32 Direct Payment of Pension and Benefits The Government has changed the way it makes pension, benefits and Tax Credit payments. In April 2005, all pension books were replaced with the Direct Payment system. This means pension, benefits and Tax Credit payments are now paid straight into a bank, building society or Post Office Card Account. This information sheet looks at choices for Direct Payment and the cheque payment exceptions service, and answers some common questions. Contents Section 1. Introduction Section 2. What are my account choices for Direct Payment? Section 3. How do the different accounts work? Section 4. What do the different accounts offer? – Current accounts – Basic or introductory accounts – How to open a current, basic, or introductory account – Post Office Card Account – Features of a Post Office Card Account – How to open a Post Office Card Account Section 5. Summary of what the different accounts offer Section 6. Cheque payment exceptions service Section 7. Questions about Direct Payment Section 8. Useful contacts Section 9. Glossary ----------------------------------------------------------------------------- Section 1. Introduction From April 2003 the Government began phasing out the pension book system and replacing it with Direct Payment. Direct Payment means your pension, benefits and Tax Credit payments are paid straight into an individual account of your choice. Direct Payment doesn’t affect how much money you receive, and you still get your money as often as you did through an order book. Direct Payment is generally more safe, secure and convenient than the old pension book system – you do not have to draw out your whole pension or carry more cash than you need. There will, of course, be people who can’t manage an account because of disability or illness. For these people, the Government has introduced a cheque payment scheme. See section 6 for more details. It is no longer possible to have your pension or other benefits paid through an order book. In this information sheet we use terms which you may not be familiar with, so we have included a Glossary on section 9. ------------------------------------------------------------------------------ Section 2. What are my account choices for Direct Payment? You can have your pension, benefits and Tax Credit payments paid into any of the following types of account: * a current account with a bank or building society * a basic or introductory account with a bank or building society * a Post Office Card Account (POCA). You can pick the account which suits you best. Even if you already have a bank or building society account, you can still open another one just for your pension. In most cases you will still be able to pick up your pension from your local post office, whatever type of account you have. ----------------------------------------------------------------------------- Section 3. How do the different accounts work? Your pension, benefits and Tax Credit payments will be paid directly into your account. With all these accounts, you will be given a card and a personal identification number known as a PIN, which you will use to withdraw money. The PIN will be only four digits long. If you don’t find it easy to remember the PIN you are given, you can change it to one that you can remember at any time. Be careful not to choose a number that someone else can guess easily. Try not to use numbers such as your birthday or your phone number. Also, try to avoid popular number sequences like 9876 or 1234 or 9999. A random combination of numbers is best and harder for a criminal to guess. If you cannot get out to pick up your pension or benefits, a carer, relative or friend should be able to make arrangements with your bank, building society or post office so that they can collect your cash for you. Ask your bank or building society how a trusted ‘third party’ would collect your cash. If you open a POCA, a second card and a different PIN can be issued to someone you trust so that they can collect your money for you. If more than one person needs to collect your money, or you are unable to operate an account because of disability or illness, see the section on cheque payment on section 6. -------------------------------------------------------------------------------- Section 4. What do the different accounts offer? Current accounts A current account will let you take money out or check your balance: * at any ‘hole-in-the-wall’ cash machine (but note that some cash machines charge users a fee) whenever you want; * over the counter at your bank or building society branch; or * in some cases, at the post office. The following banks will allow you to withdraw money from any post office: * Alliance & Leicester * Bank of Ireland * Barclays * Clydesdale Bank * The Co-operative Bank * Lloyds TSB (in England, Wales and Scotland) * Nationwide Building Society * Smile. These are the only banking groups that have an arrangement with the Post Office at the moment, but more may make similar arrangements in the future. As well as giving you better access to your money than the pension book system, a current account has the following features: * You can have a cheque book or debit card. Making more expensive purchases with cheques and debit cards is safer than carrying large amounts of cash. Also, if they get lost or stolen you can ‘put a stop’ on them. You can cash cheques or use a debit