Select Committee on Work and Pensions Appendices to the Minutes of Evidence


APPENDIX 15

Letter from UNISON to the Secretary of State (PC 19A)

THE PENSION CREDIT CONSULTATION PAPER

  I am writing to focus on a couple of issues of particular importance to the 1.2 million members of UNISON regarding the proposals to introduce a Pension Credit.

  First of all I welcome the idea of a Pension Credit, as not only is it a good idea but I would suggest utterly essential for the effective operation of the Minimum Income Guarantee. Most of our members are both relatively low paid but also contribute towards a second pension in an employer's pension scheme.

  We certainly believe that there should not be a savings trap to penalise those who would otherwise have qualified for a Minimum Income top up. Without a Pension Credit, not only will Stakeholder pensions be impossible to promote amongst the low paid it may also be difficult to persuade existing low paid members to remain members of their employees pension schemes.

  We are concerned that the proposals for the Pension Credit will effectively knock off 40p for every pound of pension earned. Even with the partial offset it will be difficult to persuade a lot of our members to contribute to second pension provision as it could be demonstrated that earning small amounts of pension will still represent bad value for money in view of what will be undoubtedly seen as low paid members paying a "40 per cent marginal rate of tax" on their pension. We are also concerned that it would appear only pensioners with an Income under £135 per week and couples under £200 per week are likely to benefit at all from the Pension Credit.

  When responding to the Government's paper on Partnership In Pensions in March 1999, it was our view that a Minimum Income for a single person at that date should have been at least £150 per week and this view was shared by Age Concern. It is our view that a proportion of low paid members would achieve this level of income with a small second pension on top of their Basic State Pension and SERPS. It would be pernicious then that the income for this group would be clawed back by suffering a reduction of 40p in the pound on the entire second pension that they have earned.

  Although we welcome what the Government has done in providing additional income to the poorest pensioners without any second pension, and standing firm on issues such as the Winter Fuel Allowance, and free TV Licences for those over the age of 75, we believe that the Government will be open to serious criticism on the point of means testing the pension for those on the lowest incomes. We would ask the Government to think again on its proposals, on offsetting every pound of pension. We suggest that if the Government cannot go the whole way in removing means testing altogether for the low paid, it should at least allow a certain level of second pension to be earned without any offset applying against the Minimum Income Guarantee. From our figures we would suggest that the income from State Pension and second pension should at least equal £1.60 per week before the 40p in the pound offset was applied.

  The other major concern that we have on these proposals is that during a period of a rapidly rising Minimum Income Guarantee there will be no Pension Credit in force until April 2003. We cannot see any reason why there should be a delay of two years as this will act as a significant disincentive for members to make any pension provision during the next two years. This may well hamper those who will be trying to persuade members to contribute to Stakeholder pension and/or to join their employer's pension schemes.

  It may also have the effect of dissuading many women who have suffered discrimination as a result of being denied membership of their pension schemes because they were forced to work part-time. The recent judgement in The House of Lords has made it clear that such members are likely to have to pay employee contributions for the back period. This being the case it will be extremely difficult to persuade members who are likely to be within the range covered by the Minimum Income Guarantee to pay lump sums to purchase a pension, which will effectively be offset by 40p in the pound. This will mean that it will effectively be the tax payer that picks up the full cost of the discrimination perpetrated by employers in not allowing low paid members to join the pension schemes in the first place.

  I hope you will accept the above comments as constructive criticism of what we view as in principal a good idea. We certainly support the view that the Pension Credit should come into force from age 60 for both men and women. We also support the views of the TUC submission, in particular the concerns over the treatment of pensioner couples and the suggestion for the help for the poorest pensioners.

  We consider the issue of Pension Credit to be a very important one for our members especially in a period where employer pension provision Is under attack and many of the large employers are threatening to change otherwise good employer pension schemes from defined benefit to money purchase Stakeholder provision for new employees. We would welcome further discussion on this issue. Please feel free to contact either myself or Glyn Jenkins, UNISON's Head of Pensions if you require further clarification or comment

David Prentis

General Secretary

28 February 2001


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 12 April 2002