State Pension Credit Bill [Lords]

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Mr. McCartney: The majority of pensioners will be guided through the claims process by Pension Service staff over the phone. A large proportion will not fill in a form themselves—they will simply be asked to indicate that the information provided is correct. It will be a change not just in emphasis but in the whole way in which the system works. The job of the Pension Service is to be the advocate on behalf of pensioners, not the gatekeeper on behalf of the state. That is a fundamental change and that is why the service's new staff are being trained in a fundamentally different way.

Some of the hon. Gentleman's points were very legitimately put. One gets nightmares when trying to design such a system. I can only ask the hon. Gentleman to trust me that his points are being taken into account. As regards the regulatory impact of the measures, we are preparing the regulations now. I think that I gave a commitment in a previous sitting—if I did not, I am giving it now—that as soon as we can get the regulatory regimes in place and the Bill is enacted, Opposition spokespersons will have the opportunity to meet officials and go through it with them so that they can have some input. The important thing is to get the regulations right. The Bill itself is easy, but the regulatory regime is another job altogether. I give the hon. Member for Northavon that assurance.

A passage from the explanatory notes relating to the regulatory appraisal has been handed to me. It states:

    ''There may be an increase in the volume of queries made to the financial services industry at the initial claim stage as the objective is to reach more customers than the numbers currently receiving the Minimum Income Guarantee . . . However, this will be counterbalanced by fewer queries in the medium and long term as a result of plans to introduce a less intrusive income assessment and indefinite awards with five-year reviews.''

Those are excellent words, but they do not answer the hon. Gentleman's question about how much the measures will cost. The notes do not tell me, so I assume that the assessment is that there will not be a huge burden, because if such a burden were predicted, it would have to appear in the notes. Just in case there is an error, I will check for the hon. Gentleman and write to him. I hope that that answers the hon. Gentleman's queries and that we can now move on to another clause.

Mr. Clappison: I was reading The Guardian the other day. It described the pension credit as ''a complex beast''. When or if the author of those comments studies the debate, what has been said will not dissuade him from that conclusion.

I listened carefully to the Minister's remarks. The debate has been useful and I look forward to receiving the letter from him. These were only probing amendments and, as they have served their purpose, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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12 noon

Mr. Clappison: I beg to move amendment No. 30, in page 5, line 28, at end insert—

    '(d) any other relevant income to be taken into account in the determination of pension credit'.

The amendment relates to clause 7 (6), which contains the definition of ''retirement provision'' and the types of income that are to be the subject of the process described in the clause. The amendment simply asks whether any other types of income should be subject to the process.

Mr. Ian McCartney: I have a reasonably substantive response for the hon. Gentleman, at the end of which I hope that he will again say that I have been helpful.

I appreciate that the amendment is simply a probing amendment. If it were included in the Bill, it would leave a hole of at least £500 million in the Chancellor's budget. The Liberals will probably pick that and add it to the 1p.

I shall explain the objectives of the clause. As we said in response to previous amendments, the purpose of the assessed income period is to replace the weekly means test. That means that for most pensioners the requirement to report changes in their circumstances is extended from the immediate to every 5 years. That may be like a red rag to a bull to the hon. Gentleman, but I keep repeating the same point to emphasise how fundamental is the change in the measures under clauses 6 to 10. The clause provides the structure that enables us to make that change.

I shall go back a step. Most pensioners' incomes are stable when all the provisions that they have made for their retirement are settled. Obviously, some of their income streams will change—occupational pensions, for instance, will probably be protected from inflation. Capital could change as well, as pensioners utilise their capital or receive windfalls from a family will, for example. Some pensioners will need to draw legitimately on savings from time to time and some may receive money through inheritance. By and large, however, their main sources of income will not change to any extent. The clause essentially takes advantage of that fact and fixes in time these income streams.

The main sources of income that will be fixed are described in clause 7(6). They include retirement pension income, as specified in Clause 16, which includes any non-state second pensions, such as occupational pensions, stakeholder pensions and other private pensions, but excludes state benefits and pension income from non-pension annuity contracts and the income that we shall assume from capital.

