State Pension Credit Bill [Lords]

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Andrew Selous (South-West Bedfordshire): I shall speak briefly about earnings. The Minister will know of the recommendations made by the Select Committee on Work and Pensions in paragraph 42 of its report. It recommended that the first £40 of all weekly earnings should be disregarded when calculating pension credit.

This generation of pensioners is healthier than previous generations, and many pensioners wish to continue in the labour force, perhaps in part-time jobs. Pensioners who live alone find that the opportunity to get out of their houses to be with former work colleagues is extremely valuable. Age Concern made that point when it gave evidence to the Select Committee, and all members of this Committee probably received an e-mail from Age Concern yesterday asking for that point to be raised today. I shall be interested to hear the Minister's response on that.

Mr. McCartney: I see the amendment as a scene-setter for a more substantive discussion on clauses 15 and 16. I shall try to paint a broad picture, and a more detailed discussion of Opposition Members' contributions may be best dealt with during our consideration of those clauses.

Although the amendment appears to be a draconian attempt to blow a hole in the Bill below the water line, I accept that that is not the intention of the hon. Member for Daventry. He has floated several ideas to see what comes back from the fishing expedition.

Subsection (2)(a) shows that entitlement to savings credit is based on a claimant's qualifying income. Subsection (4) shows that the calculation of the savings credit is also based on the amount of a claimant's qualifying income. If the amendment were accepted, without removing the word ''qualifying'' from subsections (2) and (4), we would be left with a calculation without a definition of the terms on which it is based. In effect, no one would be rewarded for thrift—the hon. Member for Daventry said that he did not intend for that to happen.

The concept of a qualifying income is important to both the working of the savings credit and the principles behind it. We want to reward specifically people who put away money to provide for retirement. Many people have to take difficult decisions when

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finding money to put into second pensions and general savings. We also want to reward people who continue to work after pension age.

We intend to prescribe qualifying income as all income defined in the Bill as retirement pension income, which is mentioned in clause 16, in addition to income from capital, annuities and earnings, which is defined in regulations under clause 15. Those income streams represent either a pensioner's savings during their working lives or, in the case of earnings, a pensioner's continuing contribution to, and participation in, the work force.

We do not think that it is right that some elements of income are rewarding. We would not want pensioners to be rewarded for their earnings through the new working tax credit. It would be absurd for that income to reward pension credit—it would be a credit on top of a credit. Similarly, if a pensioner had a younger partner in receipt of incapacity benefit, we would not want to reward that benefit—that would be bizarre.

I shall paint in the field, and give an extensive, but not exhaustive, list of items that will not be treated as income or that will be treated as income and totally ignored—they will not be defined as income under the Bill. The list includes: attendance allowance, disability allowance, and similar elements of war pensions; payments in respect of dependant children, including integrated child credit, and any other income or capital of those children; rent from second properties, as capital value is taken into account; actual income generated by a person's capital, as we take notional income into account; payments from local authorities, where persons provide foster or respite care; payments from the independent living fund, the Macfarlane or Eileen trusts, and community care direct payments. Other items that we are proposing to disregard also include cash in lieu of concessionary coal, voluntary payments from relatives and charitable payments—which the voluntary sector will be pleased to hear.

Mr. Boswell: It is useful to have this list. I am not trying to trap the Minister—I might just have misheard—but did he say that if there is income from compensation funds paid to, for example, a person who was injured in childhood and still has the capital, that that income will be included? I think that that is at least a possibility, and he might wish to write to me on that subject.

Mr. McCartney: I referred to the Macfarlane and Eileen trusts and the independent living fund. I also said that it was not an exhaustive list, and that I am still considering adding to it, so I could include compensation arrangements. I know that the hon. Gentleman is not trying to trap me, but I hope that he can see that we are trying to make this as extensive an operation as possible to ensure that the widest possible notion of income can be disregarded to maximise the potential for people to get access to the credit.

Income is relevant to the guarantee calculation; for single people, the top up is £100, and for couples the sum is £154. There might be other obscure forms of income that I have not yet come across but, in this business, we learn something every day. That is why

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we have given ourselves powers to add to the list under clause 15 (1). Again, I will give examples of what we are talking about: regular payments from United Kingdom occupational and personal pension schemes, and their foreign equivalents; payments from retirement annuity contracts; annuity income funded from other sources, for example from a home income plan or where a similar or associated loan is secured on a person's home that will be offset with regard to the interest that the person has to pay on that loan; assumed income from capital, so that actual income from capital will be ignored, but income at £1 per week for each £500 or part thereof will be assumed, based on the total value of the capital assets of the claimant and their partner in excess of £6,000—or £10,000 in residential care cases.

The value of some types of capital assets, notably the person's home and personal possessions, will be ignored. We have done it that way because, in the consultation, older people's organisations overwhelmingly supported assumed income in the way that I have described. That is important, because we want older people to understand how the system works.

The current minimum income guarantee disregards will be carried forward into pension credit: single pensioners will receive a £5 disregard, couples a £10 disregard, and a £20 disregard will apply in other prescribed cases. People who are currently entitled to higher disregard will continue to receive it. Earnings that are disregarded will not be taken into account in a guarantee credit assessment. War disablement and war widows' and widowers' pensions, and the whole of any war widows' supplementary pension—which is paid in addition to the normal pension to certain pre–1973 war widows—will be ignored, as will the first £10 of other war pensions, including foreign war disablement and war widows' and widowers' pensions. With regard to matrimonial maintenance payments, working tax credit, employers' sick pay, and the Nazi persecution pensions paid by the German and Austrian Governments, the first £10 will be ignored. Rent from lodgers, boarders or sub-tenants will also be included in the calculation of the guarantee.

Qualified income is defined in clause 3(6). That relates to calculations for the awards. The relevant sum for single people is £13.80, and for couples it is £18.60. Other income is also relevant: regular payments from United Kingdom occupational and personal pension schemes, and from their foreign equivalents; payments from retirement and annuity contracts; annuity income funded from other sources; assumed income from capital; earnings; the current disregards that I have set out and retirement pension and any foreign equivalents, including the 25p age addition; graduated pension; age addition; SERPS, including a notional amount for a retired pension for those who have deferred their retired pension. In addition, amounts paid in respect of children will be disregarded.

I hope that hon. Members can understand how much work is going into putting the framework

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together to maximise both the opportunity for the minimum guarantee and the reward element. Certainly, there are difficult issues. Hon. Members raised some that might be better debated under clauses 15 and 16. I hope that that information will give them an idea of how the Government intend to deal with the issue of maximising the uptake of pension credit.

Mr. Boswell: I am grateful to the Minister, because he has elucidated some of the Government's thinking. He has provided a list that will help not only members of the Committee but organisations that represent older people to think of possible gaps such as those that he identified. I was pleased that he expressed a willingness to keep an open mind as to whether other categories of income might come under that list. He also said that we will have time in our considerations of the Bill, let alone before subsequent regulations are made available, to discuss whether certain kinds of income should be included, and how they should be treated if they are.

The Minister is right to say that it would be appropriate to talk about income and earnings, subjects to which he will want to return, under clauses 15 and 16. I was not proposing to belabour the point on the amendment. I thank him for what he has said so far, and express qualified satisfaction with that. Although there are matters to which we must later return, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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