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8 Dec 2004 : Column 157WH—continued
Withdrawal of Pension Books
4 pm
Mr. Paul Burstow (Sutton and Cheam) (LD): I am grateful for the opportunity to speak about the withdrawal of pension books and some issues associated with the roll-out of direct payments. Last week, I met the parliamentary panel of the Greater London pensioners forum and its chairman, David Dombey. GLF members expressed concerns about the withdrawal of the pension book and the impact it was having on pensioners throughout London. I said that I would apply for an Adjournment debate to air their worries. This is just one of those times when a debate comes along much quicker than we expect it to, and, given the timing of the changes in respect of pension books, that is probably a good thing, too.
According to figures supplied last year by the Department for Work and Pensions, more than 350,000 pensioners in London used the pension book to collect their pension. About 5,000 such pensioners live in my constituency. This afternoon is not the first time I have sought to express worries about the new arrangements for paying pensions. I have previously asked Ministers, especially the Leader of the House, about the exception service and the implementation of the Post Office card account, both of which issues have been brought to my attention by constituents, especially the Sutton seniors forum and Age Concern Sutton.
My purpose in wanting today's debate was to clarify the Government's intentions, especially in respect of the 140,000 or so pensioners who have, to date, not responded to letters sent by the Department asking how they want their pensions to be paid in future. I believe strongly that pensioners should be able to keep receiving their pension payments via the pension book, if they wish. It should be a matter of choice for them, as individuals. However modern the direct payment system and however good it may be, the fact is that some people do not want their pensions paid that way. Their choice is being reduced, not increased.
Three options were outlined in the Department's letter to pensioners advising them of change to pension payment methods. I am sure that the Minister will be only too familiar with them, but I shall rehearse them for the record. The options are: placing pension payments into existing bank or building society accounts; opening a separate basic account with a bank or a building society for Post Office payments; and the Post Office card account itself.
Members of the Greater London pensioners forum have said that many pensioners in London have not been fully informed about the changes that have taken place and those that will take place. It has not been made at all clear to pensioners that, in effect, a fourth option is available to them—the exception service, which involves the payment of pension by cheque. Pensioners in such circumstances will be sent a cheque to their home address that they can take into their post office to cash, like a giro. To all intents and purposes, it sounds similar to the existing pension book system.
The Department's leaflet "A Guide to Direct Payments" makes no mention of the exception service. It is not presented as an option in that document. There is no reassurance for those with worries about how they
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will manage a Post Office card or bank account. There is nothing to explain what the alternative might be. Instead, in response to the question posed by many people, "What if I don't think I can manage an account for a direct payment?", the leaflet simply suggests that they contact the Department.
Originally, the Department stated that that fourth option would be open to pensioners only when they could not use one of the other methods. However, it has now confirmed that pensioners who do not opt for any payment method will automatically be transferred to the exception service when the system changes from next April. The literature made available to pensioners does not explain that, as a result of which many feel unnecessarily anxious that, if they do not choose an option, their pension will stop all together. That anxiety led the Greater London pensioners forum to raise the matter with hon. Members just last week. It seems that the Government are determined to get the maximum number of pensioners on to the cheapest possible system for delivering pension payments. That is causing upset and worry. I would like the Minister to say what the Government are doing to communicate more clearly that fourth option—the exception service—to pensioners.
There is also concern about the home visits that Pension Service staff make. The purpose of such visits is ostensibly to be helpful and to give advice and support over the decisions that people need to make about payment methods. However, some elderly and vulnerable pensioners find the visits distressing, no matter how courteous staff try to be. It would be helpful if the Minister could say something about the purpose of such visits and which groups are being targeted for them, in terms of age, disability and so on.
A number of problems with the new system are coming to light. For example, there are difficulties in setting up Post Office card accounts. In answer to a parliamentary question in June, the Under-Secretary of State for Work and Pensions, the hon. Member for Gravesham (Mr. Pond), said:
"We recognise that some customers may find the process difficult, but we have made it as simple as we can. We are considering ways to make the process more customer friendly and simpler to operate."—[Official Report, 7 June 2004; Vol. 422, c. 19W.]
Someone who wants to open a Post Office card account has to take the following steps. First, they have to receive a letter from the Government telling them about the changes and informing them of the three options. Secondly, the person calls the Government's helpline. Thirdly, they receive a welcome pack from the Department with a personal invitation document. Fourthly, they have to take the personal invitation document to a post office, which will send the application back to the Department. Then another welcome pack is sent with the account and personal identification number. Finally—the sixth stage—the person has to fill in the original form and return it to the Post Office. There seems to be a bias towards take-up of direct payments into bank and building society accounts. Indeed, Postwatch has said that the
"application process requires the customer to retain and assimilate documents they receive at different stages in the process. Duration between receiving these different documents is often quite long. It can be confusing and is potentially off putting."
