|State Pension Credit Bill [Lords]
Maria Eagle: I am listening to what the hon. Gentleman is saying, but I have not had the advantage of seeing the pamphlet and I am sure that he will lend it to me. Does he not welcome the simplification of the capital rules that the Bill introduces?
Mr. Brazier: Let me explain why not, in so far as I can while remaining in order on a narrowly drawn amendment. In arguing the case against the measure—savings take-up is central to the whole case against the Bill—I want to be clear on one point lest there be any mistake. I wholly share, as does my party and, I am sure, the Liberal Democrats and the Scottish National party, the underlying objective that the Government claim to have in the Bill: to reward those who save but feel that they miss out because of the way in which means-tested benefits work within the system. The problem with the measure falls into two parts. My hon. Friend the Member for Daventry alluded to both and the hon. Member for Northavon alluded to the first.
The point was made from the Conservative Front Bench, not only by my hon. Friend the Member for Daventry in Committee, but on Second Reading, that the minimum income guarantee itself has sucked a huge number of people into the problem and has pushed it well up the age spectrum. All the figures we were given about a £100,000 pension fund being required just to balance the value of the minimum income guarantee and so on apply.
The second and more narrow point that concerns us—the reason for the amendment is to show the impact on saving—is that more than half of the pensioner population will come within the remit of the Bill. As my hon. Friend the Member for Daventry explained so compellingly, the problem is that if a steep taper is put into the Bill, side by side with the taper that is provided by taxation, the taper provided by housing benefit to such a large proportion of recipients and the taper provided by council tax, people will see immediately that, if they had not saved during the last years before their retirement and had chosen to spend their money on other things, the proportion lost would be very little.
I do not want to repeat the incredibly good opening speech by my hon. Friend the Member for Daventry in which he quoted different bodies which illustrate these points and which have been through the figures. I leave the Committee with one final thought: does anyone remember a measure—I cannot in all the years that I have been in Parliament—that offered to hand out large sums of money to an extremely worthy group of people but which met with so few welcoming voices? The least we can do is to measure its impact.
Andrew Selous (South-West Bedfordshire): I also want to speak briefly to amendment No. 20. I concur with the comment of my hon. Friend the Member for Canterbury that we did not hear much from the
Column Number: 71Minister about the amendment. I believe that he broadly welcomed its intention, but he tried to tell us that there were other means whereby the Department would seek that information.
The Government have said that they want to move from the current figure of 40 per cent. of funded pensions to 60 per cent. Opposition Members thoroughly support them in trying to attain that. That is even more important given the accelerating demise of final pension schemes.
I shall focus on a comment in paragraph 32 of the Select Committee's report, in which the Committee said that it hoped that in future it would always pay to save. Because of the complexity of pension legislation—I am thinking especially of the task facing independent financial advisers and others; some of my constituents recently contacted me to explain the difficulties that they face—rl>we need clarity.
My hon. Friend the Member for Hertsmere described the four categories of people for whom we cannot say that it always pays to save. Amendment No. 20 is important. The first is those with less than a basic state pension. Information from the Department is that 12 per cent. of retiring men currently do not have a basic state pension. However, 75 per cent. of retiring women do not have a basic state pension and will therefore fail to benefit from the savings credit in the Bill. Women aged between 60 and 65 currently number 1.5 million, a figure that it is anticipated will rise to 2.2 million by 2031. They are a second major group that has no incentive to save under the Bill as currently structured. There are more than 3 million self-employed people who, because they do not fall within the ambit of the state second pension, suffer a disadvantage in being unable to benefit from the savings credit in the Bill. Even for those who save £50 a month and are entitled to the savings credit, for the first 10 years or so, there is no benefit. I hope that amendment No. 20 highlights the suggestion in the Association of British Insurers submission that there might be a disregard for the first £10 of saving income. The graphs in its submission to the Select Committee show that if there were, it would always pay to save.
