APPENDIX 13
Memorandum submitted by the Trades Union
Congress (TUC) (PC 17)
EXECUTIVE SUMMARY
A summary of the points raised in the Trades
Union Congress submission are set out below:
(a) The TUC welcomes the Governments plans
to introduce the Pension Credit, the document outlines the TUC's
view on the help being given to today's pensioners, including
the new State Second Pension (S2P), free eyesight tests; winter
fuel payments, and free TV licences for the over 75's. The TUC
also welcomes the Chancellor's announcement in the Pre-Budget
report that future indexation of the basic state pension will
never fall below 2.5 per cent.
Whilst welcoming the Governments proposals for
Pension Credit, the TUC does have a number of concerns to raise:
(b) Take-up of the Pension Credit will be
vital to its success—the TUC recommends that the Government
takes particular care to communicate the way in which Pension
Credit will work carefully to all pensioners, and ensure that
claiming Pension Credit is a simple and straightforward process.
Means tested benefit and pensioners do not mix well, the Minimum
Income Guarantee is clear example of this.
(c) The TUC is concerned that pensioners
who have not accrued a full basic state pension will not be helped
by the Pension Credit. The TUC recommends that pensioners who
do not have full entitlement should be deemed to have a full basic
state pension in order that additional savings can count for Pension
Credit purposes.
(d) In the TUC's view Pension Credit treats
pensioner couples unfairly, a married pensioner couple each with
full entitlement to the basic state pension will be no better
off, and receive no additional Pension Credit than a pensioner
couple who receive the married couples basic state pension. The
TUC recommends that any pensioner couple's basic state pension
income in excess of 160 per cent of the single person's pension
should be included as creditable income.
(e) The Pension Credit appears to unfairly
treat those pensioners who defer receiving their basic state pension
and therefore receive increments to the state pension once it
becomes payable. The TUC recommends that increments earned as
a result if deferring a basic state pension should be counted
for Pension Credit purposes.
(f) The TUC believes that it is essential
for the stigma of the means test to be removed, and call on the
Government to ensure that this new form of provision is as easy
to claim as possible. The Pension Credit will provide a much-needed
incentive to save for a pension in the future—this is essential
if pensioner poverty is to be addressed in the medium term.
INTRODUCTION
1.1 The TUC welcomes the opportunity to
submit evidence to the House of Commons Work and Pensions Committee
inquiry into the Pension Credit. This response is the result of
consultation amongst the TUC's 76 affiliated unions.
ABOUT THE
TUC
1.2 As Britain's national trade union centre,
the TUC represents almost seven million working people through
its 76 affiliated unions, but touches the lives of many more.
The TUC's broad aim is to promote the rights of those in work
and to campaign effectively for policies that help the unemployed
in their search for quality jobs.
1.3 Pensions us a prime example of where
unions have been able to promote the rights of working people;
for example by:
— Negotiating with employers to introduce
occupational pension schemes;
— Negotiating to extend occupational
pension scheme coverage, notably to part-time workers;
— Ensuring that pension fund assets
are free from fraud and abuse; and
— Winning redress for workers who were
mis-sold personal pensions.
HELP FOR
TODAYS PENSIONERS—GOVERNMENT
STRATEGY
1.5 The TUC welcomes the measures the Government
has taken aimed at ensuring that more of today's working population
have the opportunity to save for retirement in an affordable way.
The TUC particularly welcomes the new state second pension (S2P)
which is aimed at the low paid and which skews benefits to those
earning less than £10,500 a year.
1.6 The TUC also recognises that the Government
has taken significant steps to help today's pensioners, too many
of whom still live in poverty. These measures include: free eyesight
tests; winter fuel payments; free TV licences for the over 75's;
concessionary transport allowances and increases to the capital
allowances.
1.7 The TUC welcomes the Chancellors announcement
in the Pre Budget report that future indexation of the basic state
pension will never fall below 2.5 per cent. The TUC is committed
to pressing for the re-introduction of the earnings link for the
purposes of up-rating the basic state pension.
THE PENSION
CREDIT—THE
TUC COMMENTS ON
THE GOVERNMENTS
PROPOSALS
INTRODUCTION
1.8 The TUC welcomes the Governments commitment
to help those pensioners who have modest retirement incomes but
who can by no means be described as comfortably well off. The
TUC shares the Government's assessment that this group of people
should be rewarded for saving for retirement. Through the two
pension telephone help lines the TUC has run, it has become clear
that pensioners who have managed to save moderate amounts for
retirement feel a great sense of frustration that they are no
better off than pensioners who have saved nothing and receive
means tested benefits. Like the Government the TUC hopes that
the introduction of the Pension Credit will act as an incentive
for people to save for their retirement.
1.9 The Government is right to pinpoint
concerns at the growing inequality of pensioners' incomes. Over
the last two decades, the incomes of the richest quintile of pensioners
have risen by over 80 per cent whilst the incomes of the bottom
quintile have risen by only 30 per cent. The TUC shares the Government's
assessment that the incomes of those pensioners in the lowest
two quintiles require special attention.
2.0 The Government has said that it wants
to make it much easier for pensioners to claim the Pension Credit.
