HMRC Overcharging Grieving Relatives With ‘Death Tax’


Upset relatives grieving the loss of a relative who has died in the last month have been wrongly taxed on inherited pensions due to an error by HMRC. An error within the HMRC systems has led to the families of people younger than 75, who died since April 6th, having their ‘death benefits’ taxed at the wrong rate, overcharging them by thousands of pounds. This is despite the tax that no tax is actually due, as new rules were previously introduced under the pension reform, which allow anyone who dies under the age of 75 to pass on their retirement fund tax free.

Several pension companies including LV= and MGM Advantage said that relatives of customers who were deceased had received letters from HMRC saying that they were being taxed- the letters were incorrect and luckily, the companies had managed to act quickly enough to prevent any tax being deducted wrongly from payments.

However, one pension company said that hundreds of relatives of deceased customers’ had been taxed by mistake. This led industry experts to claim that this discovery could be the ‘tip of the iceberg’. Last week, some of the biggest pension companies’ such as Legal & General and Prudential said that they would not be disclosing whether some families had paid too much tax. In a bid to stop the issue before it goes any further, pension providers have been told to stop reporting death benefits to HMRC until the system error has been fixed. However, some providers issue the information automatically and are unable to stop it.

A spokesperson for the pensions provider Hargreaves Lansdown said that it is ‘critical’ to get the tax right, but it is unlikely to be just one provider who has been affected by the error. Similarly, the Chief Operating Officer for LV= said that they had heard from customers who had received an incorrect tax code from HMRC, but they were able to ensure that they weren’t affected by the error. Lastly, he said that the customers were already dealing with the loss of a loved one, so did not need to be dealing with tax issues too.

A representative from the Association of British Insurers said that they had informed HMRC it may be impossible for some providers to stop providing the information. He said that they had been working alongside HMRC to find a solution to the problem.

A spokesman from HMRC denied that anyone had been affected by incorrect tax. They said that individual pension providers are responsible for operating a PAYE system and are required to treat such payments as tax free.

For more information on inheritance tax, contact HMRC.

How the Social Fund Can Help You through the Cold Weather

The Social Fund UK

The Social fund can help those on a low income with certain expenses. During the winter months, it is no secret that heating in the British home is somewhat of a necessity, but that doesn’t stop it from costing an arm and a leg to fund. This is where the Social Fund helps. If you are entitled, funding will be provided for your heating that does not require repayment and will be paid into the same account that receives your benefit payments. The scheme was put in place on the 1st November 2015 and continued until the 31st March, where people were given £25 per week to help with their heating bills. The scheme is due to start again on the 1 November 2016, and plans to run for the same period of time.

How does it work?

It’s all very technical, but in a nutshell, it has to be cold, hence The Cold Weather Payment. Those that are entitled will have their postcode area linked to a weather station and payments are then made when there is going to be periods of cold weather. The requirements for the payment are when the weather station forecasts seven consecutive days with an average daily temp of 0 degrees Celsius (or less). This more than likely means that during the winter months, there are certainly people that will be entitled to the payment. There has, however, been some criticism of the scheme, because some areas of Britain may be cold enough to receive a payment that week, while others may not. For example, in some areas of Kent, it may be at or below zero for seven days, requiring payment, where in close by Sussex, there might be a day during the week that takes the average temperature to above zero, meaning that it is ‘too warm’ to require a payment. Just the luck of the draw.

Who is entitled?

If you currently claim income, universal credit or income based Jobseeker’s Allowance then it is likely that you will be entitled to the Cold Weather Payment, in the next winter. Before we go any further, it is worth noting that the payments are not to be confused with Winter Fuel Payments. These are also a type of funding but are made to people above state pension age – whatever the weather. Another thing worth noting is that the Cold Weather Payment is based purely on income, and not savings, and you don’t need to go through the hassle of putting in a claim.

Other weather based entitlements

It doesn’t just stop at funds for heating, and there are other schemes available to keep your house cosy. Financial assistance is also provided through something called the Warm Front Scheme. With this, the government have aimed to tackle fuel poverty by providing grants for loft insulation, draught-proofing, wall insulation, gas heaters, central heating and hot water tanks. This might be offered to those living in poorly insulated properties, with no central heating system.

If your energy bills are becoming unmanageable, or have left you struggling after the cold winter, there is also another aptly named programme in place; the Warm home Discount. This is where rebates are provided on already paid energy bills. 2014-15 saw homes that qualified receive a bill rebate of £140. Instead of just receiving this in cash, the rebate comes in the form of a discount and should contribute towards settling any existing bills.

Female Victims Of Pension Reform Could Turn To JSA

Women who are expected to lose out on thousands of pounds as a result of the Government’s changes to the pension age are being told to think about claiming Jobseeker’s Allowance instead, by a Conservative minister.

Shailesh Vara is a work and pensions minister. He suggested unemployment benefits as a possible source of income for the millions of women who will have to wait 18 months longer to receive pension entitlements, because the state pension age is increasing from 60 to 65 by 2018. The comments came shortly before a debate took place in Westminster, influenced by a petition of over 140,000. The Government made the pension reforms in 2011 and campaigners are saying that they are too rushed, failing to give working women enough time to plan for their retirement.

