APPENDIX 16
Letter to the Clerk of the Committee from
Thomas M Ross (PC 20)
Dear Mr Moon,
I should first explain that the Pension Provision
Group (PPG) has ceased to function, following the publication
of its final two reports, on Pensions and the Labour Market and
Pension Provision and Self Employment respectively. The Group
are not, therefore, in a position to respond to your request for
evidence, but I wanted to take the opportunity to make a few comments
in a personal capacity.
The PPG took a keen interest in the original
Pension Credit proposals. Whilst welcoming the prospect that many
of today's pensioners would gain from the proposals, we were concerned
about their possible effect on the Government's long term strategy
for pensions as set out in the 1998 Green Paper. Our specific
concerns included:
— the Credit, as proposed could lead
to less, not more, savings;
— the interaction with Housing and
Council Tax Benefits was unclear and the benefits of the Credit
(and its cost) would depend greatly on what was decided;
— difficulties of ensuring a good level
of take-up of the Credit;
— the arrangement, as described, could
encourage people to retire sooner;
— couples and those delaying receipt
of their State basic pensions would be treated adversely;
— taking account of actual income from
savings could lead to anomalies;
— the effect of the Credit makes it
important that the self-employed are brought into the State Second
Pension.
We therefore proposed modifications that would
make the Credit more of a transitory scheme, leaving universal
State pensions to be the main driver of policy in the longer term.
I believe that the Government's final proposals
move some way towards meeting the PPG's concerns. In particular:
— as I understand it, the Bill is drafted
in a way that de-links the starting point for calculating the
Credit from the basic State pension after 2003. This flexibility
would give future Ministers the opportunity to make the Credit
a transitory scheme as the PPG envisaged;
— income from savings will be reckoned
on a notional basis and the deemed rate of return of 10 per cent
seems to me to allow reasonably for a running down of capital;
— Housing and Council Tax benefits
will be adjusted on the lines of option C of the PPG's response;
— the combined amounts of the basic
State pension of couples, in excess of the couple rate, will attract
the Credit; so will increments for late commencement;
— the age from which the Credit becomes
available will rise in line with the women's State pension age.
I trust that these observations will be of interest
to the Committee. I look forward to seeing its report in due course.
Thomas M Ross
Principal & Actuary
AOL Consulting
14 January 2002
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