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House of Commons

Monday 20 May 2002

The House met at half-past Two o'clock


[Mr. Speaker in the Chair]

Oral Answers to Questions


The Secretary of State was asked—

Minimum Income Guarantee

1. Norman Lamb (North Norfolk): If he will make a statement on the take-up rate of the minimum income guarantee. [55487]

The Minister for Pensions (Mr. Ian McCartney): More than 2 million pensioners benefit from the minimum income guarantee. Those pensioners are on average £20 a week better off. Some 3,400 pensioners in the North Norfolk constituency are claiming MIG.

We have introduced several measures to make it easier for pensioners to understand and claim their entitlement, including a new 10-page claim form and a dedicated MIG claim line, and claims for MIG are now invited when pensioners apply for their retirement pension.

Norman Lamb: May I draw the Minister's attention to research carried out by a university of East Anglia student, Victoria O'Brien, which I will send to him? It sets out the

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extent and impact of the lack of take-up of the minimum income guarantee in North Norfolk and nationally. In particular, I draw his attention to the estimate that in North Norfolk alone the poorest pensioners are failing to receive between £2.5 million and £4.5 million. The impact on them, and on their access to food, heating and so on, is obviously considerable. What further steps is the Minister taking, beyond the big initiative back in 2000, to ensure that the poorest pensioners get what money is due to them?

Mr. McCartney: I would welcome a copy of the review of MIG by the hon. Gentleman's constituent. Local authorities also conduct reviews. In the constituency of my hon. Friend the Member for Stalybridge and Hyde (James Purnell), my Department, the local authority and community groups have collectively made a great effort extensively to increase the number of those who can benefit from MIG. We will do anything that we can to achieve that in North Norfolk and more widely between now and the introduction of the pension credit, which will be a further major boost by the Government to older people's income.

In my first answer, I told the hon. Gentleman about some of the measures that we have taken, but since September last year we have also been making more information available. We have been looking at older people's life cycle events and linking those to our attempts to involve them in claims. We have introduced a dedicated Pension Service, the role of which is to act as a first-hand evidence system and an advocate on behalf of older people. Between now and the introduction of the pension credit, the Government are taking a whole range of measures, including advertising and making direct contact with older people and with organisations that represent them. We want to ensure that we build on the success of benefiting 2 million people.

Let me put the matter into context: when we came into power, more than 2 million pensioners were not getting the benefit of MIG, which we introduced from a standing

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start. Those pensioners were in poverty, forgotten about and voiceless, but under this Government they are out of poverty and have a very strong voice.

James Purnell (Stalybridge and Hyde): Is my right hon. Friend aware that the pilot programme to which he referred has increased the take-up of MIG from 76 per cent. to 81 per cent. in less than 18 months? Will he consider encouraging all local authorities to set targets to raise the take-up of MIG in that way, specifically using the unique system developed in Tameside whereby pensioners can claim online? Just by putting in their national insurance number and their council tax benefit number, they can automatically find out whether or not they are entitled to MIG.

Mr. McCartney: I honestly did not know that my hon. Friend was behind me when I mentioned him; I thought that I would give him a plug for his excellent work anyway. I hope to visit his borough in the next few months. It has an exemplary record in introducing systems of working directly in the community. Those include making household visits to everyone over 60, introducing new technology, setting up local advice centres in conjunction with our departmental officers and working with community groups. As a consequence, there has been a huge increase in the take-up of MIG there. Indeed, more than £800,000 of additional income has been claimed through MIG simply as a result of the campaign.

I shall study that best practice in the hope that we can introduce it as part of the local work by the Pension Service. We need to look at the best of what local authorities do and at the best of what we do, put the two together and ensure that every pensioner who is entitled to income from the Government gets it.

Mr. Paul Goodman (Wycombe): With up to a quarter of those eligible for MIG not taking it up and with the take-up of housing benefit and council tax benefit falling, is it not now clear that the Government's mania for means-testing, which leads to low take-up, is betraying the very vulnerable people whom they were elected to represent?

Mr. McCartney: One of the main reasons why the take-up of housing benefit has fallen is not a lack of take-up by older people but the fact that the Government have got more than 1 million people back into work. They are getting a fair wage, so they do not have to claim housing benefit, unlike the position that they were left in by the previous Government. As well as MIG, we are introducing the pension credit, and I hope that the hon. Gentleman will support that measure in the Lobby on Thursday. The pension credit means not only that5.1 million pensioners will get additional income, but that, for the first time, many pensioners will get access to both housing benefit and council tax benefit because of our changes to the rules on capital. That would never have been done under the Conservatives.

Mr. Frank Roy (Motherwell and Wishaw): The Minister will agree that take-up of any benefit is important, but it is especially vital for our poorer pensioners. Will he assure me that pensioners will be able to visit the new Pension Service agency centres

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throughout the country and speak to staff face to face to ensure that they receive the benefit to which they are entitled?

