Pensions and other contributory benefits will go up by 2% from January if the States approve Social Security's proposals at the September States meeting.

Supplementary benefit and other taxation-funded benefits will also go up by 2%.  But, Social Security are not recommending any increase in the rate of family allowances, winter fuel allowances or personal allowances for people in care homes.

'This year has been unusual, because the most recent RPI figure was negative, at minus 1.3%', says Deputy Mark Dorey, Social Security Minister. 'But we recognise that this was largely the result of the global economic downturn and historically low interest rates. Most pensioners don't have mortgages or other borrowings, so haven't had any advantage from the lower interest rates in that respect. It is more likely that they are disadvantaged, because the interest they receive on any savings will be negligible.'

'Taking those things into account, we think that a general increase of 2% in most benefit rates is reasonable' says Deputy Dorey. 'But recognising the severe pressures on general revenue expenditure across the States and bearing in mind the negative RPI, we're not recommending an increase in family allowances.'

Benefit increases

Pensions

Single pensioners will get an extra £3.40 per week, with a full rate pension increasing from £171.25 to £174.65.

Pensioner couples will get an extra £5.15 per week, increasing their joint pensions to £262.15.

Other contributory benefits

Other contributory benefits, including sickness, unemployment, invalidity and bereavement benefits all go up by 2%.

Social Security have again drawn attention to the increasing number of claims for invalidity benefit. Invalidity benefit is a long-term sickness benefit for people who have been incapable of work for more than 6 months. In 2008 there were 788 people receiving invalidity benefit and in 2009 the figure is 841, an increase of approximately 7.0%. Once again, the growth area includes mental health, which accounts for 27% of all invalidity benefit claims.

‘Since last year we have continued to have success helping people back into work but recognise that getting involved early is the key to reducing the number of claims that become long-term' says Deputy Dorey. 'We're currently working with the Health and Social Services Department to develop proposals to provide psychological therapies at the primary care level and will submit a report to the States during 2010'.

Supplementary benefit

Supplementary benefit rates and the benefit limitation will go up by 2.0%.

The former Government Business Plan directed Social Security to investigate an integrated tax and benefit system which would target people vulnerable to poverty. In 2008, Social Security and the States Treasury and Resources Department received presentations on Guernsey Supplementary Benefit, Jersey Income Support and UK Tax Credits. What became clear was that the main principle behind any new system adopted locally should be that work is incentivised and rewarded. Social Security and the States Treasury and Resources Department have agreed that Social Security should commence work on modernising the existing supplementary benefit scheme and this is now a top priority.

As interim measures, prior to the wider modernisation of the supplementary benefit scheme, Social Security are recommending amendments to update some of the eligibility classifications. One of these changes, if approved by the States, would mean that a single parent could only claim supplementary benefit if their youngest child was under 12 years of age.

'This means that from January next year, single parents with older children wishing to claim supplementary benefit will need to register at the Job Centre and actively seek work' says Deputy Dorey. 'We know that this change will affect about 50 single parents already getting supplementary benefit and we will provide them with extra help to get them job-ready and to look for suitable work.'

Winter fuel allowance

Over the last year, the price of fuel, light and power went down by 4.1%. But, rather than reduce the existing level of the fuel allowance, Social Security are recommending that the allowance is held at the current rate of £22.70 per week and that the 2 year movement in prices be taken into account when recommending a fuel allowance next year. The fuel allowance is paid over the winter months to householders receiving supplementary benefit.

Family Allowances

Family allowance is a universal benefit that is paid to all families with qualifying children. Given the negative RPI and the constraints on States expenditure, Social Security are not recommending any increase in the current rate of £14.60 per week per child for 2010.

Long-term care insurance benefits

Social Security are recommending that the co-payment, which must be paid by people in care before any long-term care benefit is paid, should increase from £162.40 to £165.62 per week from next year. They recommend that the maximum residential care benefit should increase from £359.94 to £367.15 per week. Nursing care benefit is to increase from £672.00 to £685.44 per week.

Prescription charges

Prescription charges will increase by 10p, to £2.90 per item from 1 January 2010.

Contributions

Upper earnings limit

Following States approval of Social Security’s proposals concerning the future financing of the contributory social security schemes, the upper earnings and income limits for employed people, self-employed people and non-employed people will be increased over a period of 5 years starting from 1 January 2010 to match the upper earnings limit for employers. For the first year, from January 2010, Social Security are recommending an upper earnings limit of £79,872 per year. The upper earnings limit for employers will increase by 2.0%, from £115,128 per year to £117,468 per year.

Contribution rates

Social Security are not recommending any changes to the percentage contribution rates for employed or self-employed people for 2010. But, following States approval in July of this year of the majority of Social Security’s proposals concerning the future financing of the contributory social security schemes, the contribution rate for non-employed people over 65 will be 2.9% from January next year.

