APPENDIX 5
Letter to the Committee from the Money
Advice Unit, Hertfordshire County Council (PC 05)
Dear Colleagues,
We wish to respond to the Select Committee's
request for submissions on the proposed Pension Credit, and have
the following comments to make:—
(a) the role of the new Credit in the Government's
overall pensions strategy
The credit appears consistent with the overall
pensions strategy, and is, in some respects, a welcome innovation.
(b) the method of uprating the Pension Credit
and the long-term implications of the method chosen
The method appears satisfactory, although it
is hard to see how the present Government can commit future Governments
to maintain the same process indefinitely.
(c) the effect of increased means-testing
on incentives to save
In our experience, decisions about savings are
not usually governed by considerations of the impact of benefit
rules. If that were the case, there would not be such a need for
Pension Credits, as today's pensioners would have chosen not to
save, given the present disincentives to do so. However, and it
may be a gradual effect, it could enter public consciousness that
Pension Credits actually reward savings and second pensions. Means-testing
of any kind is demonstrably unpopular, and will always militate
against take-up.
(d) the ability of people on low and modest
incomes to make the correct decision regarding future pension
provision
We have no comments to make on this point.
(e) the impact of Pension Credit on pensioner
poverty
The credit will assist those pensioners with
modest savings and second pensions. These are pensioners who merit
support but they are not the pensioners in greatest poverty. Pensioners
who are without any savings or second pensions will in future
actually lag further behind their (relatively) wealthier fellow-pensioners,
who will be "rewarded" for their ability to save. Pensioners
who have been on the lowest incomes whilst working, in occupations
without adequate pensions, will not gain when PC is introduced,
although we accept the improved position for that group (but not
those individuals currently within it) in the long run from other
aspects of the Government's pensions policy.
We have a particular concern at the apparent
failure of the Department of Health to consider Pension Credit
when issuing guidance to local authorities on home care charging
policies.
Local authorities will be introducing new charging
policies from April 2003, at around the same time as Pension Credit
is being introduced or calculated. In the absence of adequate
guidance from the Department of Health, it is possible that the
real gains introduced by Pension Credit could be negated by charging
policies designed without regard to the new benefit. Most authorities
are working on those new charging systems now, as the Department
of Health expect some move to be made towards them by October
2002. New software etc is already being purchased or developed
to cope with the revised charging policies that the Department
of Health anticipate, yet none of these can take account of Pension
Credit.
(f) the implications of the Pension Credit
for the private pensions and insurance industries
We have no comments to make on this matter.
(g) the proposed methods for claiming/assessing
entitlement to the Credit, including the frequency of reassessment
5-yearly reassessments are an interesting development,
so long as interim reassessments are possible when entitlement
would increase. This is not necessarily due to a fall in income
either—a successful claim for Attendance Allowance could
trigger higher MIG/PC entitlement, due to possible entitlement
to additional premiums.
(h) the likely levels of take up
This is obviously our biggest area of concern,
as a failure to engage pensioners in claiming will harm the credibility
of all concerned. The design of Pension Credit is therefore a
very significant factor. The creation of an additional benefit
does nothing to decrease complexity, no matter how sensitively
and professionally administered.
It is hard to see why a separate benefit is
required to achieve the aims of Pension Credit. The same effect
could have been achieved by simply introducing a partial second
pensions disregard into the Income Support and Housing Benefit
scheme, and amending the capital rules as suggested for Pension
Credit.
As this has not been done, then we hope that
the Pensions Service will learn from previous experience as to
how take-up can be improved. One of the key elements is the involvement
at local level with front-line "experts" in benefit
take-up—local authority welfare rights units, Citizens Advice
Bureau, Age Concern branches etc. It is only by working in a genuine
spirit of partnership with these organisations that the Pensions
Service will be able to deliver high levels of take-up.
Such take-up is also best delivered holistically,
incorporating eligibility for all benefits, not just individual
and means-tested benefits. This is one lesson that can be learnt
from MIG. National mail-shots are a relatively unsophisticated
and imprecise method, no matter how accurate the original database,
compared to the more personal approach that local agencies can
deliver.
Gary Vaux
Head of Unit
9 January 2002
NOTE:
The Money Advice Unit is a well-established welfare rights
and money advice service, operating within the Corporate Services
department of Hertfordshire County Council. Our largest single
project, employing 14 advisers and interviewers, concerns benefit
take-up amongst people over 65 in Hertfordshire. In each year,
we identify and interview between 1,500 and 2,000 pensioners and
encourage them to claim income support and/or attendance allowance.
We also provide training and information for other front-line
staff such as social workers, health service employees, housing
and education staff, CAB and Age Concern employees and volunteers
etc. We therefore speak from a position of considerable knowledge
about the factors that promote or inhibit take-up of benefits.
| 