Mr. McCartney: I thank my hon. Friend for that question. One of the new pension centres is situated in his constituency. It will be welcomed by pensioners in Scotland and will provide new jobs in the area. The role of the Pension Service is to create pension centres that will deal with up to 80 per cent. of the total case load. The other 20 per cent. includes household visits, take-up and special needs campaigns and issues associated with people with special needs such as language and disability. We will focus the local service to deal with that work on a local basis. Older people will have the choice of doing their business through pension centres such as the one at Motherwell or receiving home visits and participating in other local activities. By providing that choice, we will make improvements for the older pensioners who need to access such services from time to time.


2. Angela Watkinson (Upminster): When the ratios of pensioners' income being derived from funded pensions from the state will be reversed. [55488]

The Secretary of State for Work and Pensions (Mr. Alistair Darling): In 1998, we set out our long-term objective of ensuring that funded pension provision is substantially increased. That remains our position.

Angela Watkinson: I see three obstacles to achieving the Government's target of 40 per cent. of pensions deriving from state funding: first, the increasing number of pensioners on means-tested benefits; secondly, the poor performance of many private pension plans, which are giving pensioners a much poorer income than they ever anticipated; and thirdly, the very poor performance of mortgage endowments, which means that many pensioners will not clear their mortgage debts and will still be making mortgage payments in their retirement years.

Mr. Darling: The hon. Lady makes three points. In relation to endowment products, she raises a matter of concern, especially for people who were possibly not given the right advice some years ago. Of course, the regulatory framework has been greatly strengthened since that time, but she is right to express concern about people in that position. She also referred to private pension funds. As we discussed in the previous Question Time and on other occasions, increased longevity and the fall in the stock market have caused a number of companies to rethink their position. Interestingly, in the now corrected Office for National Statistics data, of which the hon. Member for Havant (Mr. Willetts) made so much, we find not only that there was no £100 billion fall in pension assets, as he claimed, but that contributions rose by£27 billion, which is encouraging.

In making her first point, the hon. Lady complained about the pension credit, which will benefit more than half of pensioner households by an average of £400 a year. If the Conservatives are against that, we look forward to hearing more from them. About 2 million people are benefiting from the minimum income guarantee, which will be £100 next year. The state second pension sees

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18 million people gain, and some of them are getting more than double what they would have received under the former state earnings-related pension scheme.

The hon. Lady was right to raise her point about endowment mortgages. On her other two concerns, the Government will make proposals on private pensions, and we are absolutely right to make state provision available, especially for those on low incomes, and to ensure that saving pays—something that never used to be the case.

Mr. Frank Field (Birkenhead): Does the Secretary of State accept that the great driving force affecting funded provision is the new accountancy rules, which will make it more difficult for the Government to achieve objectives that the whole House supports? Is there not a case for suggesting that the Government should request the accountancy body to withdraw the rules to allow further consideration? Some accountancy rules are necessary in deciding what liabilities appear on what balance sheets, but the current rules are harmful to long-term funded pension provision.

Mr. Darling: My right hon. Friend refers to the accounting rule commonly known as FRS17. It is not FRS17 or any other accounting rule that is closing down pensions: companies are choosing to close down those pensions, but they should take a long-term view on their pensions just as they do on other matters. They would not make a major investment decision on one set of accounts, and they should not make a long-term decision on pension funds purely in relation to what is shown in respect of one accounting requirement. I have told the Accounting Standards Board that I think that FRS17 is exacerbating an already difficult situation. I find it difficult to understand why we have an accounting standard that is not shared by other countries—the standard used in the United States, for example, is different—and I have suggested to the board that it might be better for everyone concerned if we had a standard that allowed companies to look at their pension funds over a period of years, rather than taking a snapshot decision that could be grossly misleading.

I must make the point that companies considering their pension funds should themselves take a long-term view, and that simply getting rid of, or rewriting, FRS17 would not solve the problem that some occupational funds face. I certainly would not argue in favour of the Government taking over accounting standards, because I believe that there is some merit in those matters being independently scrutinised. I happen to think that the Accounting Standards Board has got it wrong on this occasion, and that it should accept that.

Mr. Steve Webb (Northavon): Will the Secretary of State acknowledge that the lesson of history is that one group that, on average, does badly out of privately funded pensions is women? Women past and present tend to have fewer and lower occupational pensions, and lower private pensions. Is it not also the case that only one in three of the Government's new shiny stakeholder pensions have gone to a woman? Will the Secretary of State tell us what projections his Department has produced of the future entitlements of today's working women to funded pensions? If no such projections have been produced, will he commission a study of women's pension entitlements,

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to ensure that history does not repeat itself and that women do not remain the poor relation in private pension provision?

Mr. Darling: The hon. Gentleman omitted—by accident, I am sure—to mention that most of the gainers under the pension credit will be women. He is right to say that women have not done so well out of funded pensions—partly because of low pay, and partly because, historically, there were fewer women in the labour market—and that the beneficiaries have predominantly been men. The pension credit, however, will predominantly benefit women. The state second pension—which I think that the hon. Gentleman opposed, although I might be wrong about that—will also benefit women, particularly those on low wages. Indeed, some 18 million people on low wages, and others, will gain from the state second pension, and women who take career breaks to look after children or other people will also now get a pension, whereas in the past they got none. So, in relation to both the pension credit and the state second pension, women have gained as a result of the changes that the Government have made.

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