK, regardless of their personal means. It is seen as a vital support for hundreds of thousands who live independently but might otherwise need to go into residential care.
The benefit is paid at two rates, a basic 55.10 a week or a higher 82.30 for people who need help day and night, and there are no restrictions on how it may be spent.

The Autumn (2015) Statement.  There was quite a lot in this, mostly starting from April 2016.
As most people will have heard the Chancellor suddenly dropped his plans to cut working tax credits. But other ideas were quite significant.
In future banks will pay up to 1000 interest on savings accounts without deducting tax. This does not affect ISAs, the annual amount of which remains the same. The personal tax allowance will rise to 11,000. There will be a significant increase in Stamp Duty on almost all second home purchases, including Buy to Let.  The State Pension rises to 119.30 a week but new pensioners will receive 155.65, creating two levels of pensioner. A very generous Help to Buy scheme will be introduced for the Greater London area. With a 5% deposit buyers will be able to borrow 40% of the cost of a house, up to 600,000, free of interest.

Not strictly Pensions but a clarification of 'Rights to Buy' for Council tenants. A big article but interesting

Think you can only get cash grants for energy saving measures if you are on benefits ?  The government's commitment to make it a green and pleasant land means that you can get free loft and wall insulation; and a substantial grant towards the replacement of an older, inefficient boiler. Check with the Energy Savings Trust on 0300 123 1234. Council house and Housing Association tenants have their own arrangements.  Many people are missing the benefits to which they are due.  See also

Read the Mature Times page on this issue :

October 2015  A useful  Telegraph article on the flat rate pension from 2016...  Although the new flat rate pension will especially benefit people who have not been able to accumulate sufficient contributions during their working lives... e.g. people who have cared for elderly parents, those who chose to stay home with their kids and the self employed, it points out that, because the SERPS (additional pension) element will be phased out, people who have not yet retired could lose up to 1,400 per annum in pension payments.   This AgeUk site might be of interest to people who wish to stay in their own home to the end of their days but are finding it increasingly difficult to maintain it (and afford it).  As it means gifting the house to AgeUK in exchange for considerable benefits it may not appeal to someone who hopes to leave the house to their relatives.  But I can see that, in some circumstances, it might be an answer.

September 2015: Pension top-up. Out of the blue the government has announced that retired people can top up their State Pension by handing over a lump sum. Whilst this may seem a good idea for people who expect to live to a ripe old age and have not had the opportunity to qualify for a good pension, further investigation shows that it is not all plain sailing.  In order to boost your pension by 25 a week a 65 year old would have to give the Treasury no less than 22,250. Granted the scheme is inflation proofed (what's inflation, Daddy?) and half would pass to a legal partner on your demise, but you had better live to 84 to make this worthwhile.  Also, you may lose some benefits and tax credits because of your bigger pension. As the Pension Minister said 'The scheme may hot suit everybody".
I am NOT an adviser (or a mere 65) but I think I would prefer to take the Deferred Pension option.  For every year you defer your full State pension after retiring age you add 635 to your annual pension. OK, a 25 a week top up is 1200 p.a. but  two years deferment adds 1270 p.a. and you still have your cash earning interest. What interest ? I hear you say. Well, on 22,250 even a measly 1.25% National Savings ISA pays 278 (another fiver a week to your pension) and you can probably find better than that if you look around.  Bit of a no brainer, really.

I feel sure this article from Age Action Alliance is very right for many older people

July 2015 The health secretary, Jeremy Hunt, faces a growing backlash after quietly (he got that wrong) shelving a key Tory manifesto commitment to cap care costs for the elderly, as experts claimed that the policy fiasco has cost taxpayers up to 100m.(there was wide publicity about the proposal before the election - which, no doubt, swung it in their favour. But nothing could have been more telling than the blistering article in the Mail (21st July 2015) headed BETRAYED !

For and excellent explanation of the new pension fund arrangements see my page at PENSIONS.HTM. This does NOT cover STATE pensions..
For people coming up to retirement the official site to find out what your state pension is likely to be is at

I just had my statement of next year's State Pension with a booklet attempting to explain the (still) complex structure of other pension benefits. A good read but, as you probably have one, I will not attempt to clarify it here. In general benefits rise by 2.5%.  Make sure you are getting what you are due at

The July 2015 budget was concerned largely with taxes and National Insurance for employers and was also aimed at tax avoidance by people who live abroad. Little in this budget will affect readers of these pages unless they have their younger family members living with them. From 2016 these are likely to be affected by reductions in tax credits, especially those of working age with young children.  This has been the subject of much media coverage and undoubtedly will affect those families which have come to depend upon these tax credits.

Useful numbers and links.Also at

For people born after 1935 they maybe able to transfer part of their (spare) tax allowance from one legal partner to the other.  If you think you might qualify you should REGISTER via this site>>> :

November 2014  A firm that will carry out capability assessments on benefit claimants for the government says it could take 18 months to reduce the existing backlog.
US-based Maximums Health Services will replace the current firm Atos in March 2015 on a three-year 500m contract.There are currently more than 600,000
claimants waiting to be assessed; some have been on the list for months.
The president of Maximus, Leslie Wolfe, told the BBC: "Improvements won't happen overnight".  She said: "It'll take some time to hire the health care professionals.
The expectation is that in between 12 and 18 months, we should be able to catch up on the waiting times." Atos, which has been doing capability assessments for people
claiming Employment and Support Allowance since 2008, is quitting its contract early after reaching an agreement with the Department for Work and Pensions.

This gives notice to everyone who is 'faking it', that they are OK for quite a while !

State Pensions Policy update Oct 2014
With people, on average, living longer it is inevitable that the government will gradually raise the age when we receive the State Pension (SPA) so that the taxpayer can afford the enormous cost. - a rise in the SPA by one year would currently save around 13 billion per annum.  Currently the SPA for men is 65 with women's SPA rising to equal that by 2018, Both ages rise to 66 by 2020 and to 67 between 2026 and 2028, so this will affect many people of current working age. The government has said it will review the situation every five year but that it will be kept in line with expected age levels so that they could expect to receive the pension for the last third of their lives. The next review will take place after the 2015 election. A new, higher, flat rate pension is due to commence (for new state pensioners) in 2016..From October 2015 current pensioners and those in employment will be encouraged to top up their pension by buying a new class of Class 1 NI contributions.  Alongside this is the new system of auto enrollment being offered by employers - and the greater freedom being given to people who have a 'pension pot' to do whatever they want with it. Many will splurge it or pay off debts and mortgages. But watch out! The tax man may have designs on it.

