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


Letter to the Committee from the Pension and Population Research Institute (PAPRI) (PC 12)

  Dear Sirs,

  In response to your Press Notice of 7 December, I now submit the following statement on behalf of PAPRI as a submission for your enquiry.

  At the same time I would also like to support the submissions by the Institute of Actuaries and the National Pensioners Council.

  One hopes it is not too late for the government to modify their plans in the light of what you will eventually recommend. I would urge you to hear oral evidence from the National Pensioners Council and from the Pensions Industry.

  Would you also like evidence from myself and Alan Smallbone, trustee of PAPRI? I would be glad to throw what light I can from my researches on the social aspects of pensions here in the UK. The greater reliance on means testing inherent in what the government are proposing has particularly undesirable implications in a British social context. And what the NPC call "the major uncertainties regarding future uprating of pension credit" will cause difficulties for pension providers marketing the new Stakeholder Pensions under the current regulatory regime. Alan Smallbone has campaigned on the plight of the Early Leaver disadvantaged by Final Salary pension schemes.


  As has been pointed out by the National Pensioners Convention (NPC) there are inherent defects in the means-testing proposed with the introduction of Pension Credit. The already complicated benefit system in the UK is being further confused by the introduction of what amounts to a new disregard. It is regrettable that the DWP (formerly DSS) are now planning to bring much larger numbers of pensioners within the scope of means-testing rather than make progress to a restoration of the earnings link for the contributory old-age pension.

  Alastair Darling is mistaken in imagining that the new Pension Credit will "tackle the injustice of the system we inherited which penalises thrift". As the NPC response to Pension Credit says, there is a massive increase in means-testing implied because the effect "is to raise the cutoff point for what is now called the MIG". In future, savers will be caught by the new Pensions Credit.

  When it is said by the Secretary of State that it would "increase guaranteed incomes, end the weekly means test and reward thrift", he is obscuring the further institutionalising of means-testing that is implied. There is moreover no recognition that the existence of the new Pension credit system will inhibit marketing of the new Stakeholder Pensions to those on moderate incomes.


  Besides being objectionable in principle, the new Pension Credit seems unsound administratively because it does not operate consistently with the present system of Housing and Council Tax Benefits which are also means-tested now. From page 24 of the consultative document, it is apparent that there is no known solution to this difficulty.


Resentment and Unfairness

  Those who are disqualified from Housing and Council Tax Benefits by receipt of the new Pension Credit will be treated harshly. There will also be resentment felt by those who are just above the limits so they do not benefit from Pension Credit. A leading actuary has said the new features with MIG and Pension Credit being both introduced are "bizarre. . . what's the incentive to save through stakeholder if MIG exists". (M. Arnold, Pensions Age, February 2001). Both MIG and the new Pensions Credit are supposed to be designed to assist those earning low and moderate incomes.

Degradation in Old Age by those who are found to have claimed dishonestly

  Inevitably there will be some who will be tempted to avail of the new Pension Credit by making dishonest claims. It is regrettable that when they are discovered these pensioners will have a degraded old age—these are likely to be the very people who have made some savings and provision for old-age—that were the group for whom the Pension Credit was designed to help!

Patrick Carroll

10 January 2002

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