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					8 September 2003 To: Directors of Social Work Chief Executives

Your Ref: Our Ref:

Dear Colleague Guidance on Charging Policies for Non-residential Care Services for Older People I am writing to notify you of an update to COSLA’s guidance on non-residential care, to take account of the introduction of the Pension Credit on 6 October. This is to raise the minimum threshold used in the guidance for over 65s, from the current level of 12.5% over the Minimum Income Guarantee (which will become the Guarantee Credit) to 16.5% over. The change is designed to be cost-neutral for those Authorities currently applying the 12.5% threshold, i.e. the extra cost of the higher threshold should be balanced by the additional charging income resulting from the new benefit. The change also aims to be administratively simple and to support the aim of Pension Credit, to reward those who have saved for retirement. I attach a short note with further background on the reasons for the change. Authorities who already apply a more generous threshold should also consider adjusting their charging policies so that individuals benefit from the Pension Credit. I would also like to take this opportunity to correct an omission in the final version of the guidance which we issued last year. The recommended calculation of tariff income from capital should be £1 for every £500 and not £1 for every £250. This correction is timely, because it matches the calculation of tariff income under Pension Credit. I apologise for issuing this change so close to the Pension Credit introduction date. To ensure that individuals benefit as they should from the Pension Credit, COSLA recommends that Authorities implement the change as soon as possible. I would also like to remind you of COSLA’s agreement with the Scottish Executive to review the implementation of the guidance. We aim to survey Authorities on that later in the year. Yours sincerely

Alan McKeown Policy Manager

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PENSION CREDIT AND HOME CARE CHARGING 1. This note is to support the change to COSLA’s Guidance on Charging Policies for Nonresidential Care Services for Older People in response to the introduction of Pension Credit. The guidance is changed to increase the weekly charging threshold for over 65s from the current level of 12.5% over the Minimum Income Guarantee (which will become the Guarantee Credit) to 16.5% over. The change is to support the principle unpinning Pension Credit, of rewarding those who have saved for their retirement. It is being made following an approach from the Scottish Executive. 2. The increase to the weekly charging threshold should be cost neutral for Local Authorities. Any costs involved would be balanced against the extra income which Authorities will receive in charges from people who are better off as a result of Pension Credit. Background – Pension Credit 3. Pension Credit will replace the Minimum Income Guarantee (MIG) for people aged 60 years and over, from 6 October 2003. It will provide a guaranteed income for all those aged 60 or over and, for the first time, a Savings Credit to reward those aged 65 and over who have made modest provision for their retirement. Pension Credit comprises:  The Guarantee Credit, to ensure a minimum level of income to those aged 60 and over of £102.10 a week for a single person and £155.80 for a couple (this will replace MIG). (These amounts are increased for those with housing costs, severe disabilities, caring responsibilities or transitional protection in MIG). The Savings Credit will reward those aged 65 and over who have made some provision for their retirement, in addition to their basic state pension, such as a small second pension (i.e. SERPS, occupational pensions, personal pensions, stakeholder pensions), modest savings or earnings.

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In general terms:   People aged 60+ will have their income made up to a minimum of £102.10 p.w. and £155.80 for couples (the current MIG levels). Over 65s with income between £77.45 and £139.08 (or £123.80 and £155.80 for couples) will also receive a weekly savings credit of up to £14.79 (£19.20 for couples), dependant on income.

Existing COSLA Guidance on Charging Policies for Non-residential Care Services for Older People 4. Other than for personal care for over 65s, which cannot be charged for, Local Authorities have discretion as to how they charge for care provided for people living at home. COSLA issued the ‘Guidance on charging policies for non-residential services that enable older people to remain in their own home’ in May 2002. 5. The existing guidance recommended that Authorities use a threshold of at least 12.5% over the MIG level in assessing an individual’s ability to contribute towards the cost of his or her home care services, i.e. single pensioners only contribute from income above £114.86 p.w. once the costs of housing, council tax and supporting children, have been disregarded.

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Leaving the threshold unchanged would mean that, while many over 65’s who benefit from the Pension Credit would still be better off after paying for their home care charges,

6. where the minimum COSLA guidance is followed, about 40% would lose most or all of this extra benefit. This would not fit with the Pension Credit principle of rewarding those who have saved. 7. A simple disregard of the savings credit would not work, as people whose income is too high to qualify would be left worse off than those who had made less provision for their old age who do qualify. Change to the Guidance 8. At current levels, single pensioners would, therefore, only contribute from income above £118.95 per week, once the costs of housing, council tax and supporting children have been disregarded, instead of the current threshold of £114.86. Couples would only contribute from income above about £181.50, instead of the current threshold of £175.27. 9. The change is designed to be cost-neutral for Local Authorities, i.e. the cost is balanced by the extra income Authorities will receive in charges from people who are better off as a result of Pension Credit. This is based on analysis of data on income distribution for over 65s in Scotland. The balance of income obviously depends on take up of the new benefit, and it is worth reinforcing recommendation 8 of the existing guidance ‘that all Local Authorities should be pro active in promoting benefit take up for service users’. 10. The change also aims to be in line with the Pension Credit principle of rewarding those who have saved, and to focus on a similar group to the new savings credit. Both benefit over 65s who have made extra provision for their old age but, to address the issue at 7 above, this change also rewards those with too much income to qualify for the savings credit. 11. Lifting the charging threshold should be simpler to administer and for people to understand than other alternatives such as the introduction of a cost-neutral taper. 12. Although many people would not receive the full benefit of extra savings credit entitlement, in raising the charging threshold, every single person with at least enough income to qualify for £4 of savings credit would be £4 or more per week better off. Every couple with at least enough income to qualify for £6 of savings credit would be £6 or more per week better off. Timing 13. Pension Credit is introduced on 6 October. To ensure that individuals benefit as they should from the Pension Credit, COSLA recommends that Authorities implement the change as soon as possible.

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