Mr. McCartney: The hon. Lady makes a good point. I can assure her that when we design all the materials that the Pension Service will send out, we will sit down with pensioner groups from the beginning and agree the design, content and language. We have a group that already does that, and because of many of the changes that have already taken place, the materials that we have produced are quantifiably better than in the past—irrespective of the party in Government; this is not a partisan point. That has happened because we have put a new system in place.
I would be happy to write to the hon. Lady and the rest of the Committee, but the process is simple. The statement will set out the entitlement, the guarantee and the credit, how the figures have been established, what payment arrangements are in place, and what the bottom line is. It will also include clear points of information about the simple easy way to gain access to the new Pension Service.
Any materials produced by the Pension Service, for whatever reason, must be compatible with older people's organisations and language. It is also important to remember people whose first language is not English, and those who have disabilities such as visual impairment, and to produce materials that are accordingly sensitive. They must not lose out or receive a service that is any less first class than those without disabilities receive. The hon. Lady's point is well made and will be taken into account when we produce materials for the Pension Service that will help pensioners with their relationship with the Department. I hope that now that I have made those remarks, we can agree to the clause.
I shall make one final point, so that later we can have some continuity with the comments of the hon. Member for Northavon. Under his proposals on state pensions, 80 per cent. of pensioners will still qualify for the minimum income guarantee through a means test. I look forward to further discussion on that subject, and I ask hon. Members to support clause 6.
Question put and agreed to.
Clause 6 ordered to stand part of the Bill.
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Fixing of claimant's retirement provision
for assessed income period
Mr. Clappison: I beg to move amendment No. 29, in page 5, line 15, leave out 'except in prescribed circumstances'.
The Chairman: With this it will be convenient to take amendment No. 28, in page 5, line 17, leave out paragraph (b).
We have had a wide-ranging debate, which is not unreasonable as clause 6 is the first of five related clauses. However, from now on I shall be eagle-eyed, and I shall be grateful if the Committee keeps closely to the amendments that we are debating.
Mr. Clappison: At the risk of having my words picked up and swept away under your eagle eye, Mr. Atkinson, I shall say that I think I can manage to stay in order in talking to amendment No. 29. It is a simple probing amendment concerning the technicalities of clause 7, which according to the explanatory notes establishes that
''Specifying an assessed income period has the effect of fixing, for that period, what is to be treated as an element of the claimant's retirement provision''.
That is important when it comes to determining how much the pension credit is going to be.
Subsection (4) creates a mechanism for making adjustments to the amount of retirement provision. The explanatory notes say:
''The intention is that the regulations will provide for the amount of income from a pension or annuity to be deemed to increase from time to time in line with the terms of a claimant's pension or annuity arrangements and for the rate of return on capital to be treated as adjusted from time to time. In some cases, the assessed amount may be deemed to stay the same.''
The subsection provides that the assessed period should be deemed to change in that way ''except in prescribed circumstances''. We would simply like to know what those prescribed circumstances might be, and when the amount would not be adjusted in line with changes in pensions and annuities, as the explanatory memorandum is silent on that point. The purpose of the amendment is to deem which prescribed circumstances would be an exception to that rule.
Amendment No. 28 concerns subsection (4)(b), which provides that the assessed amount of income from capital may be increased or decreased by regulation. We would like to know a little more about how return on capital is to be so adjusted, particularly in the light of earlier remarks. It would be helpful to have an extra explanation of that.
Mr. Webb: Subsection (4) deals with the way in which someone who makes a claim for pension credit will have imputations made about their income from capital for up to five years, which is the period between making claims. The innocent-looking subsection to which the amendments relate has the potential to be the administrative nightmare of the pension credit. I am grateful to the hon. Member for Hertsmere for tabling amendments on subsection (4), as they will give us the opportunity to hear from the Minister how the
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process to which the probing amendments relate will work.
An individual might report an occupational pension at the start of the five-year period. The subsection says that the Government may make an assumption about what happens to income from that pension in the next five years. The assumption might be that it should rise in line with inflation. There would then be a recalculation each year, because there would have to be an annual recalculation of the pension credit anyway, as all the rates will change. The recalculation will be made on the basis of a guess as to what that occupational pension will have risen to one year on, two years on, and so on.
As soon as one says that, one realises the problem. People may have pension income from a multiplicity of sources. They will have worked for more than one employer, and may have annuity income and all sorts of private savings income. As I understand it, subsection (4) allows the Secretary of State to deem an increase for every one of those sources of income, according to the rules of the pension scheme. When people apply for the credit, in this unintrusive, bureaucracy-light or bureaucracy-free way, will they have to state the name and address of the pension provider of each pension that they receive? Will they have to stipulate the indexation rules for each pension of which they are in receipt—
Mr. Brazier: Some of them are discretionary.
Mr. Webb: Some of which are discretionary, as the hon. Gentleman says. If not, will that be a regulatory burden on the pension provider? In other words, will everyone who pays a pension to a recipient of pension credit have to tell the Department for Work and Pensions the uprating rules for each pension paid, which will differ?
Will the system be based on an individual-specific assumption about indexation—the ''deeming'' in subsection (4)—for each pension that each claimant receives, and who will provide that information? If so, that will involve an enormous administrative cost. If not, will people be deemed, using a broad-brush approach, to, for example, have added price indexation when many of them will not have done? Although over one year at 2.5 per cent. inflation that might not worry us too much, over five years at 4 per cent. inflation, for example, it could worry us considerably. Either a guess will be made that could be badly wrong and lead to people seriously missing out, or a specific and individualised calculation will have to be made for each pension and recipient, which will mean a huge administrative and regulatory burden. Either of those avenues would worry me. I hope that, when he responds, the Minister will make it clear exactly how the process of deeming will work.
Mr. McCartney: I shall first answer some questions. We intend to use the power for pensioners who enter retirement homes, when their capital disregard increases from £6,000 to £10,000. That will be significantly beneficial.
I take the hon. Gentleman's point that the proposals seem bureaucratic. As we said earlier, making pensions simpler can be complex in the back
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room, but the complexities lie with the Pension Service, not the pensioner. He asks the legitimate question, will this be a bureaucratic nightmare for older people? The answer is no. Each stage in the assessment will include safeguards, some of which will be automatic. If the assessment is wrong, pensioners themselves can intervene and tell us, and a relationship will develop between the older person and the Pension Service.
Clause 7 is part of the family of clauses 6 to 10 and is designed to help pensioners in their relationship with the Department. Subsection (4) ensures that foreseeable and regular changes in retirement provision are taken into account during an assessed income period. The words ''foreseeable and regular'' are important. The one thing on which we agreed in the previous debate was that the income of the vast majority of pensioners is stable, as are, generally, the sources of that income. That does not constitute a huge burden, as part of the claims process is establishing the rate and timing of second pension increases, using information from either the pensioner or, with permission, the provider. Only if we cannot establish the actual rate will we deem the rate to be that of the September retail prices index. Again, that is part of a process that takes place now. Every September, an RPI rate is deemed that everyone knows and understands, and we are using that.
The provision is intended to allow for annual increases in second pensions and annuities and to allow us to give effect to a change in the rate of return on capital or the amount of capital disregarded within an assessed income period, which will be done automatically.
Mr. Brazier: Will the Minister give way?