Introduction of an allowance for non-employed contributors

In July the States also approved Social Security’s proposals for an allowance on income for non-employed contributions. The allowance for non-employed people will be deducted from their annual income figure and their contribution payments calculated on the balance. Social Security are recommending an allowance of £6,290 per year from January.

Overseas voluntary contributions

People living overseas can choose to pay contributions towards their old age pension. The rate payable is currently linked to the upper earnings limit and is already considered expensive. Social Security are recommending that the social insurance regulations be amended to remove the link to the upper earnings limit and that the rate be increased annually in line with the general increase in benefits. If approved by the States, this means that from 1 January 2010 the rate would be £77.26 per week for the non-employed and £85.40 per week for the self-employed.

Apportionment of contribution income between the Funds

The increases in the upper earnings limits for employed, self-employed and non-employed people over the next 5 years are intended to support the sustainability of the Guernsey Insurance Fund, not the Guernsey Health Service Fund or the Long-term Care Insurance fund. Social Security are therefore recommending that from January 2010 the apportionment of the contribution income between the 3 funds is adjusted accordingly.

Estimated operating deficit on the Guernsey Insurance Fund in 2010

Taking into account the proposed contribution and benefit rates for 2010, Social Security estimates that there will be an operating deficit in the order of £0.5m in 2010, which will be covered by investment income.

Amendments to the Health Service Law

Social Security are recommending an amendment to the Health Service Law to enable the Department to finance pilot health benefit programmes and research and development from the Health Fund. They refer to an impasse that has occurred concerning the financing of a pilot programme for mental health services in primary care. Under current legislation, the Fund cannot pay for such a trial and no funds are available from general revenue. The Policy Council has some reservations about this proposed amendment to the legislation, but will be content if Social Security give an assurance that they will consult with the Policy Council and the Treasury and Resources Department in the use of funds in this area.

The Insurance Fund, the Health Insurance Fund and the Long-term Care Insurance Fund have to undergo actuarial review at least once every 5 years. While the Insurance Fund and the Long-term Care Insurance Fund can be reviewed by an actuary appointed by Social Security, the Health Insurance Fund can only be reviewed by the UK Government Actuary’s Department. Social Security are recommending that the Health Service Law also be amended so that in future the actuarial review of the Health Insurance Fund can also be carried out by an actuary appointed by Social Security.

Attendance Allowance and Invalid Care Allowance

Attendance allowance is a benefit paid to people, including children, who are severely disabled, mentally or physically, and who need a lot of care by day or night. Invalid care allowance is paid to the person who is providing the care for a person receiving attendance allowance.

During 2009, the Department concluded the first step of a review into the adequacy and effectiveness of attendance allowance and invalid care allowance. The second step of the review is under way and will involve the Department discussing its findings with disability organisations and the Policy Council’s Social Policy Group and actively promoting the two allowances and increasing the level of information available to healthcare professionals.

'We are likely to recommend changes to both the allowances through a report to the States during 2010' says Deputy Dorey.

11 September 2009

SUMMARY OF PROPOSED NEW BENEFIT RATES - WEEKLY RATES

2010 rates (2009 rates)

Old age pension -
        Insured person - £174.65 (£171.25)
        Dependant wife or wife over age 65 - £87.50 (£85.75)

Widowed Parent's Allowance - £183.61 (£180.00)

Widow's Pension/Bereavement Allowance - £157.85 (£154.75)

Unemployment, Sickness, Industrial Injury and Maternity Allowance - £128.52 (£126.00)

Invalidity Benefit - £156.52 (£153.44)

Industrial Disablement Benefit - £140.77 (max.) (£138.00)

Supplementary Benefit requirement rates:

Short-term (under 26 weeks)

        Married couple - £176.61 (£173.15)

        Single person - £122.64 (£120.25)

        (Plus additions for dependants)

Long-term (26 weeks +)

        Married couple - £217.91 (£213.65)

        Single person - £150.78 (£147.85)

        (Plus additions for dependants)

A rent allowance, on top of the above short-term and long-term rates, will apply to
people living in rented accommodation.

Long-term Care Benefit

        Co-payment - £165.62 (£162.40)

        Private residential - £367.15 (£359.94)

        Private nursing - £685.44 (£672.00)

Attendance Allowance - £87.71 (£86.00)

Invalid Care Allowance - £70.91 (£69.50)

Family Allowance - £14.60 (£14.60)

Single payment benefits

        Maternity Grant - £322.00 (£316.00)

        Death Grant - £500.00 (£490.00)

        Bereavement Payment - £1,584.00 (£1,553.00)

Contact information

Malcolm Nutley, Administrator - Tel. 732581