We are all familiar with the expansion of life insurance companies' business within the financial sector. Income bonds are now a particularly popular form of investment, carrying an element of life insurance cover if death occurs during the bond's term.

Now, CD R(IS) 7/98 established that the surrender value of such bonds was to be disregarded. Unfortunately, the case under consideration was a "capital draw-down" arrangement - interest was rolled up to increase the amount of capital invested and the claimant drew on the capital itself. The Comm. was satisfied that no income was being drawn and that "capital treated as income" (ie payable in instalments) was the issue. He said that because the outstanding number of instalments on the bond, when added to the claimant's other capital, exceeded the then capital limit, the payments of capital were indeed income.



Revenons a nos moutons, as they say in Germany. The above case has proved unfortunate for residential care users. The Comm. made only a passing reference to the fact that no income was involved in the case before him. He would, doubtless, have expected everybody to know that income from capital is capital (especially if it's disregarded capital, I reckon !). I advised my LA years ago to treat income from life-related bonds as capital, as long as it was definitely income, not capital. But, my manager attended a national meeting of finanancial assessment officers recently and found that no other LA represented there does what we do !

Charging for Residential Accommodation Guide para 6.037 states:

"If the resident receives an income from the bond such as a life interest ... the bond should be treated as income."

I think a life interest is something different, contingent on a will, etc, but clearly the reader could easily think it refers to a standard life-related fixed term bond. Superficially, R(IS) 7/98 might be read as bearing this out, alas !

Your views, please.

Paragraph 13 of schedule 4 of The National Assistance (Assessment of Resources) Regulations 1992 (capital to be disregarded) states “any amount which would be disregarded under paragraphs 15, 16, 18 or 19 of Schedule 10 to the Income Support Regulations (surrender value of life insurance policy, outstanding instalments, social fund payments and tax refunds on certain loan interest)”.

So as it is the same disregard to be found under paragraph 15 of schedule 10 of the IS Regulations then the principles applied by the commissioner in R(IS) 7/98 to Income Support should also apply to LA’s charging policies, should they not?

Well, I think it's the value of the RIGHT TO RECEIVE instalments of capital that's being referred to in the Charging Regs; but an interesting point comes to mind, having had my memory jogged by the CPAG Handbook, page 914. This reminds us that there's no provision within Pension Credit for capital to be treated as income ! So RA 7/98 would only apply to IS/JSA/ESA for under 60s as far as the capital draw-down rules are concerned.

Unfortunately, the 1992 Charging Regs refer the reader only to IS Regs. Anybody know if there's been an amendment to these to reflect the introduction of Pension Credit ?