card at your bank or building society to withdraw money if you have difficulties remembering a PIN. Debit and credit cards now use the chip and PIN system. If you have difficulties remembering a PIN, ask for a chip and signature card instead. You can also cash cheques at your post office if you bank with: – Bank of Ireland – Barclays – cahoot – Lloyds TSB. * You can arrange for your bank or building society to make regular automatic payments from your account for items such as fuel and telephone bills by setting up a ‘direct debit’. Paying in this way can sometimes qualify you for a discount as well as spreading costs over the year. * You can pay cash, cheques and other direct payments into your account as well as your pension. * You will be sent regular statements telling you how much money has been paid in, spent and withdrawn. * You can ask for a credit card or an overdraft with your account which allows you to borrow money from your bank or building society. (This works best if you can pay the money back quickly to avoid paying interest rates or getting into long-term debt.) You should not have to pay a fee for a normal current account that is not overdrawn. Some banks and building societies offer ‘extras’ with a current account (such as leisure discounts and free travel insurance) for a monthly fee. These are often called ‘premium’ current accounts and have names that include words like ‘premier’, ‘gold’, ‘plus’, ‘additions’, or ‘more’. If you are offered one of these, you should decide whether you can afford the fee and whether you will get your money’s worth from the ‘extras’. Don’t be afraid to say no. For the purpose of receiving your pension, benefits and Tax Credit payments, a normal current account will be fine. You cannot open a bank or building society current account if you have been declared bankrupt now or in the past, you have a bad credit history or you have outstanding County Court judgments against you. If this is the case you will need to open a basic or introductory account or a POCA instead. Basic or introductory accounts A basic or introductory account is a ‘no frills’ account. It has similar features to a current account (see the summary on section 5). The biggest difference is that you will not usually be able to go overdrawn or arrange an overdraft. Some basic or introductory accounts will offer you a cheque book, but a lot don’t. Not many people know that this type of account exists – including some bank and building society staff. So you may need to be quite determined to get one of these. If you have a basic or introductory account with one of the banks or building societies listed below you can take out cash free at any post office counter using your card and PIN: – Abbey – Alliance & Leicester – Bank of Ireland – Bank of Scotland – Barclays – Clydesdale Bank – The Co-operative Bank – First Trust Bank – Halifax – HSBC – Lloyds TSB – Nationwide Building Society – NatWest – Northern Bank – The Royal Bank of Scotland – Ulster Bank – Yorkshire Bank. The Financial Services Authority (FSA) produces a leaflet on basic or introductory bank accounts called Just the facts about basic bank accounts. You can get a copy by calling the FSA consumer helpline on 0845 606 1234. How to open a current account or a basic or introductory account * Decide which bank or building society is best for you. * Go into your local branch and complete an application form. * You will need to take proof of identity. Banks and building societies are very strict about what documents they will accept. It may be best to phone in advance to find out what they need. Unfortunately some banks and building societies will accept only passports and driving licences. * If you need to give someone else access to your account (a carer, friend or relative who usually picks up your pension), you should ask the bank or building society for details of how a ‘third party’ can collect your cash. It will discuss the options with you and help you make the necessary arrangements. * Once your application has been processed, you will be sent your card and PIN. These will arrive separately, for security reasons, within a few days of each other. * You will then be able to give your new current account details to the Pension Service by filling in the form that’s been sent to you and returning it in the pre-paid envelope. Post Office Card Account The government has plans to end the Post Office Card Account (POCA) in 2010. It will be replaced with a similar account but no decisions have been made yet. A POCA is a bit different from a current, basic or introductory account. It is only for your pension, benefits and Tax Credit payments and you can only withdraw money at the post office. It would probably suit you best if: * You don’t want all the facilities (such as overdrafts and debit cards) you get when you open a current or basic or introductory account. * You are unable to open a current or basic or introductory account – perhaps because you don’t have the necessary proof of identity. * You simply don’t want your pension and benefits to be paid into a bank or building society account. As with the other accounts, you will get a card and a four-digit PIN. You can go into any post office, hand your card to the cashier and tap in your PIN into the keypad at the counter. The cashier will then give you as much or as little cash as you want (providing you have enough money