Does the “room tax” affect people receiving pension credit?

Does a person benefiting from a pension credit pay the “tourist tax”?

Tourist tax: This is Money columnist Steve Webb examines how the measure works and who is affected

Steve Webb responds: In April 2013, the government made various changes to the rules regarding housing allowances for people living in properties owned by local authorities or housing associations.

One element of these changes became known as the “bedroom tax”, although the government called it the “removal of the spare bedroom subsidy”. I’ll explain how this change works and to whom it applies.

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How does the “room tax” work?

For many years, people living in private rental accommodation have been subject to a number of limits on the amount of housing allowances they can claim.

One of those limitations is that they can only claim rent from a property that meets their needs. If he happens to be renting accommodation with one or more additional bedrooms and pays a higher rent accordingly, the housing assistance system does not cover this additional rent.

What is the pension credit?

Retirees can use this benefit to supplement their income if what they currently receive is below a certain level per week.

The pension credit is divided into two parts:

* Guarantee credit supplements your weekly income if it is less than £ 159.35 and you are single, or less than £ 243.25 if you are in a relationship

* The savings loan is an additional payment for those who have saved money for retirement, such as a pension.

You do not have to pay tax on the pension credit.

To benefit, call 0800 991234 free of charge to find out if you are eligible and how to register.

The government has more here, and you can find a pension credit calculator here.

This is Money has a guide to the benefits people over 65 can claim here.

When the last government was looking to save money on various perks, it concluded that it was unfair that private tenants were faced with a limit of perks for properties larger than they were supposed to need, but not social tenants. Thus was born the “tourist tax”.

The calculation has different steps. Essentially, the local authority will determine how many bedrooms they think they need based on your family makeup.

A couple would be deemed to need a bedroom, older teens of the opposite sex might be entitled to a bedroom each, younger children of primary school age might share a bedroom and so on. .

If the house you are in has more bedrooms than you need, then a deduction is made from your housing allowance. This rate is currently 14 percent for an additional bedroom and 25 percent for two or more additional bedrooms.

When the policy was first introduced it was very controversial, in part because certain groups of people may need more space than they immediately appear.

Examples included some people with disabilities who might need extra space for medical equipment or who might not be able to share a bed with their partner, or perhaps separate families where an extra bedroom is needed for one. child who comes to stay for short periods.

In response to this, the government introduced general exemptions from the “room tax”, such as allowing a spare room for a night caregiver to come and stay.

Steve Webb: Find out how to ask the former Pensions Minister a question about your retirement savings in the box below

Steve Webb: Find out how to ask the former Pensions Minister a question about your retirement savings in the box below

The government has also allocated millions of pounds to local authorities to provide discretionary top-up payments on a case-by-case basis to those for whom the rule would create particular hardship.

In Scotland a separate scheme is run by the Scottish government which effectively wipes out the impact of the ‘room tax’.

Are retirees affected by the tourist tax?

The original policy only applied to people of working age. For retirees, it was decided that it would be unreasonable to expect them to go out and find a job to supplement their benefits or downsize to something smaller.

On this basis, the beneficiaries of pension credits would not be affected.

More recently, the government announced its intention to expand the scope of the “bedroom tax” to include retirees who started a new tenancy after April 2016.

However, following an outcry, they changed their mind and the Prime Minister announced in November last year that the change would not go ahead.

ASK A QUESTION ABOUT STEVE WEBB’S PENSION

Former Pensions Minister Steve Webb is This Is Money’s Agony uncle.

It’s ready to answer your questions, whether you’re still saving, quitting work, or juggling your finances in retirement.

Since leaving the Department for Work and Pensions after the May 2015 election, Steve has joined the Royal London pension company as Policy Director.

If you would like to ask Steve a question about pensions, please email him at [email protected]

Steve will do his best to respond to your post in a future column, but he won’t be able to respond to everyone or correspond privately with readers. Nothing in his responses constitutes regulated financial advice. Posted questions are sometimes edited for brevity or other reasons.

Please include a daytime contact number with your message – it will be kept confidential and will not be used for marketing purposes.

If Steve is unable to answer your question, you can also contact The Pensions Advisory Service, a government-backed organization that offers free assistance to the public. TPAS can be found here and its number is 0300 123 1047.

StevWe receive many questions about the state pension forecast and about COPE – the equivalent of contracted retirement. If you write to Steve on this topic, he answers a typical reader question. here. It includes links to several of Steve’s previous columns on state retirement forecasting and contracting out, which might be helpful.

If you have a question about state pension supplements, Steve wrote a guide that you can find here.

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