Examination of Witnesses (Questions 25-39)|
WEDNESDAY 27 FEBRUARY 2002
25. Can I welcome representatives from Age Concern,
Help the Aged and the National Pensioners' Convention? I understand
that Mr Bickerstaffe is a bit challenged for time and the proceedings
have been running a little late so I am going to ask his fellow
witnesses if I can go through the three groups and ask each of
you to say a few words about the work you do and perhaps leave
Mr Bickerstaffe to say what he has to say at the end. We have
in front of us the dream team, as Sir David Frost would say. We
are really very grateful that you have put so much effort into
your written submissions, which we value greatly. We have some
questions that have arisen from the study of your submissions
and we would like to try to get through a fairly ambitious agenda.
Do not all feel that you have to answer all the questions that
are put to you. Richard, would you say a word about Help the Aged,
who you are and what you are doing?
(Mr Wilson) Richard Wilson. I am Policy Officer on
Incomes issues and I have a particular interest in benefit take-up.
(Mr Kohler) Mervyn Kohler. I am the Head of Public
Affairs for Help the Aged.
(Ms West) I am Sally West. I am the Income Policy
Officer at Age Concern.
(Mr Lishman) She is the authoritative one. I am Gordon
Lishman and I am Director General of Age Concern.
(Mr Lynes) Tony Lynes, Pensions Adviser to the National
(Mr Bickerstaffe) Rodney Bickerstaffe, President of
the National Pensioners Convention. Tony Lynes will be happy to
talk about any details but my starting point is the Social Security
Committee's Seventh Report less than two years ago. It said clever,
nice, smart, understandable things. I thought it was all fine
and on the Pension Credit in particular, the committee moved towards
eradicating means testing and perhaps that would help. My first
big point would be means testing. It is a massive extension in
terms of numbers. Secondly, although we are told that there is
going to be a gentle introduction of it and it is going to be
non-intrusive, people will hardly know they have been hurt, nonetheless,
there is still some stigma about it. There are take-up issues
and issues of complexity around that means testing agenda. Secondly,
so far as women are concerned, non-payment between the ages of
60 and 65 we say is discriminatory and it only applies to income
above the state basic. So many of our women are well below that
level, disgustingly so, but true. Thirdly, unnecessarily complex,
not to say confusing. In that sense, it is not particularly transparent
to John and Jane Citizen and it certainly is not to me. Fourthly,
it will not eradicate pensioner poverty. Our position is there
is a better way to spend the money. Nobody is going to say no
to additional money but we would say the Basic State Pension should
be (a) increased substantially and (b) linked to average earnings.
26. The submission you have made is very useful
to us but do you want to add anything? It is clear to us that
there is a welcome for the Credit there but there are concerns
(Mr Lishman) There is in particular a welcome for
the additional expenditure and for the generalised commitments
from Government that have gone along with that additional expenditure,
in relation to pensioner poverty. Our concerns are, firstly, the
absence of clear and specific targets in relation to pensioner
poverty. The Government has committed itself to such targets in
other areas; we think they should be applied here. Secondly, the
question about the extension of means testing. Thirdly, we are
very much concerned about whether this last brick is going to
be a last brick in the architecture of something that holds together
or a last brick precariously balanced on top of a rather incoherent
wall that may lead to it tumbling apart, particularly in terms
of the understanding of ordinary people of the strategies that
are available to them in order to maximise their income in retirement.
We will be publishing tomorrow some detailed survey information
that we can share with the Committee, which looks at: the understanding
by younger people of the architecture of the pension arrangements
they need to consider; their failure to comprehend those things;
and the implications of that in terms of the overall economic
implications of societal ageing and the implications for a large
number of individuals of those changes.
(Mr Wilson) Help the Aged welcomes the Government's
financial commitment to pensioner income that the two billion
pound benefit represents, but believes that there are more efficient
and effective ways of getting this money into pensioners' pockets,
given that so many of the beneficiaries of the Pension Credit
will be older pensioners, single pensioners, women pensioners.
We agree that this is all about undoing the damage of the MIG
but any means tested benefit creates winners and losers and is
divisive. This new Pension Credit will transfer these problems
onto a different group of people.
27. The Government says that one of the key
aims of the Pension Credit is to tackle poverty amongst today's
pensioners. We have already heard from Mr Bickerstaffe, and it
was in the NPC's memorandum, that poverty reduction is "not
the sole or even the main aim of the Pension Credit". So
my question is to Age Concern and Help the Aged: do you agree
with the view of the NPC?
(Mr Lishman) Broadly, yes.
(Mr Wilson) Yes.
28. You therefore do not think that the Credit
has any role at all in helping pensioners who are at the most
risk of falling into poverty during retirement?