in your account to cover that amount). You can also get a statement of how much money is in it. Features of a Post Office Card Account * Only your pension, benefits and Tax Credit payments can go into it. You cannot pay in any other cash or cheques. * You can only check your balance and withdraw cash from a post office. But it doesn’t have to be your local post office – it can be any post office, wherever you happen to be. For example, you cannot pay your wages into this type of account. * You will not get paid interest on your money or be allowed to go overdraw. * You will receive a written statement every 3 months. If you lose a statement, you can call up the POCA helpline which will issue you with a replacement. * You can arrange for a second card and PIN to be issued to someone you trust, so that they can collect your money for you. If more than one person needs to collect your pension, it would probably be best to ask for cheque payment – see section 6. How to open a Post Office Card Account: * Call The Pension Service on 0845 606 0265 (or 028 9054 9393 if you are in Northern Ireland) to request an application form to fill in. You can also call the POCA helpline on 08457 223344. * Tell the operator that you want to open a POCA to receive your pension. Remember, even if you already have a bank account, you are entitled to choose to have your pension paid into a POCA. * If you want to open a POCA to receive your benefits you will need to phone the office which issues that benefit. You can find the contact details of the offices which deal with different benefits in the ‘Useful contacts’ section in section 8. * After phoning to open a POCA you will then be sent a ‘personal invitation document’. Fill this in and take it to a post office. If you are not sure how to fill it in, someone at the post office should be able to help you. * The post office will send you a ‘pick-up notice’ to let you know when your card has arrived at the post office. You will also receive a Personal Identification Number (PIN). For security reasons they will arrive separately within a few days of each other. * Take both of these back to the post office where you filled in your personal invitation document and collect your card. Your new account is ready. If you lose your card, the Post Office can issue a new one within four to five working days (see section 7). ------------------------------------------------------------------------------ Section 5 Summary of what the different accounts offer Will my Current account allow me to: Withdraw cash at a post office?: Depends on which bank or building society your account is in. Withdraw cash from cash machines?: Yes Have a cheque book?: Yes Set up a direct debit?: Yes Check my balance at the post office: Depends on which bank or building society your account is in. Arrange for an overdraft or go overdrawn?: Yes Basic or introductory account: Will my basic or introductory account allow me to: Withdraw cash at the post office? Depends on which bank or building society your account is in. Withdraw cash from cash machines: Yes Have a cheque book?: Depends on which bank or building society your account is in. Set up direct debits?: Yes Check my balance at the post office?: Depends on which bank or building society your account is with. Check my balance at cash machines?: Yes Arrange for an overdraft or go overdrawn?: No Pay in cash, cheques or other direct payments?: Yes POCA Will my POCA allow me to: Withdraw cash at the post office?: Yes Withdraw cash from cash machines?: No Have a cheque book?: No Set up direct debits?: No Check my balance at the post office?: Yes Check my balance at cash machines?: No Arrange for an overdraft or go overdrawn?: No Pay in cash, cheques or other direct payments?: State pension, benefits and Tax Credit payments only -------------------------------------------------------------------------------- Section 6. Cheque payment exceptions service Some people will not be able to manage a bank, building society or Post Office account because of a disability or illness. For other people there may be times when they cannot use an account – perhaps because of a short illness or when a regular carer is not around. The cheque payment system is for people who: * have difficulty remembering and using a PIN; * cannot manage using a key pad at a cash machine or at the post office to access their money; or * need different carers or helpers to collect their pension. How does the cheque payment exception service work? Cheques will be sent to you through the post, weekly or monthly, depending on which benefit you are claiming. Cheques are posted to your home so that they arrive on the date that payment is due. If you receive more than one benefit, the Department for Work and Pensions (DWP) will, where possible, combine them to reduce the number of cheques that you receive. The cheques can be cashed at the post office like a giro cheque or paid into a bank account. As for the pension book system, a carer or helper can collect your pension or benefits for you if you sign the back of the cheque. But they will need to give proof of identity for you and themselves. How do I arrange cheque payment? If you or someone you care for needs this method of payment, you should tell the office that issues your pension, benefits or Tax Credit payments (you can find the contact details on section 8). You will need to briefly