The message that the process seems to be sending is that the Post Office card account is not the best kind of account.
Postwatch makes it clear that postmasters are being encouraged by the payments system to push ordinary bank accounts instead of Post Office accounts, which is quite striking. Under the terms of the card account sub-postmasters receive 14p per £100 withdrawn. That means that £3,214 will have to be transacted in one hour to generate just £4.50, to cover the cost of the counter clerk, minimum wage and such overheads as national insurance and sickness absence.
By contrast, sub-postmasters receive 12.5p per transaction from the independent banks that are members of the scheme, regardless of the amount being transacted. Therefore, to earn £4.50, only 36 transactions, of any amount, are required each hour. The chairman of Postwatch, Peter Carr, put the matter this way:
"These margins are dangerously thin but given the choice the sub postmaster would elect to dispense cash to bank customers rather than Post Office Card Account customers."
In other words, it is against the interests of postmasters to encourage a transaction that will make them worse off, so they are likely to discourage such a system too.
There are also concerns about accessibility to the new arrangements. Currently, a pensioner can allow anyone to collect their pension on their behalf. Under the new system, a pensioner can nominate a person to collect their pension on their behalf. That person will be sent a card and PIN for the purpose. However, there is no provision for a pensioner who falls ill, as we all do from time to time, to ask someone to pick up their pension if they have not already made those nomination arrangements. Similarly, pensioners who rely on a number of different carers to pick up their pension, as is all too often the case, will not be allowed to carry on doing so.
Part of the answer to such concerns is the exceptions service—it could also be described as the cheque system—which is intended to enable people to cope with such circumstances. However, what happens if the cheque that is paid through that service is lost in the post or severely delayed, perhaps on a bank holiday or over the Christmas period? Indeed, the Post Office seems to be struggling a bit now in that regard.
In answer to a parliamentary question, the Minister for Pensions said:
"Procedures are in place to ensure that, where a cheque is late or goes missing, the customer receives a replacement payment as soon as can be arranged. The action to be taken will depend on the individual customer's needs and circumstances and might involve a home visit if that is the most appropriate solution. Our aim is to ensure as far as possible that a customer does not suffer hardship."
It is unclear what is being reviewed, or what the time scale is of that review. It would be useful if the Minister could shed some light on the nature of that review and when it will be concluded; that would certainly help members of the Greater London pensioners forum.
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If pensioners receive a cheque through the post, they should be able to cash it at a post office, but that will surely require some ID, such as a driving licence or passport, and most pensioners who are unable to manage an account are unlikely to have those documents. That point has been put to me by pensioners' groups.
I understand that the current cost of the weekly payment by order book is about £1.10. According to a written answer in November by the Under-Secretary of State for Work and Pensions, the hon. Member for Gravesham, the average cost of the cheque will be £1.35 after next March. The cheque system is more expensive than the current order book system. Those who cannot manage an account will be paid by the cheque system, but that is more expensive than the current book system. Why is it not possible to retain a pension book for those purposes?
The withdrawal of the pension book has contributed to a significant reduction in the number of post offices, especially as, in the past, a large chunk of their business relied on the payment of benefits and pensions. That has had an impact in my constituency, where the Post Office recently proposed the closure of six post offices as part of its area plan. It has already closed, or proposed to close, three of them—those at Angel hill, Church Hill road, and Oldfields road. They are still consulting about three more—those at Belmont, Cheam and Stonecot; they are in limbo because of these difficulties.
It is hard for many of my constituents to take the Department's latest leaflet seriously when it reassures them that they will be able to collect their pension at their post office: first, because those post offices will probably not be there, as so many of them are closing; and secondly, because they can only do so if their bank has an arrangement with their post office.
I want to end with a few questions and points for the Minister. The cost of the cheque is £1.35 compared with £1.10 per payment for the pension book; even at this late stage, therefore, the Government should reconsider their plans to scrap the pension book and allow existing pensioners to carry on with it. They have come to know and love it, and it gives them a sense of security. The information the Department provides for pensioners about payment methods must spell out all the options, including the exception service. Why is that being omitted from the details that pensioners get to see, unless they start ringing up and asking questions? It should be made clear which banks and building societies will allow pensioners to get their money at a local post office. That should be part of what people consider in their decision making. If they are enticed into having a direct payment into a bank account, they should know whether that bank has an arrangement so that they can take the money out at a post office, if one is still open.
