Watchdog’s Chilling Threat To The Elderly And Disabled- Pay Carers A Pension Or Be Fined

More than 100,000 elderly and disabled people have been warned they face a £400 fine or prosecution if they don’t set up a pension for their carer.

Charities say they have been flooded with calls from the frail and vulnerable who have been left terrified by the threatening tone of letters sent out by watchdog The Pensions Regulator.

It demands they have a legal duty to pay into a pension for their employees or face penalties.

Those affected all receive money from their local council to pay for their care, but have been unwittingly caught up in an overhaul to pensions.

Since October 2012, all employers have had to automatically sign up staff members into a pension and pay contributions on their behalf. Initially just big businesses had to do this, but now smaller firms are being included.

Those who might not consider themselves as employers at all are now being told they have to pay into a pension for workers aged over 22 who earn more than £10,000 a year.

This includes families who take on full-time cleaners or nannies and also tens of thousands of disabled and elderly people who receive cash directly from the local council in order to employ a carer.

This system is known as direct payments. The scheme is popular because it allows councils to reduce their costs, but also helps the elderly or disabled find a carer who suits their specific needs.

Technically, it means they are an employer and, as such, must provide a pension to their carer under the new rules.

But many have no idea they are classed as a business and have no knowledge of pensions.

Rob Wilson, chief executive of charity The Rowan Organisation, which helps those who receive direct payments, says: ‘We are getting a lot of calls from people who are very worried about this. They are looking for help, but there seems to be no advice for them out there.

‘The tone of the letter from The Pensions Regulator is also quite threatening. It would be daunting for the chief executive of a big company to receive, let alone someone elderly in need of care.’

One Money Mail reader, a disabled 78-year-old man who is terminally ill with the lung condition emphysema, received one of the letters last month. It told him he must set up a pension for his three carers by February next year.

The letter is addressed to ‘Dear Chief Executive/Business owner’ and goes on in complicated language to advise him of a date by which he must start the pensions.

It continues in bold type: ‘If you fail to comply with your duties you may be fined or prosecuted.’

The letter adds that he can nominate someone to deal with the administration of the scheme, but that he is legally responsible for it. He has less than two months to find someone to do this task and tell the watchdog his choice.

The reader told us: ‘I went into a blind panic when I opened the letter. I saw the bit where it threatened legal action and said I had to do things by March. It seems completely crazy. I’m someone in need of care; I’m not a business.’

He says he asked his local authority for help and a local charity, but no one was able to tell him what he should do next. He adds: ‘The doctor says I shouldn’t get stressed because it will make my illness worse, but I can’t help but do so.’

It was only later he realised that, in fact, none of his three carers were eligible because they all earn less than £10,000.

An estimated 100,000 people receive direct payments, which are available to the elderly and disabled who have been assessed by their local council as needing care and support services.

The direct payment allows them to buy in and arrange help themselves instead of getting it directly from social services. The money is often paid on to a cash card or into a bank account.

How much someone receives is decided after an assessment with the local authority.

The way carers are paid lies at the heart of the complication. Many carers who look after one person are effectively an employee of the person they’re looking after. In many cases, they are paid their wages directly by the household they’re helping.

Alternatively, the carer may be paid by a third-party that takes care of income tax and National Insurance payments.

But the cared-for person — who usually pays a fee for such a service — still remains the employer, and will receive the letter.

A few carers are also self-employed, and many work via an agency; they won’t be affected.

People receiving direct payments must account for how their money is spent to their local authority. This can involve providing timesheets or receipts.

They are generally barred from employing a spouse or a close relative living in the same house, although relatives living elsewhere are usually permitted.

There is no set amount that people in need of care can receive from their local authority. But they will have to go through an assessment where the hours they will need is worked out by council staff.

There are also further concerns that the additional cost of supplying the pension might have to come directly from the elderly or disabled person since there are no promises that their direct payment would rise to meet it.

Experts say some local authorities will hike payments to cover these costs, but others won’t — leaving a shortfall.

By 2018, someone employing a carer earning £16,000 a year would have to find roughly another £25 a month or £306 annually to pay for the pension contributions.

The Pensions Regulator says employers are generally given a year to set up a pension. Those who fail to comply face an initial fine of £400, though this could rise for persistent offenders.

Charles Counsell, executive director of automatic enrolment at the regulatory body, says: ‘We recognise the particular challenges automatic enrolment raises for people with carers and have been working to ensure our communications help meet the needs of this unique group of employers.

‘The letters we are sending to all employers are factual and a call to action. If an employer needs support in understanding and complying with their duties, we’re here to help.’