Pensioners do not have to tell us about increases in these incomes. Let us be clear about this: if a pensioner wins the lottery in the second week of his or her assessed income period, the increase in capital, be it £10 or £1 million, will not be reflected in the pension credit entitlement until the end of the assessed income period—in four years and 50 weeks' time.

Only those who believe that the pension credit is some benefit of last resort have any reason for alarm,

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but it is not the case. The pension credit is an entitlement that combines a decent guarantee with a savings reward, and is far removed from the world of income support. The new system is very different from the old system, under which pensioners would have to report even the aforementioned penny. In fact, the sum involved would be only a tenner, but hon. Members will understand my point. Under the old system, any increase in income had to be reported and would be lost in adjustment, so the new measure represents a dramatic change in practice.

The amendment would allow all state pensions and benefits to be fixed for the duration of the assessed income period, but it would go further: it would allow all income received in a pensioner's household, from whatever source, to be fixed. Thus, during the assessed income period, no account would be taken of new benefits received by the claimant or his partner. In pension credit, as in other income-related benefits, most other benefits are taken into account as income. If the claimant's younger partner started to receive incapacity benefit, it would not be set off against pension credit until the end of the assessed income period. That would amount to double provision and is therefore not acceptable. Secondly, no account would be taken of increases in earnings, so if a younger partner got a highly paid job, that, too, would be unacceptable.

I feel sure that the Committee would agree that there is a difference between the income sources that we intend to fix and those where we will still require changes to occur when they happen. I trust the balance that we have made in clause 7 and I hope, after that explanation—

Mr. Webb: The Minister helpfully referred us to the definition in clause 7(6)(a) which, as he has just said, says that retirement pension income is defined in clause 16. In the long list on page 10, clause 16(1)(h) says:

    ''Income from a retirement annuity contract'',

so retirement pension income under subsection (6)(a) includes income from a retirement annuity contract. However, subsection (6)(b) says:

    ''Income from annuity contracts (other than retirement pension income)''.

Can the Minister clarify the distinction? It is not clear to me why retirement annuity contracts are counted in subsection (6)(a) and annuity contracts are separately listed in subsection (6)(b) and the amendment refers to inserting additional categories.

Mr. McCartney: I am just as hazy as the hon. Gentleman, so we shall keep waffling until we get an answer. That illustrates the importance of Committees—it is impossible to know every answer under the sun.

Mr. Clappison: Will the right hon. Gentleman give way?

Mr. McCartney: I know that the hon. Gentleman is trying to help me. If he is going to embarrass me, he had better make it worth while.

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The answer might be that it is to take account of the different types of annuity. Some annuities have fixed interest returns and some have non-fixed returns. Some relate to a small payment on death that comes from some of the capital. I hope that I am in the right ball park, because if I am not, it is a really big embarrassment.

Mr. Clappison: To reiterate my earlier point, does the Minister agree that it is important, without alarming pensioners, to give them the fullest possible information?

Mr. McCartney: The hon. Gentleman is absolutely right. Maybe we should start with Ministers. I hope that we can, at some stage, have a good discussion about the relationship of the Pension Service to the issues raised by the hon. Member for Northavon and others. That is increasingly seen as a critical factor in the successful outcome and implementation of pension credit. We have between now and October 2003—which is not a great deal of time, given the task before us.

I think that I have offered, but I cannot remember whether it was during this debate, to arrange for any Opposition spokesperson who wants to visit our emerging pension centres to do so. They will be open visits, with no restrictions, and we hope that they will return and tell us what can be done to improve the centres. [Interruption.] Ah, God is on our side. I shall read this for the record.

    ''Retirement pension annuity—required to purchase before age 75 if a member of a defined benefit scheme. Non-pension annuity—for example home equity release.''

Clause 15 lists all categories of income including pension income. Pension income is given a more detailed definition in clause 16. I hope that that answer helps the hon. Gentleman. It has helped me, in that the provision does what I thought it would by differentiating the various incomes that come from annuities. If the hon. Gentleman reads the answer and is still not satisfied—if he thinks that I am still talking gobbledygook—I shall offer a fuller and more detailed explanation. I thank the hon. Gentleman for that googly; I hope that it is the last in this Committee.

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