Draft State Pension Credit Regulations 2002

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Mr. Boswell: With respect, 5.5 million pensioners will be on means-tested benefits, and a net accrual of about 3 million pensioners will be in that position for the first time. That is likely to inflate the figures. Given the Minister's rather dramatic confession that no systematic study has been carried out on the number of temporary movements, will she at least give the Committee a commitment to keep the matter actively under review and to ensure that there are dedicated staff to handle and dispatch it, particularly if it gives rise to administrative difficulties in the various pension centres?

Maria Eagle: The hon. Gentleman makes a mountain out of a molehill. There is nothing new about people losing their benefit entitlement when they go abroad for a certain period, and having to make a new claim when they come back. In fact, the rules of habitual residence to which he referred were initially put in legislation by a Conservative Government.

It is not the business of the Department to spend all its time, effort and resources trying to keep track of the number of people who go on holiday for what length of time but to administer benefits when people claim them by finding out whether they are entitled to them and giving the benefits as quickly and as accurately as possible. I do not want the hon. Gentleman to think that it is the core business of the Department to go

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around adding up the time for which people go away on holiday. Clearly, the situation is no different for pension credit than for income support, in that people must report when they are out of the country for a certain period. However, they are perfectly entitled to claim again when they come back.

We intend to administer pension credit as efficiently as possible. We shall keep a close eye on the number of people claiming and ensure that our staff in the various pension centres who are administering the benefit are able to do so. To that extent, I give the hon. Gentleman the assurance that he seeks.

The hon. Gentleman made some points about overpayments, as did the hon. Member for Canterbury, and asked whether it would be better to suspend the assessed income period rather than finish a claim. That point was raised in some detail by several Opposition Members. It is not clear why people returning from abroad should be singled out in this way for different treatment, unlike others who are also entitled and whose assessed income period might end, such as people who have lost a partner. We debated that in Committee and on Report. We explained then that we intend strictly to limit the number of changes in circumstances that will require reassessment of income, because we do not want to spend time reassessing what is intended to be a substantially longer assessed income period than that for income support. A protracted absence abroad is one instance of where a claim should end and it is right that when a pension credit claim closes, it should be closed. There will be administrative confusion and problems if claims are to be suspended and reactivated. It is simpler to close the claim and open another, and it is entirely consistent to make a full assessment on a new claim when people have returned to the country.

Mr. Boswell: I want to pick up on the Minister's use of the word ''protracted''. The essence of our concern is that a four-week period is reasonable for absence on holiday. She told the Committee that she does not know how many people are likely to be in that category, but I think it would be common ground between us that that does not represent a protracted absence abroad.

Maria Eagle: I understand the hon. Gentleman's point, but I have said that we must ensure that the new pension credit carries forward some of the main rules of income support while trying to include simplification and improvements in other respects. The income support rules have been carried forward, so we are not changing them gratuitously. I cannot agree that more than four weeks is not necessarily protracted. He said that that is not, but we believe that the figure represents the right balance in assessing whether someone is on holiday or doing something a little less temporary.

It must be right that, when simplifying the system for the benefit of pensioners, we also simplify the administration wherever possible. We do not want an administrative burden over and above what is necessary to ensure that pension credit is put into effect. As the Department responsible for its administration, we must take those balancing issues into account. We believe that the existing provisions

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strike the right balance between the interests of pensioners who go abroad and those of taxpayers. They have generally worked well for income support. We have not seen major protests about them and we are justified in carrying them forward, although the hon. Gentleman may not agree.

The hon. Gentleman also referred to overpayments. Of course, we look at those sensitively in the light of individual circumstances and seek to recover overpayments only when there has been an intention to deceive. If there has been an administrative problem on our part resulting in people receiving overpayments, we have discretion not to seek repayment. However, we also have an obligation to the public purse and to ensure that we do not hand out money for things to which people are not entitled. In appropriate circumstances we will recover overpayments, but we always try to do so in a way that is affordable for the person who is paying. We shall not change that in respect of this benefit.

The hon. Gentleman also asked about European Union problems and said that Euro-lawyers may be flying around and trying to drag us to the European Court of Human Rights. The residence requirements are not inconsistent with EU law. It is not inconsistent to require that someone should be in the United Kingdom to be entitled to a benefit. I do not agree with the rhetoric in respect of Euro-lawyers dragging us off to the ECHR.

Annabelle Ewing: The Minister referred to both the European Union and the European convention on human rights. Did the Minister mean both EU law and the convention law, or one or the other?

Maria Eagle: Let me clarify that. When I referred to the European Union I was trying to make the point that the residence requirements about which hon. Gentlemen were concerned are not inconsistent. We must be ready for the ECHR to look at everything we do, but I was making a specific point about the EU.

I have probably said quite enough about temporary absence abroad.

The hon. Member for Daventry raised some points about income arising from PEPs and ISAs. The value of such capital is included in the pension credit assessment, and the imputed income is applied to the capital value at a level that we discussed in great detail during the passage of the primary legislation and rewarded through the savings credit. He also had fun reading out some of the regulation on living away from a claimant and talked about collusion in circumstances in which people are taken to live together. The test that we apply is whether a couple are living together as a couple, which has to be assessed case by case. Given the many types of social security benefits, my Department is extremely experienced in making such assessments, and given that the provision has been carried through from income support, I do not anticipate particular difficulties other than those that we normally experience with all benefits.

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The hon. Gentleman referred to regulation 17(10)(c), which relates to 50 per cent. of second pension contributions being disregarded. The purpose of that is, of course, to encourage ongoing provision. Again, it is a rule carried forward from income support, and its main purpose is to allow those with younger partners, who may still be working, to be credited. Although it has always been thought that it is not right for the Government to meet the whole cost, I emphasise that there is nothing new or novel about the provision.

