Third Standing Committee
on Delegated Legislation
Monday 8 July 2002
[Mrs. Marion Roe in the Chair]
Draft State Pension Credit Regulations 2002
The Parliamentary Under-Secretary of State for Work and Pensions (Maria Eagle): I beg to move
That the Committee has considered the draft State Pension Credit Regulations 2002.
Before I pitch in to the meat of the regulations, I welcome you to the Chair, Mrs. Roe. It has been a hardy little band of us who have dealt with all the primary and secondary state pension credit legislation, but this is the first time that you have had what I hope will be the pleasure of keeping us in order. I hope that I speak for all Committee members when I say that we do not intend to give you too much trouble on the disciplinary front, but who knows how things will go? I welcome you to the resumption of deliberations.
The draft regulations are lengthy, and I want to set out briefly the principles behind them and give a little detail on some of them, while leaving as much time as possible for hon. Members to raise issues and ask questions. At first sight, these 50 pages of close-typed legislative speak can look quite daunting.
The draft regulations deliver on our commitment to pensioners to give them a reward for having saved. They will not penalise saving, as the current system does. They attack pensioner poverty, by raising our weekly minimum guaranteed income for pensioners to at least £100. With pension credit, the average pensioner household will be over £1,150 a year, or £22.50 a week, better off than in 1997 because of the Government's personal tax and benefit changes. The regulations will abolish the weekly means test from the age of 65, which remains the single biggest barrier to pensioners taking up their entitlement.
The content of the regulations was heavily rehearsed in our debates on the primary legislation, so I do not expect that hon. Members will have spotted any surprises. The regulations may look rather forbidding, but they have to be comprehensive and to cover every eventuality, even though it is undoubtedly the case that much of the text will in practice affect very few pensioners. We have designed the pension credit to suit the needs of today's pensioners, with arrangements that are markedly different from both income support for working age people and the weekly means test that still repels many pensioners from taking up their entitlement. Where possible, we have also used as much as we can of the existing system. We need to introduce the credit as quickly as possible by using the IT systems that we already have to ensure a smooth transfer to pension credit next year for the 1.8 million pensioners on the minimum income guarantee.
In the main, the draft regulations cover people not in Great Britain; couples who live apart; the
Column Number: 4
calculation of the guarantee credit; the assessment of income and capital; the savings credit; and the assessed income period. I will briefly take each of those in turn, starting with residence. Pension credit, like income support, but unlike the state retirement pension, will of course be funded from general taxation. Regulations 2 to 4 set out the circumstances in which it should not be payable to people with little or no day-to-day connection with this country, as well as the usual exceptions.
Mr. Julian Brazier (Canterbury): Does the Minister accept that she has already contradicted her original aim of doing away with disincentives to save by making it clear that the benefit will be seen not as something that people have acquired by right of contributions of any sort but as a benefit that will be treated in the same way as income support? It is a means-tested benefit with all the rules of residence with which the regulations are loaded.
Maria Eagle: I understand the point that the hon. Gentleman makes, because he and his colleagues had something to say about that during the passage of the primary legislation. This part of pensioner entitlement will be funded from general taxation and so is part of the package of support that we have designed to ensure that pensioners in this country are not left in poverty. It is, therefore, designed for those who remain in this country. I think that that is the explanation that the hon. Gentleman seeks, although I do not expect that he will agree with it.
Regulation 5 provides for circumstances in which a couple are to be treated as no longer part of the same household. Again, the provisions mirror those that already apply to income support. The guarantee credit, the core of pension credit, is in regulation 6, which gives the amount of the guarantee credit for when the legislation comes into force. That will be not less than £100 a week for a single pensioner and £154 a week for a couple. I know that hon. Members who sat through the primary legislation Committee will recognise those figures. There is no surprise in them, but hon. Members should also be aware that the amounts in the draft regulations will be covered by the Secretary of State's annual review of benefit rates in the autumn. The uprating order, which the House will consider then, will provide the final figures that will apply when pension credit is introduced in October next year.