The Warm Home Discount Scheme -  An extra 200,000 pensioners will get this help with their energy bills this winter, the government has announced. It is paid for by the energy companies and is now worth 140 per household. The scheme is being expanded, to include everyone who receives Pension Credit Guarantee.Pensioner groups welcomed the move, but warned that thousands of elderly people who do not claim Pension Credit will miss out on the payments. Hundreds of thousands of people on low incomes are also eligible to claim the discount, which in most cases is applied automatically by energy suppliers. However many people do not get the discount, unless they ask for it. Such households are being advised to contact their energy company directly, as eligibility criteria vary between different suppliers. So ASK !

November id Free Will Month :  Make a will or get your updated for a donation to a number of charities such as Red Cross, Save the Children...Click the link to find participating solicitors

January 2014 The Chancellor is warning of further cuts in 2014 in order to balance the budget, which is still based on continual borrowing. Some of the cuts will be from the welfare budget, so it sounds like more problems for people on benefit.

Welfare changes for disabled delayed

25/7/14 Another "sorry, the money's all gone!“ There is a state of dismay as Green Deal cash incentive closes. The tiny 120 million  allocated to this scheme, which was intended to encourage more people to adapt houses to save energy, has been claimed in just seven weeks. The Green Deal Home Improvement Fund was closed due to a surge of applications. In an unpredictable (is someone pulling my leg?) turn of events, the government has announced that the full 120 million allocated for the Green Deal Home Improvement Fund has been spent and the scheme is now closed. At first the government said the amount that could be claimed was being reduced from up to 7,600 to 5,600, and flue gas heat recovery systems was removed from the list of eligible technologies, to ensure the remaining funds lasted longer.Now, the government is claiming that pending applications and payments about to be made mean that the 120 million mark has been reached. You may still be entitled to other grants to help you make your home more energy efficient - we've put together a guide to help you find out about other energy grants.Potential Despite being told that applications would be accepted up until 23:59 on Thursday 24 July, many potential applicants were disappointed to find that the website was unavailable several hours before this. announcement. Some people and companies are in the process of arranging improvements - tough!

June 2014 The  unpopular tax on spare council house bedrooms (intended to encourage people to move to smaller accommodation to relieve the shortage of houses for people with larger families) seems to be in trouble with many people finding it difficult to pay and many appeals pending for disabled people who need the room. It is difficult to imagine that this policy will survive as we go towards the next election.

January 2014  Oh dear ....The anticipated shake up of the benefits systems faces further hurdles after rifts between two government departments at the centre of the scheme. Documents leaked to the Guardian showing mounting friction between the Department for Work and Pensions (DWP) and the Cabinet Office has put “high-level” risks to the project’s success. The boffins are leaving the sinking ship.

The government said the process of reassessing people was taking longer than planned. The government's welfare changes for disabled people in England, Scotland and Wales have been delayed. People will move from Disability Living Allowance to the Personal Independence Payment next week only in certain areas instead of the whole of Great Britain. Work and pensions minister Mike Penning said reassessing people was "taking longer than expected", but introducing the scheme "gradually" was beneficial.
Or to put it another way : Labour's Rachel Reeves said it showed there was "chaos" in the department
Or to put even another way it will be a
'Controlled approach'. Claimants will remain on Disability Living Allowance (DLA) for the time being except those in Wales, the East and West Midlands and East Anglia, who will transfer to Personal Independence Payment (PIP) from Monday if their condition changes. The government said the need for the alteration "only came to light at the beginning of October as a result of our ongoing analysis of the introduction of PIP" and this would ensure it could be handled "in a more gradual, controlled and manageable way".In a written ministerial statement, Mr Penning said: "Introducing natural reassessment gradually enables us to test the claimant reassessment journey (and give us time to recover from the chaos ?)

NEW: The State Pension Summary February 2013 (click this line) One of the important things to note is that the Single Tier Pension of 144 will now start in April 2016.  So, men born on 11th April 1951 (and after) and women born on 6th April  1955 (and after) will come under the new system. They will need 35 years of contributions to get the full amount. This is a rise from the previous requirement of 30 years.

Q: If it looks likely that I will not manage 35 contribution years by the time I finish work, is it worth me buying the additional years ?  
If you are in reasonable health it is generally beneficial to pay the additional contributions as the extra pension will far exceed what you pay.

The State Pension Due to the rapid rise in life expectancy the government is bringing forward plans to raise the age when you can receive the pension and there are plans to link this age to life expectancy, which may see the age rise eventually to 70 or even more. But my usual readers need not worry too much as the changes will be gradual, the rise to 66 starting in 2019.  Even now, when you reach State Pension age you have three choices. 1. Take it and stop working. 2.  Take it and continue working. 3. Defer taking the pension.  If you take option 2 yon do not have to pay National Insurance. If you defer taking your pension, (Option 3) when you do take it you can receive an extra amount or take a taxable lump sum equivalent to the amount you deferred (plus interest).

Universal Credit By January 2016 the proposal to replace a plethora of benefits with a Universal Credit is still in the doldrums The plan to do this gradually appears to be stuck with just three boroughs : Sutton, Croydon and Southwark.  One wonders whether this scheme will ever take off.

At the same time, people who live in council houses with a spare bedroom are to immediately be billed for that privilege. Some disabled people may be exempt. Are there enough alternative houses ?
At the same time
there is to be a cap on benefits such as Housing Benefit, meaning that people in expensive (publicly funded) houses may have to move to cheaper property (but who will empty the Knightsbridge bins ?).
At the same time
the issuing of special loans to people in difficulty is now to be the responsibility of the Local Authority. Oh! what a tangled web we weave.

(Extracted from "Which" magazine) : The government is planning a "fully-funded solution" to the cost of social care. The plan is that the the local authority would cover the cost of care for one person to the extent of 72,000 (in total).  This does not include 'hotel charges', (accommodation and food) which must be a large proportion of what care homes currently charge).  These accommodation charges will still have to be paid, up to a maximum of 11.500 per annum. But the cost of care itself is problematical, as some care will cost more that the local authority is prepared to pay over and above the 72000 cap.  So, in addition to the continuing accommodation costs, the person (or their relatives) may have to fund additional care costs.  The threshold (of savings) a person can have for any care-home means-tested support rises from 23,250 to 118,000. And there is a promise that no-one should have to sell their home in their lifetime to pay for their care. It all sounds rather complicated and difficult to administer.