explain to the operator why you (or the person you are calling for) cannot use Direct Payment. The office issuing your pension, benefits or Tax Credit payments will then mark you down as needing cheque payment. If you are already using the Direct Payment scheme, but are having difficulty with it, you can contact your local DWP office and ask to be transferred to the cheque payment scheme. Problems with cheque payment Cheque payment is less secure than Direct Payment. Probably the biggest problem with cheque payment is that you will have to rely on the post to get the cheque to you on time. Cheques could get lost in the post or be stolen. If this happens, you will need to contact your local DWP office as soon as possible to request an emergency payment. You may be asked to complete a form to request a replacement cheque or collect the cheque at a local benefit office. If you need the money urgently, or you can’t fill in forms or travel to a local benefit office, then the DWP may be able to bring the cheque to your home. Ask to speak to the manager of the benefit office if you are not happy with the arrangement to replace your late or missing cheque. In the event of a postal strike, your cheque will be sent to your local post office. ------------------------------------------------------------------------------ Section 7. Questions about Direct Payment If you have any questions about Direct Payment, such as which account options are available or how to change from cheque payments to Direct Payments, then call the office that issues your pension or benefits (contact details in section 8). Your local CAB may also be able to help you choose the right account for you. Or call SeniorLine on 0808 800 6565 (or 0808 808 7575 if you are in Northern Ireland). Here are some common comments and questions that Help the Aged has been asked: What if I lose my card? * Your bank (or building society) will have a system in place to help you if you lose your card or think it has been stolen. You should tell them immediately if you think this has happened. Go into your bank or give them a call. There will usually be a customer service or a ‘lost card’ telephone number on your bank statement. The card will then be stopped so no one can use it and you will be sent a new card and PIN. Your bank can usually arrange for you to get money out without your card until the new one arrives, but ask them how you would go about this. If you find your card after you have reported it lost or stolen, you won’t be able to use it again. So it is best to destroy it and wait for your new one to arrive. * If you have a POCA you should tell the Post Office immediately if you lose your card. You can report it lost or stolen by calling the Post Office’s lost and stolen card line for free on 0800 389 2101, which is open 24 hours per day. The operator will arrange for you to get a new card in one of two ways: – If you have money in your account, the operator will give you a reference number and then contact your post office to tell them to give you a new card (called a ‘vault card’). You will then be able to go into your post office, give the cashier your reference number, pick up your new card and use it with your existing PIN as normal. You will also need to present identification. This can often be done on the same day you report your card missing. – If you have no money in your account when you report your card lost or stolen, a new card will be sent to your post office in four to six working days. You will be sent a letter when it is ready to collect. If you know that you will receive your pension, benefit or Tax Credit before this time, and you need the money, call the Post Office’s lost and stolen card line on the day that the pension, benefit, or Tax Credit is due. It will give you a reference number which you can take to your local post office to get the money out. What if I forget my PIN? Your PIN will be only four digits long and you can change it to a number that you think you will remember any time you use your card. If you do forget it, tell your bank, building society or post office immediately so you can be sent a new one. While you are waiting for a new PIN: * If you have a bank or building society account you can use your debit card (or cheque book and card) to withdraw money at the counter of any branch of your bank without needing to use your PIN. You may be able to draw cash at the post office if your bank or building society has an arrangement with the Post Office (see section 4). * If you have a POCA tell the Post Office immediately if you forget your PIN by calling the POCA helpline on 08457 22 33 44. You should get a new PIN sent to you in two to four working days. You will not be able to access your account while you wait for your new PIN, so it is a good idea to change it to one you are less likely to forget as soon as you can to avoid this inconvenience. I don’t think I will be able to use the keypad at the Post Office. The Post Office has tried to make the keypads easy to use by working with the Royal National Institute for the Blind (RNIB). The keypads make ‘beep’ sounds and have markers to guide people with visual impairment. Check out the keypads when you go to the post office. If you do not think you will manage with the keypad, it may be best for you to get cheque payment of your pension or benefits (see section 6). Does my carer need power of attorney