Research conducted on behalf of the Labour party found that over 2.5 million women who were born during the 1950’s will be affected by the reform. However, any form of compensation for these women has been ruled out. Mr Vara said the reform needs to be viewed ‘in a broader context’. He said to MPs that there were ‘a whole lot’ of other benefits available to women who are affected, such as Jobseeker’s Allowance, Employment and Support Allowance, Carer’s Allowance and Personal Independence Payments. He said that we should not forget that pensions will be uprated and that the new simplified State Pension starts from April. He also cited an increase in cold weather payments and protected winter fuel payments as a good thing for pensioners. All of these options contributed to the ‘broader context’ that Mr. Vara spoke of. shutterstock_326906771

The former work and pensions secretary said that Mr. Vara’s comments were ‘outrageous’, adding that women do not want unemployment benefits, they want the pension that they are entitled to. The shadow work and pensions minister Angela Rayner said that it was ‘shocking’ to suggest Job Seeker’s Allowance as an alternative. She added that by accelerating the rise in the female state pension age and not communicating the changes effectively, ‘millions of families’ feel as if their plans for their later life have been ‘ruined’. She said that the petition was a ‘testament of strength’ to the campaign.

The debate in Westminster Hall was led by the Labour MP Helen Jones who said that she was also of an age which would be affected by the pension reforms. However, a number of Conservative MPs also voiced their concerns and called for transitional relief for the women who were going to be affected.


Calls For State Pension Age Rise To Be Slowed Down

MP’s have put inequality between men and women at the centre of their debate as they call for the planned rises to increase the State Pension Age for women to be slowed down or readdressed in order to give women who don’t have much time before they retire to adjust to the anticipated changes.

The debate took place in the House of Commons and was led by the Scottish National Party MP Mhairi Black. The debate has led to more calls for the Government to review the current policy around State Pension Age rises.

Since 2010, the age for women’s State Pension has risen from 60 to 65 to become equal with men, with plans for it to increase to 66 by 2020. The plans to equalise the state pension age have been in place since 1995 but were pushed into motion in 2010. However, some women have said that they weren’t informed of the planned changes in 1995. In particular, a group of women who were born in the 1950’s will face a dramatic difference in their planned age to retire.

MP Black said women had already faced a ‘lifetime’ of gender inequality in times of lower pay, as well as giving up work to look after children. She added that they were now facing ‘harsh’ rises in the State Pension Age.

She said women are getting ‘short changed’ just because they are female, adding that she did not believe the Government had to set out to purposely cause problems for pensioners. MP Black said the Government should now review its pensions policy or be condemned for it’s ‘vindictive’ actions towards those due to retire.

She found support from Conservative MP Tim Loughton who said that gender inequality most affected women in their 60s. He said that means-testing should be reintroduced to the state pension in order to help the pensioners who are struggling financially.

From April 2016, a new ‘flat rate’ pension scheme will be brought in. It will get rid of the savings element of the pension credit, which is used as a top up for the state pension claimants. shutterstock_326906771

In order to purchase an annuity of £6,000 per year you would need to have £100,000. Mr. Loughton said that for people with lower wages, the National Insurance contributions is the only form of pension they can afford. 10 years is not enough time to begin saving into a private pension to add to the state pension. Reintroducing state pensions for those over aged 60 which is means tested would help those who are hit hardest by the increase of state pension ages.

Pension Credit is a benefit which relates to income. It’s made up of two elements- the guaranteed element and the savings element. The savings element is an extra benefit for people who have saved some money towards their retirement, for example paying into a pension fund. Savings credit can pay £14.82 a week for single people or £17.43 for couples, on top of their existing pension.

To find out more about pension credit, call the pension credit contact number.

Britons Invited To Top Up State Pension

More than seven million British people are being offered the opportunity to top up their state pensions. Men who are over the age of 65 and women over the age of 63 can get around £25 a week extra on their state pension, in return for a one off payment.

The exact amount they will have to pay depends on factors such as their age- the older they get, the lower the cost. The offer is currently open to existing pensioners and those who will reach the state pension age by April 2016. After that date, a single tier pension will begin.

Currently, basic state pension is worth up to £115.95. The new flat rate pension will be worth up to £155 a week for people that qualify. The top up scheme will be known as Class 3A contributions and will provide pensioners with an income that will rise with inflation. Any spouses or civil partners will be able to inherit at least half of the income once their partner dies.  shutterstock_326906771

Currently, around seven million people are of pensionable age and are therefore eligible to take part. However, the DWP has said that the scheme won’t be suitable for everyone and expects around 265,000 people to take up the offer. A spokesperson said:

“It won’t be right for everybody and it’s important to seek guidance or advice to check if it’s the right option for you. But it could be particularly attractive for those who haven’t had the chance to build significant amounts of state pension, particularly many women and people who have been self-employed.”

The maximum amount of extra income possible will be £1,300 a year or £25 a week. Those wishing to apply have 18 months to do so.