The funding for the proposals will be found by freezing the IHT (Inheritance tax) at the present rate of 325,000 (650,000 per couple) for three years from 2015. Also those over 65 have had their higher tax allowance frozen at 10,500 while those under 65 have their basic tax allowance increased by 1335 to 9440. In future there will be no age related tax allowance.  Not a lot of grey power there!  But See the tax allowances at

The problem with making provision for care is that few people can know if they will require it and, if they do, for how long. With uncertain risks, whether you drive a car or are on holiday abroad, the usual principle is to 'pool' the risk.  I believe it is called insurance.  So, you pay in regularly and just hope you won't need it.  If you never use it your funds go to pay for those unfortunates who do. Surely, this is the case with care. Or am I missing something?


Household Flood Insurance. From 2015 a new agreement between the Insurance Industry and the government may make Flood Insurance more possible and more affordable for people in houses at risk of flooding. The additional funding is to be funded by a 10.50 levy taken from every home insurance policy. The industry says this will not drive up premiums. (Though I can't see how that can be !) But, if you have been refused insurance before it might be worth trying again.. Mind you, after the disastrous flooding of Northern areas in December 2015 one wonders whether this scheme will get off the ground.

A VERY useful site showing the benefits available to disabled people and their carers can be found at

The Financial Services Authority has imposed a new rule on financial advisers (from 31/12/2012) that they may not be paid commission by financial organisations for policies and funds sold. They must spell out to the client what fee they will charge and how it will be charged.  Surprisingly (or not?) this does not apply to Life cover, illness and private medical insurance. See more on this on my Savings page

n.b. You can see a Life Insurance Calculator at  Also the Yours magazine will search for the best annuity if you phone 0800 915 4711 or visit .  The service is free.

Making a will  It was a surprise to me that when someone marries (in England and Wales) their will becomes void. With many older people remarrying it is important that they remake their will after they marry. Otherwise, children who were named in the earlier will may find that they have been excluded by the fact that, without a will all property will go to the new spouse, who can do what they wish with it. Indeed, if the new partner remarries, then dies, the property may then belong to someone who has no relationship to the children.

The government won the second reading of the white paper on benefits which would reduce the benefits of working age people from 'inflation rate' rises to 1% from April and for the next three years. This could affect single parents to the tune of 5 a week or (according to their mathematics) to 250 over the three years.
The argument is that public sector pay has been frozen at 1%.  So obviously they believe that 1% of a salary of 45,000 is similar to1% of benefits averaging 100 a week.
At the same time the government has revealed the changes to the basic pension, which it proposes as a Universal 144 per week (from 2017). They are also proposing to kill the 'contracting out' arrangements, by which many people pay less in National Insurance because they have other pension arrangements. Although they may still be able to get higher pensions this move will cost around 270 per annum more if their salary is around 25,000.  For someone on 40,000 this will cost them nearly 500 more

Winter Fuel Payment  Winter Fuel Payment is an annual payment to help people older people (or some on benefits) with the costs of keeping warm this winter. Please read the complicated criteria.

The European Court decision that insurance costs should not vary as to whether you are male or female became law in the UK on the 21st December 2012.  From that date insurers must charge the same regardless of sex.  This will affect CAR and LIFE INSURANCE premiums and also the amounts that are paid as ANNUITIES. As a general rule female drivers will have to pay more and those applying for annuities will get less. But men purchasing an annuity after that date are likely to get LESS.  One should bear in mind that an annuity is for life and advice at this time is essential if you are not to kick yourself for the rest of your days!  This change also affects Income Drawdown, which, in any case, has suffered from new government restrictions since April 2011.

This matter is becoming urgent for men who may be thinking of converting their pension pot into an annuity.  It takes several weeks to set up an annuity. Although annuity rates vary, and may, later, go up as well as down, it is certain that the EU directive will REDUCE men's annuity rates immediately after the 21st December 2015. Each case is considered individually and takes into account age, health and even postcode (as people in some areas live longer than others) For an annuity it may be better to be in poor health and living in one of the 'deprived' areas where deaths per 100,000 of the population are three times the national average. For an annuity quote see 

I am sure you know but: You can get free NHS prescriptions if, at the time the prescription is dispensed, you are:  

Watch out when completing benefit forms.  From this month you can be fined 50 if you complete a form and, as a result, get more than you are entitled to. This is NOT for cases of fraud (which get much higher penalties).  No, this is just for careless mistakes or misunderstandings !  But DWP staff will not be fined if they make an error resulting in you receiving the incorrect amount !

September 2012 Elderly people and their relatives may have wrongly paid for care and, until 30th September 2012, were able to claim back cash. Many older people in England and their families paid for care (whether NHS or private) when the NHS should’ve paid. This money is now being repaid. To qualify, care must've been primarily for mental or physical health issues, such as severe mobility and incontinence problems. But the deadline is now past. The Money Savings Expert had a Reclaim Care Costs guide.

September 2012 This autumn, Londoners aged 60 will once again be able to benefit from free travel on Transport for London's (TfL's) services. Apparently this was lost for a while but is being reinstated and applications can be made this month or next. Recently you had to have been 60 by the 6th April 2010 (unless you had some other disability, including severe deafness).

History : In July 2012 The Health Secretary Andrew Lansley unveiled a white paper that proposed that enables elderly citizens could cap their social care contributions. However, the government has not decided upon where the life time contribution cap would be set at for this voluntary social insurance scheme. Last year, the Dilnot review recommended setting a limit between 25,000 and 50,000 to stop pensioners being forced to sell their homes to cover the costs. But the government are looking at wider options and according to the Department of Health – the cap could be set at 75,000 or even at 100,000. But, irrespective of that, no elderly citizen would have to sell their house to pay for their care, the Health Secretary has confirmed. The state will loan the money to the elderly for their social care so that they do not have to sell their homes. However, on their demise, the state will collect the proceeds from the sale of their homes. Dot Gibson, general secretary of the National Pensioners Convention, said: "Whichever way you look at it, it's a death tax." According to ministers, the central government will work out the necessary arrangements with local authorities to effectively implement this. However, the overall reforms have not been settled.
While most of welcomed the government’s commitment to Dilnot recommendations, they are worried that the Treasury is “strangling” the reform.Michelle Mitchell, charity director general of Age UK, said: "The government's commitment to the Dilnot approach in principle is an important milestone, but without a clear plan for how they intend to deliver on that commitment there are no guarantees the Dilnot recommendations will be put into action soon, or possibly even at all." Shadow health secretary Andy Burnham said: "The truth is that the Government is ducking one of the biggest issues of our time. They are adopting a pick-and-mix approach to the Dilnot package which was conceived as a coherent and complementary whole."

