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'but shall exclude any income derived from PEPs, TESSAs or ISAs.'.
'but subject to the restriction that the income implied by any capital holding shall not exceed the current Bank of England minimum lending rate plus two percentage points, to be averaged over a twelve month period prescribed in the regulations.'.
Paul Holmes: I want to discuss the apparent contradiction in Government policy in relation to encouraging people to continue in some degree of employment after reaching the legal age of retirementa contradiction that has already been discussed in the Select and Standing Committees.
The Cabinet Office report "Winning the Generation Game" stated that older workers should be encouraged to stay in work and that more flexibility should be available in terms of retirement. The Government have often said that they are keen to maintain and even improve the ratio of workers to pensioners, but their pension credit proposals have been widely criticised as effectively discouraging people from doing part-time work after retirement.
It is widely accepted that encouraging older people to continue in at least part-time work if they wish to do so is a desirable aim. With an increasing proportion of elderly people in the population at large, it makes economic sense for the nation to retain for longer the work contribution, skills and expertise that are based on the years of expertise that older people have. It also makes financial and personal sense for many individuals to continue working for at least part of the week after
Despite the widespread agreement on those views in all quarters and the Government's stated intention of encouraging more pensioners to continue in work, Government policy on pension credits seems designed to achieve precisely the opposite effect. The Select Committee made that point clearly in its second report of 200102, which pointed out that the Government's proposals on pension credits disregard only the first £5 of earnings. After that, the equivalent of 40p in the pound is clawed back, effectively imposing a top rate of income tax on pensioners' part-time earnings. The Committee made this observation:
Our amendment offers a simple and clear method of meeting those aims by disregarding those parts of a claimant's hourly earnings that are equivalent to the rate of the national minimum wage. That would achieve two things. First, it would encourage flexible retirement instead of discouraging it, as does the Bill. Secondly, it would provide a real cash incentive to people who wish to continue working after reaching state pension age. As those are supposed to be the stated aims of Government policy, I hope that the Minister will be able to accept the amendment. Or are the Government telling pensioners that they are not prepared to allow them to earn even at the level of the national minimum wage without seeking to impose on them the equivalent of the higher rate of income tax?
The first of those is the treatment of compensation funds in cases of industrial injury or medical negligence. How will the Bill deal with income from such funds as regards the pension credit? It is fair to say that this subject generated considerable interest in Committee, not only from my hon. Friend the Member for Daventry (Mr. Boswell), but from the hon. Member for Bassetlaw (John Mann), who drew our attention to the cases of several of his constituents who would be very interested in these provisions. Those cases are deserving of consideration by the House. It is important to revisit the issue, and we await the Minister's response with interest.
Amendment No. 15 deals with income derived from PEPs, TESSAs or ISAs, which is another matter that we raised in Committee. Hon. Members may have heard sufficient of my views on the generality of savings, but this issue falls within that generality. How will those important savings vehicles be dealt with? We are conscious of their general position within the policies of this and previous Governments.
Amendment No. 16 covers the treatment of income from capital. In respect of savings above £6,000, a notional rate of income will be set at around 10 per cent. after that disregard of £6,000. There has been a development since we considered the matter in Committee. The Government had said that well over 80 per cent. of pensioners have savings that fall below the £6,000 disregard. Indeed, the Secretary of State told the Select Committee:
Against that background, we believe that matters now have a different complexion. We need to hear more about it and, as my hon. Friend the Member for Daventry said in Committee, one would be struggling nowadays to find something that produced a 10 per cent. return on capital. Indeed, a substantial number of pensioners have savings of more than £12,000. The Government's proposals for the treatment of savings assume that they earn between 5 per cent. and 10 per cent. on their savings. We want to hear more ministerial comments on that and I am sure that savers want to hear more from the Minister about the treatment of their income from capital under the Bill.
John Mann (Bassetlaw): I reiterate briefly comments made in Committee about industrial injuries. I pay tribute to the hon. Member for Daventry (Mr. Boswell) for adding medical negligence to that in Committee.
Industrial injuries are disproportionately important in the coalfields. The recent judgment and the roll-out of compensation in the next year or so mean that many retired miners will receive compensation for bronchitis, emphysema and vibration white finger. In the majority of cases, the compensation will exceed the capital limit of £6,000.