(Mr Lishman) That I think is a different statement.
Yes, it will have some effect. The problem is about the relationship
between different areas of income support and their effect on
each other, the effect in relation to different savings regimes.
Although there will be some effect, we would not say that it was
going to be of a level likely to achieve the sort of targets that
government reasonably ought to be setting itself, in relation
to the reduction of pensioner poverty.
29. How do you think the proposal before us
could be amended to improve the help for lower income groups?
(Mr Lishman) I think there are two answers to that.
The first is that the proposal currently before the Committee
that you are looking at is part of that wider architecture and
many of the problems arise from that wider architecture and the
relationship between the elements of it. There are a number of
specific areas which appear in all our submissions which we can
30. Could you be quite specific in how the legislation
could be amended to help alleviate poverty?
(Mr Lishman) You were talking a few moments ago with
the ABI about ten or five per cent. The five per cent level would
be a clear reflection of reality and a way in which a significant
improvement could be made.
(Mr Kohler) Part of the answer to your question about
tackling pensioner poverty is that the Pension Credit depends
on people having a good education, good skills, a good job, a
good health record in employment and the volition to put money
into a pension scheme before they get any credit for those savings
that they have made. It is the antithesis of a redistributive
programme to help the poorest in our society. That balance has
obviously got to be drawn somewhere and I am not saying that the
whole thing should be redistributive to a flat rate benefit, but
we are going in exactly the opposite direction to that. We are
going to be rewarding people who have made savings, who have had
good jobs and so on, rather than targeting those who have had
broken, interrupted, poor experiences during their working lives.
31. We have heard from the Association of British
Insurers that they accept that the Government says it should always
pay to save. You do not think that should be the basis of pension
policy? It should not be paying pensioners to have saved earlier
in their life to make them better off.
(Mr Kohler) I am not suggesting that the basis of
pensioners' policy is wrong but with respect to this particular
measure it is not going to be attacking poverty, as we understand
it, since poverty tends to arise as a result of poor opportunities
to save, poor work records etc.
32. Should it not be the case that we should
not be linking these two if the Pension Credit is not to deal
with pensioner poverty but to make sure that those pensioners
who live just above the poverty line have an incentive to save
before they reach pensionable age?
(Mr Kohler) I would be satisfied with that.
33. That is the purpose of the Pension Credit.
We must not be confused and denigrate it if what it fails to do
is deal with pensioner poverty, which is a different issue. Have
I summed up accurately?
(Mr Kohler) I totally concur.
34. It is very easy for us to see that as a
criticism of the Pension Credit but the criticism is for something
it does not set out to do.
(Mr Lishman) We may be coming to a question about
(Mr Lynes) Means tested benefits have a built in disincentive
effect and what the Government is doing is trying to reduce that
disincentive effect by saying that, instead of being taxed at
100 per cent, in effect, on any additional income that you get
from your savings or occupational pension, you will only be taxed
at 40 per cent. That is as far as it goes. It reduces the disincentive,
but the disadvantage is that it brings three times as many people
into the means testing net. If you look at it in terms of the
kind of advice that young people now will have to be given about
whether it is worthwhile to save, it seems to me that with a prospect
of at least half of them being subjected to a 40 per cent tax
on the income from their savings they really have to be warned
that that will be the case. It may still be true that they will
be better off if they save than if they do not, but whether it
is good value for money for them to save rather than spend the
money now is quite another matter.
35. You keep saying that the Pension Credit
is a means tested benefit. My understanding of how it will work
is that, when anyone reaches the age of 60 or 65, they will fill
out a form, which all pensioners have to do anyway because many
pensioners are taxed. This will go through the tax system. If
filling out a tax form is not means testing, why is this means
(Mr Lynes) Firstly, only a small minority of pensioners
do fill in tax returns each year. Secondly, there is an enormous
psychological difference between filling in a form to pay money
to the Government and filling in a form to receive money from
(Ms West) Most pensioners are not tax payers. Only
a minority of those tax payers fill in a tax return and quite
a lot of pensioners struggle with the tax system as it is. One
thing about income related benefits or means tested benefits,
however you describe them, is that they ask for a lot of information
that you do not need to give the Inland Revenue. You do not need
to tell the Inland Revenue about your living arrangements, if
you are cohabiting. You are taxed as an individual. Also, you
do not for example need to tell them exactly what savings you
have. Generally, you will be paying tax on your savings direct
from your bank or building society interest. It is only people
who have complicated arrangements who have to fill in those details.
You do not need to say whether you have a non-dependent living
with you. There is quite a lot more information that people feel
is intrusive that is part of the current means tested benefit
system and will still be part of the Pension Credit. Of course,
you do not get fined for not filling in the MIG form.