The complex (and ever moving) story of state pensions (and annuities) is covered in articles in the Daily Mail at It is important to read this if you think that you will be affected - and most people will.  

AgeUK have done a cartoon type video offering their help with benefits.  Click!

AgeUK also have a series of videos by a financial advisor dealing with debt, annuities and retirement.  See

They have helped thousands of people gain extra benefits. You can download their booklet called " More Money in your Pocket" by clicking HERE.  You will need a PDF reader on your computer to read it. The one I prefer is called Foxit

Claiming benefits. In a case taken up by AgeUk on behalf of an 80 year old man looking after his 78 year old wife, they managed to get him an increase of 32.93 a week PLUS Council Tax (1300 per annum) and backdated arrears of 565.If YOU think that you may not be getting benefits to which you are entitled, do not hesitate to get in touch with AgeUK 0800 169 29 39 (free phone)

I was surprised to find that I had not got a link to one of the principal organisations which help Carers.  

Housing Minister Grant Shapps has announced more cash will be given to enable older people remain in their own homes.  See the Mabels article at  This includes cash for home improvements, disabled facility grants as well as advice via  

The government is sustaining some embarrassing defeats in the Lords on their Benefit Cap proposals.  The Lords threw out the proposal to include child benefit in the cap of 26,000

At the same time the government is having great difficulty with the efforts to reform the disability benefit system (in order to reduce the numbers and cost). They have huge opposition from cross party members, in the Lords and from disability groups and are repeatedly being defeated and having to amend the proposals. Tough (and embarrassing) for the government.  But that is what democracy is all about

Shapps is also suggesting to local authorities a scheme whereby older people in large houses would be encouraged to move to smaller houses (downsize).  The local authority would then take over (maintain) the house and rent it to a family. Surplus rent would then be paid to the original owner.  Sounds good in principle but one does wonder whether this will be taken up by the local authorities or the individuals.  See  Mail article HERE:

The AgeUK magazine suggests some pointers if you are considering a move to a care home :

Ageuk have a fleet of 26 'Handyvans' around the country. They provide a service to people over 60 whose savings do not exceed 20,000. They are available to do the small jobs around the house, such as fixing smoke alarms, curtain rails, safety handles, light bulbs etc.  If you wish to find out if there is one in your area  and find out if you're eligible to receive the service - just call 0845 026 1055 or email For more detail see

Disabled Living Allowances there are some useful explanatory  (government) films about these with sound, subtitles and BSL  

The LaterLife site has produced a page on pensions at  Follow he links therein.

The Mail suggests the following links for financial help :  As a rule Org Uk addresses are 'not for profit'

n.b  Annuity rules changed in April 2011, allowing more flexibility. Under the new rules, someone retiring is not be forced to buy an annuity by age 75 but are able to invest their pension pot under the new "capped drawdown" rules. They can still take out 25% as a tax free sum (as before). But for the better off (well, this is a 'blue' government), they can draw any amount from their fund providing they can prove a secure (pension) income of not less than 20,000 p.a. (although they will have to pay tax (at 55%) on amounts withdrawn). Cash taken into account towards the 20,000 must be from State and Occupational Pensions plus any annuity income. The big difference is that when someone dies with money left in their pension, this can be used to provide an income for dependants or taken as a lump sum.  Previously, on death,  all annuity cash has been taken by the company providing the annuity.

From the Financial Times : The new rules allow pensioners, or those who die unexpectedly early and still have money in their pension fund, to leave some of the unused cash to their families. At present, anyone who keeps the money in their pension instead of using it to buy an annuity is subject to tax on their pension fund when they die. This 82 per cent tax (!) includes 70 per cent of  “unauthorised payment charges” and a further 12 per cent in the form of inheritance tax (IHT) on the remainder. Under the new rules, these assets are only subject to a 55 per cent tax, called a “recovery charge”, when passed on after death. There will be no liability to IHT

SIPPs. SIPPs. One of the most tax efficient ways for under 75s to 'put something away' is via a SIPP (Self Invested Personal Pension). You choose where to invest your contributions from thousands of funds, shares, ETFs, investment trusts, bonds, gilts and cash. Contributions attract up to 50% tax relief – the higher your rate of tax, the higher the tax relief you receive. So someone who pays 16,000 into a SIPP and is on the basic 20% tax rate actually has 20,000 invested in their pension, as the taxman automatically adds 4,000. Higher and top rate taxpayers can claim back even more through their tax return –up to another 4,000 (extra 20%) for higher rate taxpayers and up to 6,000 (extra 30%) for top rate taxpayers. This means 20,000 in a pension could cost as little as 10,000! Most people can contribute to their SIPP up to as much as they earn - with an effective cap of 50,000 per tax year – and receive tax relief. Even non earners can pay up to 2,880, to which the taxman adds 720, to make a total contribution of 3,600. Hargreaves Lansdown is the UK’s largest SIPP provider and has been voted ‘Best SIPP provider’ by 'What Investment' readers for 6 years in a row. See the SIPP section of the Hargreaves Lansdown website for more information via

An article Entitled "Retirement Income Options" : See also  It suggests that the vast majority of people converting their pension fund into a lifetime income (an annuity) tend to just request it from their insurer.  They say this can be MUCH less (for life) than they can get from shopping around. But there are many alternatives to a standard annuity.  For instance, someone who is a smoker or who has other health issues may get considerably more.   Obviously the age of the person at commencement is an issue.  But also

Naturally any annuity that increases the financial commitment of the provider will reduce the amount received each year.  

