Select Committee on Work and Pensions Minutes of Evidence

Examination of Witnesses (Questions 25-39)




  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 Pensioners Convention.
  (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 too.
  (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.

Miss Begg

  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 work through.

  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 savings incentives.
  (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 testing?
  (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 the Government.
  (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.

Mrs Humble

  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 that?
  (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.

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