|State Pension Credit Bill [Lords]
Mr. Webb: In the circumstances that the Minister describes, will it be an offence not to report an anticipated major change in income? If I knew that I was going to receive an endowment payment in six months' time, I would rather not tell the Department and have an assessment made for five years, knowing that when it did happen I could then say that it could not affect my entitlement for five years. However, it is fraudulent to fail to report something that is known to be coming down the track. I realise that one cannot always know with certainty when one is going to draw down such moneys, and one may not have known at the time of the claim. Are we about to open that can of worms?
Mr. McCartney: It is not a can of worms. On the previous amendment, we said that fraud among pensioners was extremely low and would remain so, and that pensioners themselves were committed to opposing fraud. If, with pension credit or anything else, someone deliberately and with absolute knowledge concealed a substantial income, theirs would be a fraudulent claim.
Mr. Brazier: Future income?
Mr. McCartney: No, we are not asking people to speculate about future income.
Mr. Clappison: Will the Minister give way?
Mr. McCartney: No. We are not asking pensioners to speculate about the next 12 months. For example, if, during the process of applying for basic pension credit for his state pension, someone states that he has an occupational pension that is not yet due, that is giving known facts, not speculation. It is not as though he were about to win the lottery but didn't know it. He will have received something from the Prudential, or wherever, stating a set date—those of us with endowment policies have all seen such statements—and will know. If it happens that the set date for the payment of the endowment is later than the date of the commencement of assessed income period, it is more than reasonable for that to be notified to the authorities.
Mr. Clappison: There is the issue that has just been raised about fraud. Besides that, people, particularly
Column Number: 177older people, are conscious of the need to be honest and to give a full report. They are likely to be apprehensive when they are asked about things that might happen in the future, and they are uncertain as to exactly what they must report. They find it very off-putting.
Mr. Boswell rose—
Mr. McCartney: The hon. Member for Daventry is so keen that he wants to intervene now—but I shall give him a chance to get his breath back.
I can see the point being made, and for the purposes of the debate I shall take it as genuine. The procedure set out in the Bill concerning which income must be reported for assessment and which need not be is clear and limited. It seems reasonable. As they approach retirement, people have a good idea what their income is likely to be. The Pension Service bends over backwards to talk to them about it—it is a pensioner-centred service. It goes through the process meticulously with them, because if it does not, something might be missed that allows them additional income. It is a proactive process for gaining access to income, not a gateway to prevent people from having income.
The fears of the hon. Member for Hertsmere are groundless. The only person who would not want to give the information in such circumstances would be one who was trying to gain a fraudulent advantage, which would occur only in a minority of cases. We have to take account of that, but in the genuine cases—there are some—in which a pension is to be paid later, or endowment or other income will come on stream, people should report that. There will be a shorter assessment period subsequent to the payment, then the five-year period will kick in.
Individuals may receive a windfall for some reason. We have covered that possibility, and we know the rules. There is a clear distinction between a windfall gain and additional income gain, if that has not been part of the net changes in terms of the income assessment period. Where there is a narrow focus on a range of income that will impact on the outcome of the application for pension credit, there should be an obligation on people to report it.
Mr. Boswell: I am deeply sorry that I had to miss the discussions this morning, and I will read the report of them. I shall just comment on the Minister's specific point about an endowment policy vesting on a certain day. I understand why he wants people to level with the Pension Service that that might happen. However, some kinds of asset are not formally under the pensioner's control because they are held in a fund or elsewhere, without an absolutely set vesting day. There might be an element of discretion on the part of the pensioner, and in such cases there is a potential difficulty. A pensioner who may choose from a number of dates, and who knows that that could be relevant to the pension credit assessment, might choose a date beyond the period. He might do it in good faith and be exculpable. However, the Minister must make sure that the regulations are clear about what would happen if the date were ambiguous. When
Column Number: 178would the asset be deemed to come under the pensioner's control?
Mr. McCartney: I shall give a short resumé of this morning. I was 99 not out and was caught leg before wicket by the hon. Member for Northavon—that is the best way to explain it.
The hon. Gentleman raised a simple point. The rules are quite clear. If pensioners know that they will receive additional income, from whatever source, and that that will have an impact on their application for pensioner credit, they have an obligation to inform the Department. Any ambiguity will be resolved because they and the Department will determine between them the date on which they will begin to receive the additional income. That date could fall outside the 12 months. For example, if they began to receive it in 12 months and one day's time and it represented a significant increase in income, the decision maker may have to take that into account in a positive way, given that we want people to be able to maximise their income. It may well be that there is no good reason to take date B rather than date A, but there will still be a requirement for the pensioner to notify at the point of application that they are to receive additional income.
Annabelle Ewing: Let us consider the mechanics of the measure. My experience as a lawyer dealing with financial institutions such as pensions companies is that it takes a lot of time to get information from them. What impact would that have on when the pensioner receives pension credit?
Mr. McCartney: I accept that when lawyers get involved all sorts of delay can arise.
The Pension Service has devised the application process for pension credit in such a way that at the time of the initial assessment, the key elements of what is required to meet it are in place. In ensuring that, the Pension Service will assess the pensioner. We have had this discussion in debates on other clauses. I understand the hon. Lady's point, but I do not see that there is a difficulty with respect to this clause. Irrespective of the paperwork from a particular insurance company, what is important is the fact that it is known that during the first 12 months of the assessment period a substantial sum will become available to the pensioner through either an endowment or the commencement of a works pension. It seems reasonable for it to be a requirement to notify at the point of application and for that to be taken into account in determining a shorter assessment period.
Mr. Brazier: May I raise again the question of income from work? Let us take two similar scenarios. In one case, someone retires intentionally from an area in which he has a particular specialist skill. He has his assessment and just weeks later he is approached, to his total surprise, perhaps by one of his former employer's competitors, and offered some well-paid part-time work. He decides that after all he is bored with gardening, and accepts the offer.
The second scenario is exactly the same, except that at the point at which the man fills in the assessment form, he knows that the approach from the competitor
Column Number: 179is about to be made. What would happen in those two cases?
Mr. McCartney: We are into individual cases here. If the man knows that the approach is going to be made and asks for it to be put off so that it does not affect his assessment—well, he should consult a lawyer before he does that. If the approach is made outside the assessment period, any earnings would have to be reported and taken into account, as they always must be. The money might take the form of a windfall payment and be disguised as something else, but it is unwise for people to try to be clever with a system and lead themselves into fraud. That is the important point: if a financial change is foreseeable during the 12-month period, they need to report that.
Secondly, rather than take a snapshot of income we want to review it over a five-year period. I hope that that helps the hon. Member for Perth. That is an important change: any foreseeable change between the second and fifth years is ignored. Only the first year is relevant, which is more than reasonable. We have got the balance right by following that policy for the first 12 months, after which, in years two to five, the virtuous circle kicks in and pensioners receive the benefit without losing out. When a change takes place that is not a benefit, they gain access to additional income. I do not think that anyone could expect a Government to juggle those three balls without dropping them, when all the balls in the air are 100 per cent. to the benefit of the pensioners. That is a radical departure from previous arrangements.
Mr. Brazier: I just want to make something absolutely clear about the answer that the Minister gave me on earnings and his answers to similar questions in earlier debates. If a pensioner is earning as a result of part-time work and, as is the nature of part-time work, his earnings fluctuate from week to week, will he have to have weekly assessment? Will he give me a yes or no answer to that question?
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