Select Committee on Work and Pensions Appendices to the Minutes of Evidence


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.

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