The lengthy and complicated application process for the Post Office card account needs to be simplified. Can the Minister say a bit more about where the Department has got to in simplifying the process? There also needs to be more information and safeguards, so that pensioners who use a Post Office card account and forget their PIN can still access their pension money. What is being done to address that gap in this system's armoury? There must also be flexibility in the system to allow pensioners with a Post Office card account to authorise someone
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they trust to collect their money, not just a previously nominated person; otherwise, how does the pensioner who falls unexpectedly ill get his or her pension?
For many, the pension book is the right way of collecting their pension. It gives them a sense of control over their money and lives. It gives them the peace of mind that they want. That peace of mind is priceless, yet the Government seem only too willing to take it away. Pensioners want to keep their pension books. They feel that they are being asked to pay a heavy price for the changes that are now going forward. It is those concerns, expressed by many pensioners in my constituency and across London, that led me to seek this debate. I look forward to the Minister's response.
4.15 pm
The Parliamentary Under-Secretary of State for Work and Pensions (Mr. Chris Pond) : I congratulate the hon. Member for Sutton and Cheam (Mr. Burstow) on securing this debate. He raised a number of issues and asked a number of questions about the withdrawal of the pension book. Given that our time may be more limited than usual, I may not be able to address them all, but I will write to him about those matters that I cannot cover today.
The move to direct payment, part of which is the withdrawal of order books, will increase customer choice; it will help to address the financial exclusion that blights the lives of so many of our constituents by giving them access to the financial services that the rest of us take for granted. That last point is particularly important, but it is often forgotten.
Over the last year, I have met a number of the interest groups that represent our customers. Help the Aged, Age Concern, Mind, Citizens Advice and the Royal National Institute of the Blind have all helped us to put together a way to progress with the move to direct payment, and all welcomed our attempts to bring more people into the financial mainstream. Indeed, Citizens Advice last year published a booklet called "Beyond Bank Accounts: Full financial inclusion". The foreword to that booklet stated:
"The government, the banking industry and the Post Office should be commended for the progress they have made in establishing Universal Banking Services. The ambition to enable all people to own the most basic of financial services—a bank account—is one we share."
Last week, the Chancellor reiterated his commitment to halving the number of people without a bank account, who are therefore trapped in financial exclusion. The move to direct payment is an important part of that process.
I came into politics to combat poverty and social exclusion, so I must admit to an element of frustration when I hear people seeking to criticise our attempts to extend financial inclusion to all citizens. There is an element of nostalgia for the drab days of order books and giros, but that is far removed from the reality that has left 3.5 million people excluded.
There is one aspect of the withdrawal of pension books about which I am particularly concerned—the withdrawal of pension books from pensioners by the thugs and thieves who steal an average of 100 books a week. We are not talking about the old days when each order for the basic pension was worth £67. Nowadays,
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each order book can be worth at least £2,000. That is a tempting prize for the criminal. That is why so many pensioners realise that direct payment into a bank account is a much safer and more flexible way of receiving their funding.
More than three people in every four now have their benefits and pensions paid into an account, and the figure in the hon. Gentleman's constituency is up to 80 per cent. higher than the national average. Overall, it is what customers want. A total of 18 million people now have payments made into their accounts. Independent research commissioned by the Department for Work and Pensions shows that 93 per cent. of people who have changed to direct payment are happy to receive their payments in that way; and less than 1 per cent. of customers say that they want to abolish direct payment and go back to the order book.
Once people have made the change, they realise how much more convenient and safe it is to receive their money in that way. If it is the policy of the hon. Gentleman's party to return to order books—if that is what he is telling the House—he should tell us where the party will find the £400 million needed to do so.
Mr. Burstow : The Minister did not, I fear, listen to my reasons for making this speech, in the sense that I seek to address the specific concerns raised with me by pensioner groups. I am not here to make a partisan political speech about whether my party is in favour of retaining the pension book to the exclusion of all else. Of course, that is not the party's position anyway. I hope that the Minister can respond to my concerns about the 140,000 people who have not yet responded to the call to change the method of payment.
Mr. Pond : I certainly will address those points, but I think that it is helpful to have it on the record exactly what the party's policy is. When we hear representations in the House about the wickedness of moving away from order books we will bear it in mind that there is no plan to return to them. I hope that the hon. Gentleman will tell the pensions organisations in his constituency that that is his policy.
