Low earners hit by state pension and LTC double whammy


Low earning renters are set to lose out from the combination of reforms to the state pension and long-term care, an influential think-tank warns.

A report published yesterday by a research team which includes staff from the Pensions Policy Institute and London School of Economics, warns low earners could lose out without transitional protections.

The single tier state pension takes effect from next April , while the cap on individuals’ long-term care costs is due in April 2020.

The report says homeowners are likely to benefit from both set of reforms.

But it adds low income renters are more likely to be worse off as they will lose more in means-tested benefits than they gain in the new state pension system.

PPI director Chris Curry says: “The combined effects of these two sets of reforms have received little attention despite interactions between them.

“If an individual’s net income changes as a result of changes in their state pension entitlement, the contribution they are required to pay towards their care costs can change. An increase in state pension income can be wholly or partially offset by an increase in liability for care charges.”

University of East Anglia economics of heath and welfare professor Ruth Hancock says: “Medium to high earners who own their own homes do well from the state pension reforms as they age. Low earning renters are less likely to benefit or may lose out from the reforms as their entitlements to means-tested benefits can fall because of the removal of the savings credit.

“This risk is increased if there is no transitional protection for housing benefit and council tax support, and if the savings disregard for residential care costs is removed, as we have assumed in our research.”