Those issues are important. As the ABI and my hon. Friend the Member for Daventry said, the savings gap is currently £27 billion. The Government have rightly said that they want to move to a ratio of 60 per cent. private occupational funded pensions, reversing the current ratio. We shall not achieve that unless it can be said with clarity that it always pays to save.
I refer to the recommendation in paragraph 32 of the Select Committee's report. We recommend that the Government devote time to looking into the cost of the measures. It is, perhaps, worth noting that we do not know how much the Bill will cost. As Parliament, we have passed the Bill with various scenarios, but we do not know exactly what the total cost will be. The Select Committee has been slightly more cautious and
Column Number: 72has asked the Government to look into the costs of the four measures that I have described.
Patrick Mercer: I shall concentrate on amendment No. 19, which has already been spoken to at some length. I hope that I shall not labour the points too much. The amendment has been carefully drafted by my hon. Friends the Members for Hertsmere and Daventry.
Although the Minister gave a sterling response to all the points that have been made, the amendment has the merit of casting light on a subject that is otherwise often obscured. I shall quote extensively from evidence from Help the Aged, which may provide one or two points that will help us. The minimum income guarantee is one of the only means-tested benefits with which we can compare what is going to happen to pension credit. Clearly, pension credit has no track mileage or precedent on which it can yet be judged. The MIG is probably a helpful yardstick. Despite a very expensive television campaign, it is still clear—I bow to the Minister as regards the precise figures—that much of the funds available are not yet claimed.
I take issue with the Minister about the complexity of claiming pensions and benefits. That is something that I hear about frequently in my constituency surgeries. Indeed, every time I go to Tuxford, the same point is made. Those who are most vulnerable—pensioners who are most reluctant to get involved in the bureaucracy and the complexities of applying for benefits more often than not—will say, ''Mr. Mercer, I am extremely concerned about over-applying. I would rather not apply than get paid too much benefit, then have to pay it back at a later stage.'' I have heard that three or four times—I do not pretend to have the answer. I am aware that there is ''attitudinal resistance'', to quote the report, among many of the pensioners to whom I speak about such bureaucracy. I commend amendment No. 19, which I hope would help to clarify that, and allow us to check as the new benefit comes into place.
Maria Eagle: It is interesting to hear what the hon. Gentleman said. Obviously, we want to encourage take-up. Would he accept that that concern is likely to be less when one has a five-year assessed income period, during which income is allowed to go up without affecting benefit, as opposed to a weekly means test, which was designed for income support for people of working age?
Patrick Mercer: I am grateful for the intervention. I probably would accept that, but the point I am about to make is that if the Department for Work and Pensions were to set targets for the level of take-up, rather than the current vague notion, that would help and might overcome the problems that I have just mentioned.
The attitudinal resistance that I mentioned is reflected in that 25 per cent. of those who were told that they were eligible for the minimum income guarantee but would probably still not claim. The introduction of pension credit will bring several more millions of pensioners into the means-tested programme:
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Negative perceptions, and unfamiliarity with claiming and the claims process could therefore be higher in this new group. That is what Help the Aged has to say about it, and that is my impression at the moment of the new benefits that are being introduced.
There is also the question of those people who have applied for the minimum income guarantee. The campaign had a mixed result—we have heard from the Minister that it was highly successful—but when it went out, many applied having taken the advice offered and were turned down. That has probably built a resistance into those who will be claiming pension credit; having failed in the past will make them less keen to claim again in future. The Government also say that the pension credit will bring £2 billion into the hands of pensioners. However, already £2 billion of means-tested benefits is not taken up annually:
One must consider the costs and benefits of the introduction of pension credit from the first principle.
It would be helpful if the Department for Work and Pensions were to set targets for take-up by 2004, the first year when the benefits will be active. Currently, we are told that a target of 67 per cent.—only two thirds—would be ambitious. Amendment No. 19 would assist considerably. It would make visible a problem that has beset other means-tested benefits in the past. It would be helpful, give clarity and, overall, save money.
|©Parliamentary copyright 2002||Prepared 16 April 2002|