It is important to remember that many current and basic bank accounts can be used at post offices. I know that the hon. Gentleman has had concerns about post office closures in his constituency. He asked about the information available. That is contained in leaflets produced by my Department, which list clearly the bank accounts that can be used at post offices. The fact is that more than 100 million banking transactions have been made in post offices since April 2003. That has to be the future of the post office network, into which we are investing £2 billion. We understand just how important that network is to local communities.
The hon. Gentleman made the point that the Post Office card account is, in his view, difficult to open. I would ask him to talk to the 4.2 million people who have already gone through the process and opened a Post Office card account, 80 per cent. of whom say that opening a POCA is an easy process. For some people, it will not be a simple process. We have to address that to ensure that those people can get access to their money and can get it paid in a way that is appropriate for them.
Most people recognise that order books, which came in with ration books, are an outdated means of providing people with their benefits or pensions. The
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world has changed considerably, and if people have their benefits and pensions paid into an account they can access some of the advantages of financial inclusion that the rest of us take for granted, such as discounts on their fuel bills and the convenience of being able to access their money through a cash point or over a counter at a supermarket as cashback, as well as at a post office and at a bank.
We have emphasised all along that we want people to continue to collect their benefit and pension at the post office. I hope that the hon. Gentleman will join us in a campaign to make sure that people understand that they can continue to do that. We believe that it is important that people understand that the move to direct payment does not involve a move away from the use of the post office if that is what they wish, although they have the choice and convenience of the other options.
The hon. Gentleman raised some important questions about the cheque payment system, which he described as a fourth option. It is not a fourth option. It is not the best option for most people; it is perhaps the only option for some. We have worked hard with organisations representing the groups that I have mentioned—the elderly and people with disabilities, for instance—such as the RNIB and Mind, to ensure that we can devise a system that gives people flexibility and ensures that they receive their money. Customers do not need to apply for the cheque method of payment; we will make sure that if people have not given us bank account details by the time the order books are finally phased out, they will be paid by cheque.
We will make sure that, having called and written first to let people know that we are coming and respecting their wish if they do not want us to visit, we will provide home visits for those customers who need face-to-face help with the process of accessing their money through cheque payments or by another mechanism.
The hon. Gentleman raised the question of what would happen if the cheque were lost in the post or did not arrive. The cheque method of payment is well established; we have used cheques to pay benefits for many years, going back to 1968. We have well tried and trusted contingency arrangements to make sure that people will get their money. I hope that he will report back to his constituents and those pensioner organisations with the reassurance that under no circumstances will people be left without their money. We will make sure that people get access.
The cost of the cheque system, I have to say, is quite considerable. If 2 million people are paid in that way initially, we estimate that the cost will be about £1.35 for each cheque. Frankly, I would prefer that money to go into the pockets and purses of the pensioners rather than into the cost of administering a cheque-based system,
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but that is the extent to which we are prepared to go to ensure that people who cannot operate an account can access their money in a different way.
Nine out of 10 people have said that changing to the modern accounts has made a real difference to their life. It has given them extra convenience, extra control over their money, and extra security against the thieves whom I mentioned, who so often create the tragedy of withdrawing pension books from pensioners on the street. We recognise that changing a long-standing system such as this one is bound to create anxieties, but our recent research shows that people find the new accounts easy to operate and are satisfied with the way in which the system is working.
In conclusion, we are making sensible changes.
Mr. Burstow : May I repeat one question that I asked the Under-Secretary but which he has not yet had a chance to address? How will people with a Post Office card account who fall ill unexpectedly, as we all do occasionally, but who have not made arrangements for someone else to collect the money, be able to collect their pensions in those circumstances?
Mr. Pond : People in those circumstances have two choices. A normal bank account may be more appropriate, as it is more flexible and other people can access their account on their behalf. If that is not possible, however, they should contact the office that usually makes their payments, and we will ensure that alternative arrangements are made. Someone else can collect their pension or benefit for them, or we can find another mechanism, perhaps through a home visit, to ensure that they get their money.
So we are changing the way in which payments are made, and are doing so through consultation with the organisations representing the most vulnerable of our customers as well as the others. However, I return to the point that I made at the beginning: although this is a change to a long-established system and we understand the anxiety that that creates, we do need to make this change if we really are serious about combating the financial exclusion that blights the lives of so many of our constituents. We will help people through the process of change, and we will do everything that we can to explain why we are making the change and how people can accommodate it.
I thank the hon. Gentleman for raising the issue in the Chamber this afternoon, as it gives me an opportunity to respond in part to his questions. Given the limited time that we have available, I suggest that I write to him with detailed answers to his other questions.
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