36. Can I go back to something that Rodney mentioned
earlier and that was take-up. You have all expressed concern about
take-up and we also on this side know how difficult it can be
to encourage pensioners to take up the benefits that are available
to them. We saw that with the MIG. Perhaps you can tell me why
you are not convinced that the arrangements that the DWP are going
to put in place will work? As I understand it, the new Pensions
Agency is going to contact pensioners either by phone or in writing,
speak to them about their entitlement, send them the details and
ask people to confirm it. Why will that not work?
(Mr Wilson) By definition, the people who do not claim
are the very poorest pensioners in society. You have to look back
at the research that the Government has done on take-up, which
showed very strong attitudinal resistance to take-up. Even when
they looked at people who were entitled but not receiving benefits,
they found 25 per cent, even when they were told that they were
entitled, who would not claim. A large proportion of people will
not respond to the letter through the door. We are also talking
about a section of society, old people, who are often more isolated,
more frail, more likely to be spending a lot of time at home.
Baroness Hollis makes a comparison to the Working Families Tax
Credit and said take-up of that slowly increased so surely the
same will happen with the Pension Credit. We are talking about
different people in different situations. People are not just
going to drift into claiming Pension Credit without substantial
take-up work involving face-to-face advice, advocacy and outreach.
That is not the kind of work the Pension Service is suggesting.
In administrative terms, it could be a difficult job for the Pension
Service. For instance, during the first year of the MIG campaign,
they got half a million claims processed from a much bigger base
at the DWP. A very small, new Pension Service is aiming to get
a million people through its system in half the time. It will
not have the time to talk to people on the phone and do the intensive
take-up work that is effective, as opposed to mail outs, which
will pick up a certain proportion of people, but not all.
37. If you think that the Pensions Agency
cannot do the intensive advocacy, face to face work that you are
talking about, who can? What other methods could the Pensions
Agency employ to increase take-up? We saw Thora Hird on the television
advertising the MIG. Are you saying that those sorts of television
adverts do not work?
(Ms West) The latest figures I have seen for the Government's
MIG take-up campaign and all the other initiatives that were carried
out at the same time are that it resulted in 127,000 extra claims.
This is good news but it is not getting to everybody. It should
also be remembered that it was at a time when income support,
MIG, income and capital rates were increased, so the DWP were
expecting over 100,000 extra claimants just as a result of the
change in the rules. It has been good but it has not got to anywhere
like the number of people that can claim. A lot of the things
that the Pension Service are proposing we would be very supportive
of. All the organisations here meet regularly with the DWP. We
have been talking about their initiatives, and these are things
that need to be done. We will cooperate and work together as much
as we can. They will be contacting people, but it is a matter
of looking at it each and every year because, depending on the
uprating policy, new people will come into entitlement to the
Pension Credit every year. It is a very big, ongoing task.
38. It is all too easy to fall into the trap
of putting all 11 million pensioners in one compartment and they
do not all belong in one compartment. Which of the particular
groups of pensioners do you think will be the most difficult for
Government to access and to encourage to take up the Pension Credit
and what methods can we use to approach those particular groups?
(Mr Wilson) Ethnic minority pensioners will be a big
problem. Evidence would suggest that very few people from ethnic
minorities take advantage of the MIG phone line, which is a primary
way of communicating with the Pension Service. People for whom
English is not a first language are not taking up the language
facilities. For them, there are very few other ways of accessing
the system. A lot of the time, it is an issue of confidence in
being able to assert your rights and your entitlements.
(Mr Lishman) On the evidence, the people who are least
likely to take up are the oldest, poorest, most likely to be living
alone. They are likely to be living in isolated areas or areas
without a strong community. Coastal towns are one example of that
which affects take-up in a number of areas. Can I suggest though
that perhaps the Committee might bear in mind in talking to the
Minister, that the onus on this question of take-up really has
to be on the DWP. We know the figures. They are not proposing
something new for the first time to see if they can make a significant
difference. They tell us that anything up to three quarters of
a million older people are entitled to MIG and are not taking
it up. If they are not making inroads at that level of three quarters
of a million, their top side figure, they have to be very convincing
to say that there is a justification for bringing a much larger
number of older people also into a system where they will be reliant
on that take-up process in order to get basic benefits.
39. Mr Lynes, do you have anything to add to
(Mr Lynes) Yes, the other point that I think is important
is that, firstly, the Pension Credit itself will be a good deal
more complicated than the existing MIG and, secondly, that people's
financial situation, generally speaking, is getting more complicated
all the time. With the number of people now retiring with two
or three small bits of occupational pensions and with savings
that they have invested in various ways over the years, it is
much more difficult to go through the process of claiming a means-tested
benefit in that situation than it was perhaps in the old days
when chances were all you had was the Basic Pension.