So, as you can see, there is need for impartial advice when taking this important decision.
Better Retirement Group
Key retirement Solutions
Retirement Angels
Money Advice Service (Government booklet "Your Pension - It's Time to Choose")

The Gifted Housing Service. See Basically you gift your house to  the AgeUK charity in return for receiving :

A useful question and answer site on this very complex (and in many aspects still undecided) issue is at Many of the answers still say that we will have to wait until the Green Paper on pensions is issued - and when it becomes law.

A good site that deals with GRANTS of various kinds is at Check for the latest Benefits, Pensions and Jobs at Department of Works and Pensions page.

**IVPPs  Hargreaves Lansdown sent me information about Immediate Vesting Personal Pensions (IVPP) where people under 75 can arrange an annual pension payment at a far higher rate than is now available from savings. There is a limit each year that you can put away and the money is lost on death but, as an example a man of 74 would receive as much as 211.21 a year for the outlay of  less than 2000, which is over 11%. Younger people and women would get less but even at age 50 a woman would get over 6% for the rest of their lives.  The pension is taxable and, once committed cannot be withdrawn. But, if you feel you will beat the odds and expect a long life, this is where an IVPP would pay off handsomely !

Married Couple's Allowance  Click on You should be getting this tax allowance where at least one of a marriage or civil partnership was born before April 6th 1935.  For marriages before December 5th 2005 the allowance goes to the husband. (For marriages on or after that date the allowance goes to person with the higher income. The maximum allowance (2009 - 2010 is 6,965 but this is reduced if the person claiming it is has an income in excess of 22,900. BUT the actual tax saving is only 10% of the allowance i.e. 696.50 (less for high earners). If you do not pay tax and your spouse does then you can transfer any unused allowance. If you think you are not getting this allowance you can write or phone your tax office. Claims can go back as far as the 2004/5 tax year

Did you know that under section 187 of the Social Security Administration Act 1992: it an offence for banks to take bank charges out of the accounts of people who are on social security benefits. So, if your bank has taken charges out of your Benefits eg: if you are in receipt (and totally dependent on) of any of the following benefits.

There is a useful site at (free tax advice to older people by volunteers)Tel. 0845 601 3321 email They may even make home visits for disabled people

The current tax allowances can be seen at  (IHT, Income etc)

For older people a good site is the AgeUK site  or phone their SeniorLine on 0808 169 6565 for free advice on financial matters.

OTHER BENEFITS (extracted from the Mail on Sunday 1st August 2010)

Housing Benefit. Two types : 1) The GUARANTEE CREDIT that tops up weekly income of pensioners to a minimum of 132.60 or 202.40 for couples.  Then 2) There is the SAVINGS CREDIT, which is paid to over 65s and rewards those who have modest savings but live on a low income. See Free phone 0800 991234. Anyone who gets the guaranteed element of pension credit should automatically get COUNCIL TAX BENEFIT.  Other pensioners with less than 16,000 in savings may also be eligible.  Get a claim form from your local council. Council Tax Benefit for over 65s in need of of assistance with personal care is NOT means tested


EQUITY RELEASE You can get a free booklet on this subject. The Mature Times guide, produced in association with In Retirement Services, is the first step to finding out. Call freephone 0800 082 65 70 quoting MATN080507.
Equity Release is where you release part of the value of your house but still remain in it. The money is then used for living or invested to produce income. No repayments have to be made until the person dies, when all the cash and rolled up interest is taken from the value of the house.  This would not be done whilst the spouse still lives in the house. The cumulative interest can mount up considerably over a period of years but the total sum will not exceed the full value of the house (so beneficiaries of the will will not be left with a debt)  It may be particularly suitable for people without dependents and who do not have children to which they wish to will the property or for single people who wish to reduce their IHT liability (see above). People on means tested benefits should be aware that these would almost certainly be affected.  Two alternatives to releasing equity are downsizing to a cheaper property and/or taking in a lodger.
Financial Mail also has a free guide called Home Truth  (Tel 0800 068 6065) .  The government's Financial Services Authority, now the Financial Conduct Authority ( also have one called Raising Money from Your Home. And IFA (Independent Financial Advisers) can put you in touch with members on 0800 085 3250 or   Norwich Union (Aviva) has launched an informative film (available in VHS or DVD format) available to consumers and intermediaries alike. To request a copy consumers can call 0800 404 7137.

Age Partnership is the UK's leading over-the-phone specialist in equity release.
Some equity release plans impose an early-repayment charge, so you could incur charges should you wish to pay them off before your death. However, like a standard mortgage, these will vary from plan to plan, reinforcing the benefit of Age Partnership’s specialist equity release advice before you proceed

Compare the entire Equity Release market at Key Retirement Solutions, the UK Equity Release specialists. They do a booklet about remortgaging to release money called Home Truths. Phone 0800 531 6027. But they ARE in the business and you may be also offered a 'no obligation consultation'. A basic consultation is free but if you require an in depth one they will charge and they will charge a percentage of any loan raised.

Check for Benefits, Pensions and Jobs at Department of Works and Pensions page.  

 A useful article  on you liability to pay for care is at

For other home care options see

Pensions :

An Independent Financial Adviser specialising in pension advice can be found at

State Pensions The many benefits available are very complicated to describe.  The best document for this is at  You will need to download a PDF file reader to read this. The document deals with most benefits such as Pension Credits, Council Tax Benefit, Carers allowances and even Child Benefit and Tax Credits.

Anyone deferring drawing their state pension can get increases equivalent to 10.4% for every year that they wait, OR you can get a lump sum instead.  At current estimates this could be as much as 30,000 for five years' delay.  But be careful. Two out of every five people don't make it to 70 ! And, in some poor areas of the country this is as much as three out of every five. For longevity live in Cornwall !  

SOME PENSIONERS ARE MISSING OUT  You MAY be able to pay additional contributions to improve your basic pension but the rules are complex and you should study the above page and subsequent pages, especially "What if I have a gap in my qualifying record.?" In some circumstances payment can be accepted for years as far back as 1975. Do you think that your National Insurance contribution record might be incorrect ? Look at this site for an explanation as to what might have happened  In fact, because people may now have paid into multiple pension schemes it is easy to lose track of them. The Pensions Service 0845 6002 537 offers a free pension tracing service. They have a database of over 200,000 pension schemes.