Schedule I sets out additional guarantee credit amounts, on the same basis as in income support, for severely disabled pensioners, for carers and for pensioners with entitlement to transitional additions. Schedule II covers those with housing costs.
Our approach to income and capital assessments in pension credit will be vastly different from the stigmatising weekly means test of the past. Under income support, pensioners are obliged to report to the Department every element of their income and savings, and every change that happens, as it happens, week by week.
Mr. Brazier: Does not the Minister accept that that will continue to be the case for those who have earnings? Although she argued repeatedly in Committee on the primary legislation that that was a
Column Number: 5
relatively small proportion of pensioners, it is acknowledged by people on both sides of the argument and by all those who are serious about looking at the pensions problem—something that is at last starting to concern the Government—that that proportion is going to rise rapidly.
Maria Eagle: The hon. Gentleman should be aware that the vast majority of people who will benefit from pension credit will have an assessed income period of five years. That will mean that they will not have to keep reporting minor changes that happen on a daily or weekly basis. He will be aware, because he sat assiduously through the Committee proceedings on the primary legislation, that there are disregards in respect of income. I recall, as I am sure do other hon. Members who were present during those proceedings, that there was some discussion about income disregards as opposed to other ways of dealing with earnings.
Our approach to income and capital assessment in pension credit will be different from the weekly means-testing of the past. Under income support, pensioners are obliged to report to the Department every element of their income and savings and every change that happens, as it happens. We have been able to take a radically different approach. All items of income that we wish to count are listed in the Act or regulations. Hon. Members can find them in regulations 14 to 24 and schedules IV, V and VI, which deal with their calculation. Everything else will be ignored and there will be no need for pensioners to tell us anything about it. That is a substantial simplification.
Those changes are not trivial. I shall give a few examples. Any money that pensioners receive from friends or family and any charitable payments, which must be reported under income support, will be ignored in the assessment for pension credit. As my right hon. Friend the Minister for Pensions announced on Report, compensation for personal injury will be completely ignored in pension credit. A pensioner who is attacked need not fear that we will stop her pension credit when she receives compensation. Nor will we withdraw pension credit from, for example, a miner who receives compensation for damage done to his health by his occupation.
We have removed other income support rules that are not relevant to pensioners. Although regulation 17(9) and schedule VI carry forward into pension credit the £5, £10 and £20 earnings disregards that already exist in income support—they are what the hon. Member for Canterbury (Mr. Brazier) just referred to—there will be no limit on the hours that a pensioner can work. Under the income support rules, pensioners must tell us about their hours worked, and if they work more than 16 hours in any week or their partner works more than 24 hours, their entitlement ends. That complication will be removed.
On the capital rules, as in income support, the first £6,000, or £10,000 for those in residential care and nursing homes, of a pensioner's capital is disregarded under regulation 15(6). Other existing income support capital disregards are listed in schedule V. The disregards are important, because 85 per cent. of those we expect to be eligible for pension credit will
Column Number: 6
not have to tell us about their savings at all, as all their capital will be ignored. Again, that should make claiming easier for the vast majority of pensioners.
We have made two further significant changes. As we promised, regulation 15(6) halves the existing income support assumed rate of return. Instead of £1 a week for every £250 of capital, pension credit will assume an income of £1 a week for every £500 of capital over £6,000. Together with the 60p in the pound reward for saving, that makes the treatment of capital in pension credit five times more generous than under the old income support. For example, under income support, a pensioner who has saved £10,000 is assumed by the current rules to have an income of £16 a week. Under pension credit, an income of only £8 a week will be assumed from the same savings. Secondly, we have abolished the income support upper capital limit of £12,000, or £18,000 for those in residential care and nursing homes. The treatment of capital is significantly more generous under pension credit.
On the reward for saving, the fundamental reason for introducing pension credit is to reward rather than penalise thrift.