§ Mr. BurstowTo ask the Secretary of State for Social Security if he will set out the basis for his Department's calculation that savings attract annual interest of 20 per cent.; when this figure was last reviewed; and if he will make a statement. [110918]
§ Mr. BayleyThe basis for the Department's calculation of tariff income in the income-related benefits, with a system of graduated deductions, is not intended to represent any return that could be obtained from investing capital and hence is not based on any assumed rate of return. A tariff income of £1 per week is assumed for each £250, or part thereof, held between the appropriate lower and upper limits'. The system provides a straightforward method of calculating the weekly contribution which people with capital in excess of the lower limit are expected to make from those resources to help meet their normal living expenses.
There have been no changes to the tariff income formula since 1988. The capital rules are kept under regular review.
Deduction rates rise with savings. At £3,250 the notional interest rate would be only 1.6 per cent. This rises until at £8,000 the tariff income is equivalent to an interest rate of 13 per cent. So the rule is most generous to people with relatively low savings, in line with the policy of targeting resources on those most in need.
£13,000 and £8,000 in Income Support and income-based Jobseeker's Allowance, except in residential care home and nursing home cases where the limits are £10,000 and £16,000, and Housing Benefit and Council Tax Benefit where the limits are £3,000 and £16,000.