People who did not manage to pay sufficient National Insurance contributions to get a full state pension may be able to top up their contributions for the period 1996 to 2002. Unfortunately this does not apply to women who elected to pay the married women's reduced rate for the whole of any tax year in question.  But for someone who can increase their contributions to over the 25% necessary for a state pension, they are likely to benefit quite substantially. The rule mainly applies to women born after 5th April 1938 who reached state pension age after 5th April 1998. Amounts payable would be backdated.

Please check these figures : The government reports that there is 2.5 billion in pension aid which pensioners are not taking up. The pension credit scheme aims to ensure that no pensioner over 60 receives less than 130 a week (6,760 per annum) and that no couple receives less than 198.45 per week (10,319.40 per annum) Over 65s with modest additional pensions can claim even more, even if a couple is already receiving over 13,800 per annum. Certain household payments, such as mortgage interest, may increase the amount you can get. Are you SURE you are getting your share ?  Because apparently one third of those eligible are not claiming. For more information call the free phone line at Age Concern (now called AgeUK) on 0800 169 65 65 or the government Pension Credit helpline on 0800 99 1234 The Textphone number for deaf people is 0800 169 0133

The rules on Pension Credits are a little complex.  e.g. the description of what constitutes a partner.  The partner does not necessarily have to be over 60.  In addition benefits may be payable to people who have additional pensions such as annuities. One can get an estimate of how much you could claim (and get an application form) from the tax office or Citizens Advice Bureau. But don't delay. Back pay can be claimed but only up to a year before a claim.

Many disabled and elderly people are not claiming State Benefits which are theirs of right. Virtually all those in care homes will qualify for Attendance Allowance. Those needing help at home overnight, too, get a higher rate (and this is NOT means tested). In England, people with recognised medical need also qualify for a weekly payment from the NHS towards care costs.  It is in three bands (see the link below). The level of payment is very different in Wales, Northern Ireland and Scotland.  So much for a United Kingdom !  See a leaflet HERE for more details

COUNCIL TAX BENEFIT  In addition, between 2.27m and 2.95m people who are entitled to don't claim the Council Tax benefit, are missing out on combined savings worth between 1.3 billion and 1.8 billion a year. You may qualify for council tax benefit if you pay council tax and your household income and savings and investments are 16,000 or below. The amount your bills will be reduced by depends on circumstances such as your age, the ages and size of your family. If you have income or savings of over 16,000 you can't normally get council tax benefit, unless you're aged 60 or over and getting the 'guarantee credit' element of the pension credit.

The total of unclaimed benefits (excluding care allowances etc) is therefore around 4 billion !

******** is a charity which offers tax help to older people with a NET household income of under 17000 Phone : 01308 488066

From 2012 everyone in employment will have the equivalent of 7% of their salary saved into a pension scheme, 4% of which will come from the employee. A problem for the government is whether this will be a disincentive to work and save.  As is the case now, people who saved hard for their retirement are penalised when it comes to means-tested benefits (from additional pensions to household expenses such as central heating installation and in many other ways). It has been the same since the introduction of the 'Welfare State' : if you waste your money during your life someone else will hopefully keep you in old age. I realise, however, that there are many people who have NEVER been in a position to save, even living frugally. This problem will never be resolved. One cannot, in a modern society, let people starve because they were not wise savers during their lives, as Malthus suggested. Our local workhouse still exists, but has been turned into modern flats !

See more on pensions, including SIPPS lower down

The endowment policy mis-selling scandal. Recently some very large organisations have had their knuckles rapped because of the 'shambolic' way in which they have been dealing with people who believe they were mis-sold endowment policies. In April 2011 the high court ruled that the banks must take responsibility for this mis-selling. They are bound to appeal as the cost runs into billions.  But it does seem likely that the majority of cases will be in favour of the customer 

If you think you were mis-sold an endowment policy e.g. one that was supposed to cover your mortgage, you can ask an Endowment Investigation Company to take up your case for you.  But they will charge a percentage of what you are awarded. This can vary between 10% and 50%!  Or you can follow the procedure suggested in Financial Mail.

The Financial Ombudsman  If you feel that you have exhausted all possibilities when dealing with a financial organisation you can consider complaining to the Financial Ombudsman at


Pension books are being phased out and people receiving state benefits will have money paid either into a bank or building society account or, if they cannot be persuaded to open one, will receive a Post Office Card account. Money will be paid out by the counter clerk 'swiping' the card.

Remortgaging  Impartial booklet from
The cheapest way to borrow money - for house owners - is still to re-mortgage. Vast sums are being borrowed in this way (mortgages represent the vast majority of the trillions that we owe in the UK). A number of Building Societies will lend money to Owner Occupiers at reasonable rates, keeping the same rate for a year or so. But see the Sunday Telegraph or Mail for the fees charged and whether there is a tie-in period ('redemption penalty') after this initial low rate. Those which don't tie in may still charge a low rate. But compare this with other forms of longer term borrowing and you can see the advantage of remortgaging.  With deals like Intelligent Finance  Natwest or (RBS) you can reduce mortgage payments even further by linking your current account to the mortgage, so you only pay interest on the balance. It is a question of whether you are prepared to put the house up as collateral or are keen to keep the house value intact.  There may be an arrangement fee, which would make it uneconomic if you are borrowing a smaller amount.  It is difficult to imagine why ANY house owner would borrow large sums on credit card and store cards at their high rates.

Independent Financial Advice?  It may be independent but it isn't free.  Advisers have to earn a living and they will want you to buy something that pays them a commission. Purchasing Unit Trusts, for instance, involves initial charges and it is from these that the adviser gets his cut. Try   Other sites well worth a look are  and Free investment guides are also obtainable from  


 GARS ? Another guarantee to mull over.  During the 70's and 80's, when insurance companies were rich and optimistic (and people were not stubbornly living to 84 and 87) hundreds of  thousands of policies were sold on the basis of a GAR or Guarantee Annuity Rate with a minimum lifetime income promised. Although at least one insurance company tried to wriggle out of its contract (and was slapped down in the High Court) other companies are only giving policyholders a limited period in which to claim their GAR, resulting in a substantial loss of income for life if they fail to reply.

Life Insurance (generally for younger people). This is  another area where it pays to shop around. A broker, such as Cavendish Online may find you a better deal than going to one particular company. In fact it can save you thousands over a period of 20 years.