to draw out my pension or benefits? Not necessarily. There are a few options when it comes to another person or ‘agent’ getting access to your account. In every case you must make sure it is someone you can trust. * If you want your pension or benefits to be paid into a bank or building society account, you could set up a joint account with your ‘agent’ – particularly if your spouse draws your pension or benefits for you. * If an ‘agent’ is needed for a limited amount of time – for example, if you can’t collect your pension or benefits because of illness or a spell in hospital – your bank or building society may ask you to fill out a ‘third party mandate’ form. You can then name a person to use your account for you. * If your needs are long-term you could consider granting someone power of attorney so they can manage your bank or building society account for you. There are different types of power of attorney – it is important to choose the right one for your ‘agent’. For more information contact SeniorLine on 0808 800 6565 (or 0808 808 7575 if you are in Northern Ireland) or get advice from your local Citizens Advice Bureau (CAB). * If you have a POCA you can arrange for your agent to get a second card and PIN that will give them access to your account. If you have granted someone power of attorney, that person cannot open a new POCA in their name to receive your pension or benefits. They can only gain access to your POCA if they are a second cardholder. * If you need more than one person to manage your account for you, it may be simpler to request cheque payment of your pension or benefits through the exceptions service (see section 6). It can be complicated if you have more than one person with power of attorney. I don’t want my pension or benefits to be paid into an account because I don’t want people knowing how much money I have. The only people who will know how much money is in your account is you, your bank or building society and any trusted person you have asked to use your account for you. Your bank cannot disclose information about your account to anyone unless you have agreed. However, there are some very exceptional circumstances when the bank has to do so by law: for example, if the information is required for a court case or it becomes a public duty, but this would not be very likely. If my pension builds up in my account will I lose my Pension Credit, Council Tax Benefit and Housing Benefit? You can draw out and spend your full pension weekly if you want or save a bit in your account – it’s up to you. Any savings you have would need to exceed £6,000 in total before they started affecting entitlement to these benefits. Even if you did choose to save more than this you may still get some help. For more information on working out how much Pension Credit, Council Tax Benefit and Housing Benefit you should get, see our free advice leaflet Can You Claim It?. Or call SeniorLine on 0808 800 6565 (0808 808 7575 if you are in Northern Ireland). I used to use my pension book as proof that I receive benefits so I can get concessions. What should I do now? Your local benefit office or The Pension Service can give you a letter confirming you get a pension or benefits. This can be used to prove your right to any concessions for people on pension or benefits. I don’t want to have my pension paid into my current account because I like to keep it separate from my other money. You don’t have to get your pension paid into your existing account – you can open a new one for the sole purpose of receiving your pension. Even if you already have another benefit paid straight into a current account, for example, Attendance Allowance, you may decide that you want to open a POCA just for your pension. You may feel you would be better off having your pension paid by cheque, even if you already have an account, because it has become impractical for you to use your account since you opened it. It is up to you, not the office issuing your pension or benefits, which account you use or whether or not you need cheque payment. I want to support my local post office so it doesn’t close down. If you want to use your post office to collect your pension or benefits you could: * open a POCA to get your pension or benefits paid into (see section 4); or * open a basic, introductory or current account which allows you to take money out at the post office (see section 4); or * arrange for the cheque payment of pension or benefits if you cannot operate an account because of disability or illness (see section 6). The Government has announced that it proposes to close 2,500 post offices across the UK. There will be a consultation period for these proposed closures. If you would like more information on how to challenge a post office closure, contact the Campaigns team at Help the Aged, and ask for a briefing pack called the Post Office Closure Programme: A briefing pack for local campaigners. You can write to the Campaigns team, using the address on the back page or call it on 0207 239 1930. If you would like to find out whether your local post office is being considered for closure, call the Post Office on 08457 223344. You can also visit its website at: http://www.postoffice.co.uk/portal/po/content1?catId=57600693&mediaId=57600697 What will happen if the post office computer breaks down? The Post Office uses a computer to keep track of all the money it holds in