New ageism laws to hit older savers

SAVERS who have seen their income wiped out by successive interest rate cuts are about to receive another bitter blow from the Government. Anti-age discrimination legislation going through Westminster looks set to outlaw 'silver saver accounts' which attempt to offer a better return to hard-up pensioners.

Small investors will bear the brunt of last week's 0.5% reduction in interest rates, having already seen their income fall this year by half.

The best that savers could typically earn from reputable UK institutions before last week's MPC meeting was between 3% and 3.5%. The typical return on a savings account is now 1.4%. These rates will fall sharply again.

The worst hit are the elderly who rely on income from their savings to boost their pensions. Prime Minister Gordon Brown has said that the Government is examining ways of providing more help for elderly savers in the Budget.

The Conservatives have announced they would scrap all tax on interest paid by basic rate taxpayers, which would help pensioners. But this might antagonise other families by penalising the many millions with earnings around the higher rate threshold. A modest pay increase would push the tax on their savings from zero to 40% just as they are being hit with higher taxes all round.

Treasury Select Committee chairman John McFall has suggested raising the personal tax allowance to 10,000 for all. While this proposal has many merits, it would not help pensioners, who already do not pay tax on more than 9,000 of earnings.

Other suggestions are a sharp increase in the threshold for cash Isas so that more money can be sheltered from tax, or to adapt the Tory plan so that higher earners only pay the 20% top-up rather than being hit by a full 40% as soon as you pass the higher-rate tax threshold.

Finally, pensioners could be helped by abolishing all tax on their savings or increasing their personal allowances.

Building society bosses are meeting this week to thrash out how they intend to lobby the Government about the best way to help savers in the Budget. But they will also be discussing the anti-ageing legislation, which will be the kiss of death for accounts designed specifically to ease the plight of pensioners.

West Bromwich, for example, has an account for over-65s paying 4.75%.

Building Societies Association spokesman Brian Morris said: "There seems to be an inconsistency in the Government on one hand saying it wants to help pensioners, while outlawing silver saver accounts, thereby penalising them further."

Elsewhere, the best rates are about 3.5%, so savers should lock into the best accounts before these too fall or are withdrawn.

Scottish Widows, for example, has a couple of accounts paying 3.6% on 5,000. At the Co-op you can fix for three years at 3.5%, for two years at 3.25% and at 3% for one year. Standard Life's best rate is currently 3.85% on its instant access Isa.

Norwich & Peterborough will let you lock into 3.85% for six or nine months, or 3.65% for a year. The Yorkshire Building Society has an internet account paying 3.75%. Barclays will let you fix for nine months at 3%.

Nationwide has a one-year tracker bond paying between 1.75% and 2% above base rate, putting returns at between 3.75% and 3.9% for 1 up to 49,999, although this will fall from February 1 to reflect the base rate cut.

Longer fixes seem all the rage. While you can fix with Nationwide for six months at 3.5%, if you agree to put your money away for four years you can earn between 4.05% and 4.2%. Similarly, Dunfermline Building Society will fix your return for four years at 4%. Bank of Scotland has a five-year Web Saver paying 3.3%.

The Scottish Building Society will fix your rate for a year at 3.5%, and pays 3.1% in a cash Isa on deposits of up to 20,999, rising to 3.4% on more than 30,000. Marks & Spencer has a three-year fix at 3.25%.

You can fix at the Skipton at 3.25% for one year, at 3.5% for two years and 3.75% for three years. Royal Bank of Scotland has a one-year bond paying 3.25% on between 5,000 and 50,000.

There are better rates if you are prepared to consider higher-risk institutions, but in the current climate it makes sense to stick with UK-based institutions and only invest a maximum of 50,000 under any one banking licence.

The chief City watchdog last week announced proposals to speed up compensation when a UK bank goes bust, promising payouts within seven days. It will also demand that banks with different savings brands under one licence are forced to declare that savers with more than one account may not be protected.

Pensioners must ensure they claim all the help they are due

AGE Concern says many pensioners would be better off by ensuring they claim all the assistance due to them rather than worrying about returns on small amounts of savings, writes Teresa Hunter.

Gordon Lishman, director general for the charity, said: "The current debate about savings must not take place at the expense of the 2.1 million pensioners struggling to live below the poverty line.

"The Government must urgently prove its commitment to tackling pensioner poverty by moving quickly to pay the billions of pounds in unclaimed benefits cash automatically to all those entitled."

A checklist to make sure you are getting your due:

Winter fuel allowance

Those aged over 60 and up to 80 should automatically receive 250 towards their heating bills. The over-80s are paid 400.

Cold weather top-ups

Once the temperature reaches zero, cold weather top-up payments of 25 are due. These are only paid to those claiming pension credit.

Pension credit

From 60, everyone is guaranteed a minimum 124.05 a week to live on if single, and 189.35 for a couple. At 65, that rises to help pensioners with small amounts of savings. They get 174 weekly if single and 255 for a couple.

The savings element can give an additional 19.71 to a single person or 26.73 to a married couple, but this is clawed back once savings exceed 6,000.

Free television licence

This should be automatic for the over-75s.

Council tax benefit

This can cut council tax by up to 645 annually, but 2.2 million pensioners are not claiming. This relief can be applied for along with pension credit by calling 0800 991234. Alternatively it can be claimed directly from your local authority.

Housing benefit

This is designed to help those in rented accommodation. Claims can, as with council tax benefit, be made along with applications for pension credit by calling 0800 991234.

Christmas bonus

All pensioners on state pension, plus over-60s receiving pension credit, should have received a 10 Christmas bonus in November and are due to get another 60 in January (although some of these payments will come through in February or March). These should arrive automatically.

Insulation grants

If someone in the home is aged over 70, then you can qualify for free insulation. Similarly, the Warm Deal Scheme offers insulation grants for the over-60s.

Personal tax allowance

Pensioners are due a higher personal tax allowance, which helps to keep their cash out of the hands of the taxman.

However, it is very common for errors to take place at the point of retirement, which means the elderly can be wrongly taxed for years.

Make sure you receive your due. Those aged 64 to 74 can have income of 9,030 (rising to 9,490 in April) before paying any tax.

The over-75s have a personal allowance of 9,180 (rising to 9,640 in April).