Letter to the Committee from the Pension
and Population Research Institute (PAPRI) (PC 12)
In response to your Press Notice of 7 December,
I now submit the following statement on behalf of PAPRI as a submission
for your enquiry.
At the same time I would also like to support
the submissions by the Institute of Actuaries and the National
One hopes it is not too late for the government
to modify their plans in the light of what you will eventually
recommend. I would urge you to hear oral evidence from the National
Pensioners Council and from the Pensions Industry.
Would you also like evidence from myself and
Alan Smallbone, trustee of PAPRI? I would be glad to throw what
light I can from my researches on the social aspects of pensions
here in the UK. The greater reliance on means testing inherent
in what the government are proposing has particularly undesirable
implications in a British social context. And what the NPC call
"the major uncertainties regarding future uprating of pension
credit" will cause difficulties for pension providers marketing
the new Stakeholder Pensions under the current regulatory regime.
Alan Smallbone has campaigned on the plight of the Early Leaver
disadvantaged by Final Salary pension schemes.
As has been pointed out by the National Pensioners
Convention (NPC) there are inherent defects in the means-testing
proposed with the introduction of Pension Credit. The already
complicated benefit system in the UK is being further confused
by the introduction of what amounts to a new disregard. It is
regrettable that the DWP (formerly DSS) are now planning to bring
much larger numbers of pensioners within the scope of means-testing
rather than make progress to a restoration of the earnings link
for the contributory old-age pension.
Alastair Darling is mistaken in imagining that
the new Pension Credit will "tackle the injustice of the
system we inherited which penalises thrift". As the NPC response
to Pension Credit says, there is a massive increase in means-testing
implied because the effect "is to raise the cutoff point
for what is now called the MIG". In future, savers will be
caught by the new Pensions Credit.
When it is said by the Secretary of State that
it would "increase guaranteed incomes, end the weekly means
test and reward thrift", he is obscuring the further institutionalising
of means-testing that is implied. There is moreover no recognition
that the existence of the new Pension credit system will inhibit
marketing of the new Stakeholder Pensions to those on moderate
Besides being objectionable in principle, the
new Pension Credit seems unsound administratively because it does
not operate consistently with the present system of Housing and
Council Tax Benefits which are also means-tested now. From page
24 of the consultative document, it is apparent that there is
no known solution to this difficulty.
Resentment and Unfairness
Those who are disqualified from Housing and
Council Tax Benefits by receipt of the new Pension Credit will
be treated harshly. There will also be resentment felt by those
who are just above the limits so they do not benefit from Pension
Credit. A leading actuary has said the new features with MIG and
Pension Credit being both introduced are "bizarre. . . what's
the incentive to save through stakeholder if MIG exists".
(M. Arnold, Pensions Age, February 2001). Both MIG and the new
Pensions Credit are supposed to be designed to assist those earning
low and moderate incomes.
Degradation in Old Age by those who are found
to have claimed dishonestly
Inevitably there will be some who will be tempted
to avail of the new Pension Credit by making dishonest claims.
It is regrettable that when they are discovered these pensioners
will have a degraded old agethese are likely to be the
very people who have made some savings and provision for old-agethat
were the group for whom the Pension Credit was designed to help!
10 January 2002