different people’s accounts. If it breaks down, you should still be able to get some money. * If you have a bank or building society account that you are using through the post office, you will be able to use any cash machine to get your money. If you don’t want to use a cash machine, you will need to go to a branch of your bank or building society. * If you have a POCA and you desperately need your money there and then, your post office should be able to give you an emergency payment of up to £20 per day. -------------------------------------------------------------------------------- Section 8. Useful contacts Citizens Advice For free information on Direct Payment. Check your phone book or the library for your local Citizens Advice Bureau. Visit its website for advice at: www.adviceguide.org.uk Department for Work and Pensions – The Pension Service Tel: 0845 301 3011 Web: www.dwp.gov.uk/directpayment Financial Services Authority For a copy of the free leaflet about basic or introductory accounts called Just the facts about basic bank accounts call 0845 606 1234. Help the Aged SeniorLine For information on Direct Payment and all welfare benefit advice call 0808 800 6565 (or 0808 808 7575 if you are in Northern Ireland). Post Office Helpline Tel: 0845 722 3344 If you need information about Direct Payment, such as which account options are available or cheque payments, you will need to contact the office that deals with your pension or benefit as listed below: * for Carer’s Allowance contact the Carer’s Allowance Unit on 01253 856123 and ask for the section that deals with your Carer’s Allowance claim. If you are in Northern Ireland contact the Disability and Carer’s Service on 028 9090 6186. * for Disability Living Allowance or Attendance Allowance contact the Disability Living Allowance and Attendance Allowance helpline on 08457 123 456. If you are in Northern Ireland call the Disability and Carer’s Service on 028 9090 6178 (if you get Attendance Allowance) or 028 9090 6182 (if you get Disability Living Allowance). * for State Retirement Pension contact The Pension Service helpline on 0845 606 0265 (028 9054 9393 if you are in Northern Ireland). * for Tax Credits contact the Tax Credits helpline on 0845 300 3900. -------------------------------------------------------------------------------- Section 9. Glossary Balance: The amount of money you have in your account at a particular time. Basic or introductory account: A ‘no frills’ account you can pay money into, get cash out of by card and use to pay bills directly. You can only spend or take out money if there is enough money in your account. Chip and PIN card: A plastic card which has a microchip in it that holds your details. When you use a chip and PIN card you will need to type your PIN number into a keypad to make your purchase. Credit card: A plastic card which you use to make purchases now with the bank’s money and pay it back later. If you do not pay off the balance within a month, you will have to pay interest. Current account: An account for day-to-day money management which has all the features of a basic or introductory account and more including a cheque book and overdraft facility (if arranged). Debit card: A plastic card that you can use to pay for goods or services. The money is taken straight from your account. It is an alternative to paying with cash or cheque. Direct Debit: A system for paying bills straight from your account. You sign an agreement with the organisation that gets the payment – for example, your electricity or gas supplier – and it arranges the transfer of money from your account at regular intervals. You have a right to cancel the agreement at any time and it will be refunded if an error is made. Overdrawn : If you draw more money from your account than you have in it, you will be overdrawn, and may be charged for doing this. Overdrawing is sometimes called ‘going into the red’. PIN: Personal Identification Number is the secret code for your account which protects your money if your card is lost or stolen. You have to remember your PIN to get access to your account with your card at a cash machine or the post office (depending on which account you have). POCA: Post Office Card Account: an account into which only pensions and certain benefits can be paid. It can be accessed only at post office counters. Power of attorney: A legal arrangement in which you give someone else the power to manage your affairs. Third party: In the context of access to pension and benefit money, it means a person who acts as a go-between between you and your bank/building society/post office: for example, a friend, carer or relative. For further information contact: Information Resources Team Help the Aged 207–221 Pentonville Road London N1 9UZ Tel: 020 7278 1114 If you have access to the internet you can download our advice leaflets and information sheets by logging on to www.helptheaged.org.uk SeniorLine is the free welfare rights advice and information service run by Help the Aged for older people and their carers. Trained advice workers offer free, confidential and impartial advice about: * welfare and disability benefits * care at home * residential care * housing options and adaptations * access to health and community services. Freephone: 0808 800 6565 Textphone: 0800 26 96 26 9am to 4pm, Monday to Friday If you are in Northern Ireland, contact SeniorLine on 0808 808 7575.