Pension top-up farce

ALL my confidence in the state pension top- up system has been drained by the stream of disturbing letters you have sent us.

This vital safety net for older savers with gaps in their National Insurance ( NI) records — particularly working mothers who took a few years out to bring up children — is being undermined by Whitehall ineptitude.

There is no way HM Revenue & Customs ( HMRC) should be pocketing sums of up to £2,000 of state pension top-up money when it won’t make a blind bit of difference to your retirement income. Yet you tell us this is exactly what’s been happening.

Officials should be working out whether you will benefit from the so-called Class 3 NI scheme — and spelling this out clearly — long before you hand over any money.

HMRC’s only defence is that it merely collects your cash, rather than works out your state pension entitlement. That crucial job falls to the Department for Work and Pensions (DWP). You might have thought that when DWP officials discover your top-up cash is pointless, they issue a refund automatically. But that task again falls to the taxman. And until it issued new guidance to staff recently, it usually refused.

We’ve found the taxman has been repeating the same excuse for withholding refunds, saying that even if your voluntary payments don’t boost your pension, they often give you extra ‘bereavement benefits’.

Never mind that nobody has heard of these bereavement ‘perks’ let alone wants them, nor that single people or those already beyond state pension age are unable to claim them. It’s like walking into a car showroom and paying for a Mercedes — only to be handed a rusty old bicycle and told to shove off.

I’d love to hear HMRC boss Jon Thompson explain the difference: in both cases, someone is guilty of banking cheques for something you never get.

The DWP and HMRC must stop blaming savers for a mess of their own creation and start talking to each other and being upfront with people. Officials should review every payment received to ensure nobody has been left out of pocket by this tangle of red tape.

Budget bore

BY ALL accounts, next week’s mini budget will be one the most boring ever. We’ll get a speech only on the state of the nation’s finances and no new policy announcements, Westminster sources say.

In many ways it’s a relief to think Chancellor Philip Hammond won’t be meddling with pension tax breaks or launching a raid on the self-employed. But there are areas of our tax system urgently in need of review.

One is inheritance tax. The current annual gifting allowances are a dog’s breakfast. You can give away £3,000 a year tax-free, plus £250 each to any number of other people and £5,000 towards a son or daughter’s marriage. Then you can make gifts out of ‘surplus’ income as long as they don’t reduce your standard of living.

It’s a minefield that may leave relatives with a bill after you die.

One solution would be for everyone to have a single £10,000 yearly limit. The same goes for the family home allowance that’s supposed to give every homeowner a £1 million inheritance tax limit.

The policy is full of catches — for example, you can leave your house only to children or grandchildren.

Why not raise the nil-rate threshold from £325,000 per person to £500,000, Mr Hammond?

Council chaos

WHILE he’s at it, the Chancellor could iron out the anomalies in the council tax system.

Fees have increased by 60 pc since 1998 and now we’re told many local authorities will put an inflation- busting 6 pc on bills again this year.

The rates we pay are based on house prices in 1993. As Money Mail revealed in November, that means some in London mansions pay less than a family in Wiltshire.

Yes, some homeowners would be worse off from a revaluation, but, done fairly, more stand to benefit.

Ultimately, the status quo is not credible.