Cashing Endowments
If you are thinking of cashing in an endowment policy and it is worth over 2,000 you will find that you get a better deal by selling it as a 'going concern'.

AAP (link to is the largest endowment policy buyer & seller in the UK. Find out all you need to know about endowment surrender, selling endowments & cashing in policies with

Also have a look at (0845 20 20 200).  But not all policies are easily sold.  You need to shop around and it may be worth considering 'freezing' the policy rather than just cashing it in, which almost inevitably results in a poor deal.

If you have a Pensions Pot

Article extracted from the Guardian newspaper explaining the options : October 2014

They also have an explanatory booklet

Finding a map to guide you through the new pensions maze can be challenging

The chancellor's new pension fund freedoms, allowing savers to treat their pension pot as a bank account from April 2015 are revolutionary. But what does this mean? What can people do with their new freedoms? How do they find their way through the ever-expanding pensions maze?

To help spell out the options, we'll take the case of someone with 100,000 in their pension pot, aged 55-plus. Under the chancellor's new rules this person is now allowed to withdraw the first 25% tax-free - and is wondering how to make best use of the remaining 75,000.

I want to take it all now

The tax situation
The big issue with the above plan is the amount of tax you will have to pay immediately. Your pension money will be treated just like any other earnings in that tax year. During the 2015-16 tax year, a person wanting to take all their 100,000 pension pot will have a taxable income of 75,000 after taking the first 25,000 tax free. Assuming they also have a state pension worth 5,500, that will be a total income of 80,500 for tax purposes.

For 2015-16, the first 10,500 is tax free. They pay 20% tax on the next 31,785 (totalling 6,357) and 40% tax on the rest (another 15,286) - a total tax take of 21,643. So the person is left with 78,357 of the initial 100,000 to do with as they please.

What you can do

1. Buy to let: As soon as the chancellor said that no one would be forced to buy an annuity, it was anticipated that money would flood into buy-to-let. But do the figures stack up?

Let's say you use the 78,357 as a deposit for a property. That will allow you to buy a two-bed flat priced at just over 250,000 with a 75% buy-to-let mortgage. On an interest-only basis, the loan will cost you around 500 a month.

You might pull in around 900 a month in rent, although that is likely to be hugely variable, while the typical management fee is around 10% of the rent. So you would pick up around 9,500 in rental income, minus the 6,000 in mortgage costs, leaving you with a net income of around 3,500 a year - taxable at your marginal rate.

There might be a capital gain when you sell the property, but that will be subject to capital gains tax. Still, an income of 3,500 a year off 75,000 is relatively attractive.

2. Put the money on deposit: You can earn up 2.5% interest on a fixed-rate bond if you lock away the money for five years. That is just over 2,000 a year, which is liable to tax. But you could move 15,000 into an Isa each year; after five years it will all be tax free.

3. Put it in a peer-to-peer account: These are the online operators who match savers with borrowers, and pay much higher rates than the banks - but crucially there is no compensation scheme. Zopa is paying around 5.2%, RateSetter 5.9%, Funding Circle 7.2%. Blend them together to obtain a rate of around 6% - equal to around 4,700 a year for someone with a 75,000 pot.

Don't throw all your pension cash into one of these companies, though. The concept is still relatively untested, but putting a portion of your money into a spread of providers may pay off.

4. Buy a Lamborghini: Pensions minister Steve Webb said that under the new freedoms people could buy a Lamborghini if they liked. But 75,000 will only stretching to a six-year-old Gallardo Spyder at best.

I want to draw down the money gradually

The tax situation

Once you have withdrawn the 25,000 tax free you are left with the 75,000, which is taxable as and when you draw it down for spending.

Let's say you have a state pension worth 5,500 a year. You also have a tax-free personal allowance of 10,500 for 2015-16. That means you can draw another 5,000 from your pension without paying a penny in tax. You could supplement that with money from the 25,000 tax-free lump sum.

What you can do

If you draw down 5,000 a year from your 75,000 fund the money should at least last 15 years - longer if it is invested wisely and enjoys some capital growth.

But let's say you can't live on 10,500 a year, and your typical spending is around 15,500 a year. You will need to draw down 10,000 a year from your pension fund. You will be taxed on everything above 10,500 a year, so 5,000 is taxable. This will be taxed at 20%, so you will lose 1,000 to HMRC (and your real income will therefore be 14,500 a year net).

Drawing down this sum will exhaust your 75,000 fund rapidly, possibly in seven or eight years. Capital growth will be limited, as the amount you are taking means there is little left invested. If you are retiring aged 66, you will be left with just the state pension by your mid-70s.

You don't have to take the tax-free lump sum all in one go. You can phase the withdrawal of the cash taking, say, 10,000 in year one, and 5,000 each year after that.

Remember to use your Isa allowance. A husband and wife have a 15,000 annual tax-free Isa limit. They can both open Isas, and if they are not spending their lump sum immediately, they can put it into these accounts. The money can be drawn and spent at any time and the interest earned remains sheltered from tax.

What you can do with your 75,000 fund when leaving it invested: The fund will stay with the pension provider your company picked, unless you decide to move it to another provider. What you can do with the money will entirely depend on what the pension provider is offering - some will have extensive flexibility, others not.

Most providers will advise that the money is left in a low-risk fund that isn't much affected by the ups and downs of the stock market, maybe invested primarily in a mix of government and corporate bonds, property, and a small sum in shares.

Aviva, the country's biggest private pension provider, says it will tell savers how much they can realistically draw down from their fund without exhausting the money before they die. It may also recommend that savers blend an annuity with a steady drawdown of the money.

It says the money left in the fund is likely to be invested in a "cautious managed" fund or its "target return" fund, and is confident of obtaining around 5% over Bank of England base rate. That suggests 5.5% a year for now, or more like 4.75% after charges. For a 75,000 fund, that suggests an income of around 3,500 a year, which will be liable for tax at your marginal rate.

Wildcard - do equity release: Why not use your home as a pension when you reach your 70s or 80s? At 75 years old, a pensioner can release around 125,000 from a 300,000 home. Add that to the state pension and it could cover spending until death, and mean that the initial sum of money only has to cover spending until the age of 75. But it does mean little or nothing will be left to your heirs.

