Examination of Witnesses (Questions 120-139)
MS ALEXIS CLEVELAND, MR CHARLIE MACKINNON AND MR GEORGE MCCORKELL
WEDNESDAY 12 JUNE 2002
120. If your workloads go up much more than you predict, do you have a contingency budget so you can hire extra staff across the whole of the UK?
(Ms Cleveland) We do not have our budgets set for next year because we have not finished the spending review period yet. We have been very clear about the assumptions we have made on workload volumes and what we can cope with. We are also looking to put in place contracts with external providers to help us at least manage the telephone traffic and such like if there is an increase in the volumes over and above what we expect.
121. So you do have a series of contingencies.
(Ms Cleveland) Yes; some of those across the wider DWP, as well, because there is a bigger organisation we can draw on if our assumptions do prove to be wrong.
122. In your memorandum you talked about a phased approach to take-on of Pension Credit. What do you mean by that?
(Ms Cleveland) By that I meant looking at the cases who are currently on MIG and likely to have an entitlement, how we can transfer them on so they are up and running. We take the claims over the six-month period leading up to October, so we can just transfer them over from that date. Also the phased approach of writing to pensioners at different times so we can manage the responses within the staff we have available.
123. If I have read it correctly, peak demand is likely to be October 2003.
(Ms Cleveland) Yes.
124. How are you predicting you are going to cope with that difficult month, particularly with some of the IT difficulties you have?
(Ms Cleveland) We should not play up the IT difficulties because the Income Support system is decrepit in the sense of where we want to take the business in the future, because it is only focussed on a single product. It pays many millions of people benefit every week, so it is a stable system from that point of view. I share George's analysis that we can get a stable system in to deliver that. We will have in the new telephony across the centres by that time. We are looking to buy in additional contingency if we need it. We are also working with Jobcentre Plus colleagues to provide additional contingency if we need that as well. I do not want to sound over confident, because I do think it is a very difficult task to manage through, but having this phased approach to the claims will be an issue for some people. If we do get a huge surge of claims in October it may take us some time to clear those. The key thing for us is to make sure that we get very reliable management information, so we know exactly what is happening, so we know which levers to pull and so we get back to customers and tell them what is happening with their claim. It is the uncertainty about what is happening with the claim which is one of the biggest areas of concern, as I know from our customers.
125. I am sure we all pick this up in constituency surgeries. It is something a lot of people are very concerned about. We heard earlier today about the whole issue of take-up as far as MIG is concerned. What extra challenges do you think the Pension Credit will give as far as take-up is concerned?
(Ms Cleveland) I think it is people understanding the savings reward element of it and how far up the income line that may come. With Minimum Income Guarantee a lot of it has been understanding capital rules and the income rules and such like. This new concept of the savings reward element is going to be new for staff to understand, but it is also going to be a new concept for pensioners to understand as well.
126. Have you set take-up targets for the Pension Credit?
(Ms Cleveland) No, we have not been set a Pension Credit take-up target.
127. Is that something you would anticipate you would do in future?
(Ms Cleveland) Setting targets for our operational staff is quite difficult when you cannot get an accurate measure. It is always an estimated measure of take-up. What we can do is design our systems so that our systems ensure that for the customers who are contacting us we ensure that people get a full take-up of their benefit and then we need to look at ways in which we can get our systems to trigger whether it is a home visit or telephone call or a letter to people at certain life events. At one level it is whether we should be writing to everyone at certain age points because we know that entitlement and dependence on benefits tends to increase with age. That is the way we would be looking to tackle it.
128. Are there still some statistical anomalies around this? There are 11 million pensioners. Are there still some question marks in your own mind about working out what you would expect the Pension Credit eligibility out of that group to be?
(Ms Cleveland) You always come down to estimates, because you have to base that information on survey data which is often people's own estimate, their own analysis of what they have in the way of resources coming through. I am not looking to demean the surveys, because they are a very valuable source of information, but if you are setting targets for your clerks to manage operationally you need things they can see and feel almost on a week by week basis, rather than something which is going to be done as a statistical analysis once a year.
129. Do you have any general comment on the conclusions from our Pension Credit Report?
(Ms Cleveland) You will be getting a response. You may have already received it; if you have not, you will.
130. The Minister has signed it off but we have not actually received it.
(Ms Cleveland) I was not sure whether you had seen it or not.
131. May I ask you to help me clarify my own thoughts about the Pension Credit additional workload? For reasons Rob Marris was mentioning earlier, it is a matter of concern to us that this is a bridge too far and you are just going to swamp the system. Early on, I have clear recollection of Baroness Hollis saying that they were hoping that 5.5 million households, or thereabouts, would get extra support from the Pension Credit. At that stage they were talking about 67 per cent take-up rate. Your memorandum, paragraph 21, talks about an anticipated extra one million customers receiving the Pension Credit by October 2004. I am not saying these two things are completely incompatible, but that is a smaller figure than the Government were claiming would be entitled. Am I missing something?
(Ms Cleveland) I think it is consistent with the 67 per cent take-up figure but that is by October 2004. Clearly we need to go further.
132. Could you do that for us? If we are looking now to 2006, are there figures available to help us which would feed in the rate at which the load comes on for Pension Credit?
(Ms Cleveland) We shall have a look and see what we can give you.
133. That would be helpful. We have been concentrating on the first of your two main objectives, which is looking at delivery for the moment for the present cohort of pensioners. You also have the important role of trying to get people to think in the future about what is going to happen. Some of the plans we have for combined pension forecasts are an important part of that. Can you tell us anything about the results of the pilots which have been provided? I remember not too long ago there was a report in the Financial Times which said that it had been a flop, to use the journalistic language. Do you have any comment about that? We are all concerned at the start of this new process that delivery for the current cohort of pensioners gets priority, but we must notI hope you will agreelose sight of the fact that there is a very important role in trying to get people to learn what is coming down the track when they eventually retire. That is something we would not want to forget either. Do the pilots tell you anything which is of interest? Are they working? Are they a flop?