The hon. Gentleman asked whether mortgage insurance protection would be disregarded in pension credit, and the answer is that it will be completely disregarded. He and the hon. Member for Perth also made some points about further regulations. Further negative resolution procedure regulations on council tax benefit, housing benefit and the treatment that will be given to them in pension credit will be introduced in the autumn, and they will enable us to administer and implement pension credit.

The hon. Member for Northavon (Mr. Webb) asked how many pensioners commit fraud. He made a general point about the safety and security of the system, given that we are perhaps enabling collusion between partners on where they live. We do not have specific data on prosecutions of pensioners on income support, but we believe the level of such prosecutions to be low because the level of fraudulent cases concerning the minimum income guarantee, which is of course the pensioners' income support, is very low. In 2000, only 3.2 per cent. of MIG cases were thought to be fraudulent, so we are looking at a lower level of fraud than one might have anticipated.

The hon. Gentleman was trying to tempt me to fantasise about being the Secretary of State and making an uprating statement, but I did not do that earlier and I will not do it now. I have to commend him, because he keeps trying to get me to do that, but he will not succeed.

The hon. Gentleman made some points about the treatment of capital and, as he sees it, the differences between inheriting a capital sum and saving a similar sum through a pension. He thought that that could create a problem that might distort planned saving behaviour and enable people somehow to work the system. I shall deal with that point as a question about how income from annuities rather than capital is dealt with. Annuities are capital converted to income, which means that the capital sum has gone. Income assumed from the capital is higher because we are not in the business of preserving the capital value of the sum for ever to allow it to be inherited, and we therefore assume a capital drawdown. For example, a £20,000 inheritance could be used to buy an annuity, and we hope that we have taken account of his perception of differences, although it is always interesting to keep an eye on such things.

The hon. Gentleman also made some points about schedule VI, which concerns treatment of income. All I can say is that the £5 income disregard is another element that we have carried through from income support. I appreciate what he said about it and I understand his views, but he should recall that we

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have, for example, removed the remunerative work rule. He should bear it in mind that pension credit is designed to reward part-time or lower-level earnings. Tax credits are available to reward higher-level earnings, and he must consider the entire picture before he draws conclusions about whether a £5 disregard is good or bad.

The hon. Gentleman also asked about bottlenecks and migration. We are thinking carefully about our approach to the pension credit. We are attempting systematically to identify and contact all pensioners who might be eligible, using targeted mailshots. They will be sent out during an advanced claims period between April and October next year, with the main take-on under the credit running from October 2003 to June 2004. We will undertake mass communications activity, including television advertising, between September and December next year, to meet the commitments that we gave to Parliament about making all pensioners aware of the pension credit in advance of its introduction, and to increase the effectiveness of our direct mailing programme. We are also automatically converting the MIG case load, and are able to advise that customer group that the Pension Service will automatically put into their payment their entitlement to pension credit in the uprating notification. We can therefore contact those who already receive MIG.

We have some robust ways of ensuring that there is maximum take-up. We want people to take up this benefit and do not want to hide the fact that it exists. We want those who are eligible to claim it.

The hon. Member for Perth asked about dates, which she thought would vary and leave problems to be resolved. We are planning hard to ensure that that is not the case. In one sense it is paradoxically easier to cope with old IT than to introduce new IT at the beginning of a brand new benefit. We are very used to dealing with income support and MIG for pensioners so we have high hopes that we will be able to deal with the changeover even though it is a large task—I hope that the hon. Lady will be in a position to admit in October 2003 that she was somewhat pessimistic.

The hon. Lady also said that the assessed income period would not be five years for most people. I remind her that that period ends when there is no

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longer an entitlement to pension credit. Regulation 12(a) fixes the amount of retirement provision income used in the assessment of pension credit. It states that when a pensioner is no longer entitled to pension credit, there is no point in retaining that fixed assessed income period. I am therefore not as pessimistic as she is. She should bear it in mind that only certain things will end the assessed income period: for example, the claimant becomes a member of married or unmarried couple; the claimant ceases to be a member of a married or unmarried couple; or the other member of the couple reaches the age of 65. Only a small number of life events will end the assessed income period.

The hon. Member for Canterbury surprised us—not—with his usual condemnation of pension credit. He is so pessimistic. He asked me what the take-up rate would be, and I can say to him that we expect it to be about two thirds in the first year. We have always said that, and we have no reason to expect that to change. In relation to pensioners with earnings, he asked what the disincentive effect would be. We expect only about 70,000 pensioners with earnings to be entitled to full pension credit. I hope that pension credit will not provide the disincentive to earn that he thinks it will.

I have tried to answer all the questions, and now commend the regulations to the Committee.

Question put:—

The Committee divided: Ayes 10, Noes 5.

Division No. 1]

Cruddas, Jon Eagle, Maria Joyce, Mr. Eric Luke, Mr. Iain McDonagh, Siobhain
Smith, Angela Taylor, Ann Turner, Mr. Neil Webb, Steve Wright, David

Boswell, Mr. Tim Brazier, Mr. Julian Djanogly, Mr. Jonathan
Ewing, Annabelle Flook, Mr. Adrian

Question accordingly agreed to.


    That the Committee has considered the draft State Pension Credit Regulations 2002.

Committee rose at Six o'clock.

The following Members attended the Committee:
Roe, Mrs. Marion (Chairman)
Boswell, Mr.
Brazier, Mr.
Cruddas, Jon
Djanogly, Mr.
Eagle, Maria
Ewing, Annabelle
Flook, Mr.
Joyce, Mr.
Luke, Mr.
McDonagh, Siobhain
Smith, Angela
Taylor, Ann
Turner, Mr. Neil
Webb, Steve
Wright, David

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Prepared 8 July 2002