For example, it has already been announced that entitlement will
be worked out when an individual retires in the same way as the
basic state pension. The TUC believes that to maximise take-up
it is essential that pensioners come to regard Pension Credit
as a basic right. All possible steps must be taken to remove the
stigma of means testing and the government must ensure that the
process of claiming the Pension Credit is as simple as possible.
This means that the necessary forms should be short, simple and
straightforward—the experience of cutting the length and
complexity of the MIG claim form is a relevant example. It is
essential to create an environment where the Pension Credit is
seen as a different form of state support closer to a national
insurance benefit, rather than a conventional means tested benefit.
The TUC welcomes the apparent simplicity of the Pension Credit.
2.1 The TUC welcomes that fact that the
Pension Credit will be increased annually in line with earnings,
as is the case currently for the Minimum Income Guarantee. The
TUC would wish to see the principle applied to the up-rating of
the basic state pension.
— The TUC recommends that the Government
takes particular care to communicate the way in which the Pension
Credit will work carefully to all pensioners
2.2 The TUC welcomes the Government's decision
to abolish the capital limits, which currently bar many pensioners
on very modest incomes from claiming additional state benefits.
Their abolition will be of great assistance to very many pensioners.
2.3 The intention is that the biggest gainers
will be in the bottom 20 per cent of pensioner income distribution—but
pensioners across the whole of the income distribution will gain
something from the government's package of policies. The Pension
Credit combined with other measurers will also provide an incentive
to save for a pension in the future—this is essential is
pensioners poverty is to be addressed in the medium term.
ISSUES
2.4 The TUC has identified a number of issues
which are unclear, these matters together with the TUC's proposals
for taking them forward, are outlined in the following paragraphs:
(a) Help for the poorest pensioners
2.5 The TUC is concerned that pensioners
who have not accrued a full basic state pension will not be helped
by the Pension Credit. It seems that pensioners in this category
will have to use savings from other sources to bring their income
up to the level of the basic state pension. This income will not,
therefore, count for Pension Credit purposes. These pensioners,
who are in the main women and who are amongst the very poorest
of Britain's retired population, will therefore gain no benefit
from the Pension Credit.
— The TUC recommends that pensioners
who do not have full entitlement should be deemed to have a full
basic state pension in order that any additional savings or income,
eg from a part-time job, can count for Pension Credit purposes.
Precedent for this already exists. The State Second Pension (S2P)
will deem scheme members to have earnings of £10,500 even
If their actual earnings were below this amount.
(b) Treatment of pensioners couples
2.6 In the TUC's view, the Pension Credit
treats pensioner couples unfairly. A married pensioner couple
each with a full entitlement to the basic state pension will be
no better off, and receive no additional Pension Credit, than
a pensioner couple who have the married couple's basic sate pension
(ie 160 per cent of a single person's pension—a full basic
state pension and 60 per cent spouse's retirement pension). Such
an arrangement will do little to eliminate the perceived unfairness
of the current system and does not act as an encouragement to
women to accrue pension entitlements in their own right.
— The TUC recommends that any pensioner
couple's basic state pension income in excess of 160 per cent
of the single person's pension should be included as creditable
income.
(c) Deferral of state pension
2.7 The pension credit appears to unfairly
treat those pensioners who defer receiving their state pension
and who therefore receive increments to the state pension when
it eventually comes into payment. As currently proposed, these
increments would not count as creditable income. This will act
as a disincentive to many pensioners to defer receipt of their
state pension.
— The TUC recommends that increments
earned as a result of deferring a basic state pension should be
counted for Pension Credit purposes.
(d) Housing Benefit and Council Tax Benefit
2.8 The TUC welcomes the Governments commitment
that nobody will lose out on Housing Benefit or Council Tax Benefit
as a result of the Pension Credit. For many pensioners the additional
income they receive through Housing Benefit and Council Tax Benefit
is an extremely valuable and much needed source of extra income.
In its consultation document, the Government states that pensioners
who are currently in receipt of Housing Benefit and Council Tax
Benefit should continue to receive these benefits. The TUC shares
this view. Pensioners who need to claim these benefits should
not be worse off as a result of the introduction of the Pension
Credit.
CONCLUSION
2.9 The TUC welcomes the Government's commitment
to improve the incomes of those pensioners with modest savings.
The Pension Credit will help millions of pensioners who have saved
for retirement but who retire on low or modest incomes. The TUC
shares the Government's assessment that this group of people should
be rewarded for saving for retirement.
3.0 The TUC's main concerns on the Government's
Pension Credit Proposals are:
— The TUC recommends that the Government
take particular care to communicate the way in which the Pension
Credit will work carefully to all pensioners.
— The TUC recommends that pensioners
who do not have full entitlement should be deemed to have a full
basic state pension in order that any additional savings or income,
eg from a part-time job, can count for Pension Credit purposes.
Precedent for this already exists. The State Second Pension (S2P)
will deem scheme members to have earnings of £10,500 even
If their actual earnings were below this amount.
— The TUC recommends that any pensioner
couple's basic state pension income in excess of 160 per cent
of the single person's pension should be included as creditable
income.
— The TUC recommends that increments
earned as a result of deferring a basic state pension should be
counted for Pension Credit purposes.
3.1 The TUC hopes that the committee will
giver serious consideration to the points raised in this submission.
As always, we would be happy to discuss further any of the points
raised in this submission.
11 January 2002
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