I want to play it safe

What you can do

Buy an annuity: Everyone hates annuities, right? Maybe not. An annuity is a contract from a life insurance company to pay you a fixed income until you die. However, not a penny goes into your estate when you die, leaving nothing for your heirs. If you kick the bucket the day after you take out the annuity, bad luck, the money stays with the insurance company.

But despite the prevailing dislike of annuities, some people will prefer the security they offer. If you are 65 years old and take the 25,000 tax-free lump sum, and then shop around for the best annuity quote, you should be able to obtain an annuity of around 4,350 a year.

Let's assume you have a state pension worth 5,500 a year. Adding the 4,350 a year in annuity payment will mean you stay within the 10,500 personal allowance for 2015-16, so you pay nothing in tax. But you will have to live on just 9,850 a year, which won't be enough for many, if not most, people.

The above example is for a basic "level" annuity. The returns are worse if you choose to have an annuity that continues to pay an income to your partner after death, or if you opt for some level of inflation protection.

You can, however, obtain a higher income in two ways. First, have you been a smoker, or are you seriously overweight? If so, you can obtain an enhanced annuity - because the insurer calculates you won't live as long as other people. For a 75,000 fund, an enhanced annuity will currently pay around 1,000 more a year, at 5,350.

Secondly, you can opt for an "investment-linked annuity", where you are paid a higher income, increasing over time, but with the sum paid based on the performance of shares, bonds and other assets. The risk, though, is that the income can go down as well as up.

A mix and match approach: Financial advisers are recommending that savers should consider buying an annuity to cover the basics in life - gas and electricity bills, council tax, basic food and drink spending etc - and then keep the balance of their retirement savings in a fund to draw down when they want.

This will work best for people with larger amounts of pension savings. Let's say you have a pension pot of 200,000. You take 50,000 as the tax-free lump sum, and have 150,000 remaining. You reckon your basic expenses are 12,000 a year, so you need 6,500 in annuity income on top of your 5,500 state pension.

This will cost you just over 100,000 to secure, leaving you with up to 50,000 in the fund to draw down as and when you need it. But as your income is above the 10,500 personal allowance, sums above that will be subject to income tax at 20%.

Wildcard - defer your state pension: You can put off claiming your basic state pension, and in return the government will pay you a larger state pension in later years. What some pension advisers are recommending is that on retirement people should use their tax-free lump sum to live on for a few years, then start taking their state pension.

What does it mean in pounds and pence? Let's say someone is eligible for a state pension of 155 a week, which is equal to the "single tier pension" the government is proposing to introduce, worth 8,060 over the year.

Deferring for a year would mean the person would start getting 8,527.48, or 163.99 a week - an increase of 467.48 every year from then on. The difference will really add up over several years.

But advisers only recommend deferring the state pension if you are in good health and expect to live well into your 80s - and you should be aware that it may have an impact on means-tested welfare benefits, such as help with your rent, housing benefit, pension credit and council tax reduction.

I want to help my kids and grandchildren, and leave an inheritance

What you can do

This is a tough one. The size of pension pot saved here is scarcely enough to afford a decent income in retirement, let alone fund other people, and the reality is that many people will spend their final amounts of cash on care home costs. But here are a few options.

Gift the tax-free lump sum: Under the new pension freedoms, anybody is able to access their pension fund from the age of 55, even if they remain in work and are still contributing to the pension. Let's say Tim has accrued 100,000 into his pension by the age of 60, and his daughter Catherine, 30, is struggling to get on the property ladder.

Even though Tim is still at work he is free to draw down 25% of his fund as a tax-free lump sum - in this case, 25,000. If he then gives the money to Catherine, she can buy a house worth 250,000 with the 25,000 as a deposit, and take out a 90% mortgage to finance the rest of the purchase.

It's a very generous thing for Tim to do - he is "crystallising" his fund for tax purposes, which means he'll get little more in the way of a tax-free lump sum, and he will be left with only 75,000 to live on in retirement, plus whatever he manages to save before he finally retires.

Leave part of your pension fund as an inheritance: In September, chancellor George Osborne said he would abolish a "death tax" on pension pots, promising that 320,000 households would benefit. It means that from next April, anyone who has not touched their savings will be able to leave them as an inheritance.

Advisers Hargreaves Lansdown say that for anyone who dies under the age of 75, "any beneficiary can inherit some or all of your remaining fund, tax-free. They can do what they like with it. This is a major change."

The key thing, though, is leaving your fund "uncrystallised" - in other words, some or all of it is left with your pension provider, and with the tax-free lump sum not withdrawn. Only the better-off will be able to afford to do this.

If you die after the age of 55, any beneficiary can inherit some or all of your remaining fund as a lump sum. "They can keep it within a pension, and pay income tax at their highest marginal rate (ie, up to 45%) on the income they choose to withdraw, whether this is paid as a one-off lump sum or as a number of payments," says Hargreaves Lansdown.

In other words, if Tim dies aged 85 he can pass his pension fund to Catherine, then aged 55, and so long as she keeps it within a pension, she will only pay tax at her marginal rate when she accesses it.

Inheritance tax on your assets: Currently inheritance tax has to be paid at 40% on any assets over 325,000 for individuals and 650,000 for couples. This week David Cameron said he would like to ensure that only the "very wealthy" pay inheritance tax.

But in truth relatively few pensioners will ever see their heirs having to pay inheritance tax. Despite numerous campaigns about the "Middle classes facing an inheritance tax timebomb" (Telegraph) and the "Outrage at tax swoop on grieving families" (Express), the facts are that 96 in every 100 people don't leave enough money for there to be any inheritance tax to pay, with nursing home fees eating into any capital that they had. Meanwhile the very wealthy use trusts and "exempt transfers" to ensure their assets are passed on without tax to pay.

ADDITIONAL NEWS (November 2014) : At the moment, a member of a defined contribution (or “money purchase”) workplace pension scheme who leaves after more than three months but less than two years may be entitled to receive a refund of the contributions they have paid in – in some cases with interest on top. This is known as a “short service refund”.
The government has announced that from October 2015 this practice will be banned, because ministers are concerned that, with people switching jobs more regularly, those who keep obtaining refunds will be left with little or nothing for their retirement.
Oh dear! Mr Osborne has suddenly found a weakness in this pensions free for all !  When it comes to cash, people want it NOW and the future (or the taxpayer) will take care of itself!

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