(Ms Cleveland) There are two aspects to that. One is that we are showing that there is continual interest from employers and other pension providers to incorporate a forecast of state pension with the statements they send out to their members. We are still getting companies and organisations wanting to join us in terms of taking that forward. It is very, very early days to say whether sending people forecasts is actually going to prompt any change in behaviour and whether it is going to prompt people into taking out any additional pension. What we have been doing is some quite detailed analysis of the customer segmentation of this group. These are the people of working age and by age group, looking at numbers in employment or self-employment numbers of people who already have some second either personal or private occupational pension scheme by various income bands to see which of the groups we really ought to be targeting for this. At one level, all the time we are doing combined forecasts, we are getting to the people who are already making some provision for themselves. By the very fact that they have some sort of personal pension with an insurance company or whatever, by the fact that they already have an employer's scheme, we are adding to them. That may incentivise them to pay a bit more into one or other of their schemes, but the people we are not getting to through that route are those people who have earnings of a level where they would be able to make some sort of further contribution but are not making that contribution at the moment. It is not quite answering the question about how the combined forecasting is going, but it is important that if we are going to encourage people to save, we do not target all our resources at those people who financially are not in a position to save and will probably always be better off relying on the State Second Pension. It is those groups who are in the income bands above that but who are not making any provision who are the ones we need to find ways of targeting to meet that longer-term objective.
134. Is the Service still on course to have a national roll-out of combined pension forecasts?
(Ms Cleveland) Yes, and we have recently signed a contract for the ramping up of the numbers of forecasts which we can operate.
135. That is good to know. Can you clarify for me as well a point on the combined pension forecast? If I have two or three little bits and pieces of previous occupational schemes from previous employment in an earlier part of my professional career, the Government cannot put all those together and send me an homologated coherent forecast, it is all going to come in bits and pieces?
(Ms Cleveland) Yes. We are also looking at that issue. We call that the composite forecast. I compare it with when I pay someone to take the details of all my credit cards so if my handbag is stolen I can just phone one number to sort it out. It is almost: is there a business in there? I am not sure it is the business we ought to be in, but are people registering all their pension interests to get combined forecasts but trying to get a set of many different commercial organisations coming up with agreed assumptions about growth rates over a future period and such like? There is a danger when you get something like that, that it is going to be many telephone directories thick based on all the assumptions because within the financial services sector there is so much regulation about having to explain the nature of those forecasts that the notes will be 50 times longer than the piece of paper which has the forecast on.
136. Is it important to try to confront people because expectations have to be managed and those expectations are largely fanciful in terms of what they can expect if they live for 25 or 30 years after active retirement.
(Ms Cleveland) It is a bit like insurance companies saying that in nine per cent of claims which get through to being agreed the cheque is never cashed. I am sure there is an issue for many people who have little bits of pension because they lose contact, pension companies lose contact with them. We have a problem we know about when we issue retirement pension packs that some of them come back because people have not kept us up to date with their change of address and that is an issue which pension companies have as well, that people have their small bit of pension provision which they bought 15 years ago. They cannot actually track them down because we also offer a service for them. If we have an up-to-date address on someone, we do a mail forwarding service for that type of activity.
137. It seems to me that this is an essential part of the Government's own policy of trying to get people to take more responsibility for themselves. Certainly the experience I have come across myself anecdotally is that there are countries like America which are much more active, not just giving people information but forcing them to change what they do by giving it a much higher profile. In fact, they try to change people's ways of doing things rather than just providing the information. I hope that we shall be monitoring the models of best practice in other countries to try to make these effective messages so that people get the wake-up call early enough to make proper provision for their retirement.
(Ms Cleveland) A lot of this will probably get picked up in the Department's review following the receipt of the Sandler and Pickering reports which are coming through.
138. Indeed and we are looking forward to that. I and my rural colleagues are very exercised about Automated Credit Transfer(ACT) provision. We are slightly worried that the instructionswe are not holding anything against the staff of the Department who set out the prospectusquite clearly are exhorting people to go into ACT in a fairly strident wayI choose that adjective carefully. To what extent is that actually happening now and to what extent are we finding that people, when they come in for a new pension, are changing their behaviour and being put into ACT where in fact, left to their own devices, exercising free choice, they would much prefer to stay with the Giro book, which their neighbours and friends have been comfortable with for so long?
(Ms Cleveland) We do not have figures for those people who may have been coerced into ACT. We do know that the percentage of pensioners taking up ACT is growing. A lot of that is to do with the fact that there are more people who actively use bank accounts who are coming through to pension age. When it comes to offering the way in which we make payments, we would much prefer to make payments by bank account because that is a more secure method of payment, it is a more flexible method of payment if benefit rates change and it is much less prone to fraud generally, as we know. It needs to be separated from the ability to get cash from the Post Office because the Post Office is offering more cheque cashing facilities and you know the proposals for the Universal Bank and the commitment to be able to pick up your benefit payment in cash from a Post Office. That is not tied to it having been made through an order book, that could still be tied to a link through to ACT.
139. Are you confident that in the development of the new Service that Universal Bank is going to be up and ready to use come April 2003 when it is supposed to be rolled out?
(Ms Cleveland) I am not close enough to that particular project at the moment. We will continue to offer other methods of payment until we have an alternative in place.
8 Please refer to the supplementary memorandum submitted by The Pension Service (PS02), para 7, Ev 23. Back