Examination of Witnesses (Questions 136-139)
MR JOE
HARRIS, MR
TONY LYNES
AND MR
NEIL DUNCAN-JORDAN
10 NOVEMBER 2004
Q136 Chairman: Welcome to our witnesses
from the National Pensioners' Convention. The NPC have helped
us as a Committee a great deal in the past with various subjects
and Tony Lynes has appeared before more committee sessions over
many years on this important subject than most. We have this morning
Joe Harris, who is the general secretary of the National Pensioners'
Convention, Tony Lynes, who is pensions adviser and Neil Duncan-Jordan
who is the campaigns officer. Joe, perhaps you could set the scene
for us a little. It would be helpful if you could give a general
overview about what the Convention believes the operation of pension
credit in the last 12 months has amounted to.
Mr Harris: We have about 1.5 million
pensioners through our affiliated organisations whom we represent.
When we came across pension credit, there was great discussion
throughout the nation on what this meant to people. We looked
at it in two ways. First, what does this do to eliminate pensioner
poverty which, after all, should be the objective of us all. Then,
what about the measure itself? Overall, we think it has failed
in three respects. As far as the poverty side, bearing in mind
incidentally that 60% of median income is at poverty level which
is £250-odd a week, what does the pension guarantee do? The
first thing it does is, to a certain extent, confuse because it
is called pension guarantee but it is taking the place of income
support. The £105.45, as it is at the moment is income support.
The idea of calling it a pension guarantee I think denigrates
the whole principle of a pension. Most people do not regard a
means tested benefit as a pension. A pension is something quite
separate. What does it do for single people who have an income
of less than £105.45 a week? What it actually does is to
offer them income support which is now called pension guarantee.
"Pension" ought to come into it but hardly "pension
guarantee". It does nothing new for them. The second thing
is the savings credit which has failed in some respects because,
in the first place, it is only offered to a single person who
has a total income with their savings of something less than £150
a week. It means that anybody, as the threshold for claiming it
lies on the basic state pension which is at the moment £79.60,
who has an income including their savings of below £79.60
cannot claim anything for their savings. There are many women
who pick up a state pension which is of course below £79.60.
They probably pick up £45 or £46 a week and there are
people who do not pick up the full pension anyway, men as well.
If they have made up their income through savings to, say, just
under £79.60 they will get no benefit from their savings
which is supposed to be one of the objects of the exercise. We
feel that it fails in that respect because the poorest pensioners
who are always the target for government statements and approaches
are not really getting anything out of the savings side. The fact
is that it is offering something to pensioners. I am lucky. I
get an extra 25 pence a week now and I do not have to be means
tested for it. I am very grateful for it because 25p a week is
an extra I get which I do not have to fill out a form for. However,
when it comes to the question of the pension credit system, for
people to avail themselves of it, they have to go through means
testing. We think this is undignified and, more than that, it
is very, very confusing. Joan Humble made the point about how
confusing it is. We thought it was confusing and, having read
the Department's literature on it, because of the general, popular
confusion, we brought out a pamphlet called Pension Credit
for Beginners. We tried to simplify it. We had a wonderful
sale—50p a copy, incidentally—amongst people who least
understood whether they were entitled to make a claim or not.
That is not clear in the DWP's Pick it up. It's yours pamphlets.
We think it is very confusing. It is causing people who could
benefit from it hesitation. I think you have already heard of
the problems that are related and we feel that it is a very confusing
statement in every way as to how people can increase their income
a little.
Chairman: Your written submission is
along those lines and very welcome too so thank you for that.
Q137 Mr Goodman: Can I take you specifically
to take-up and means testing? You argue that pension credit has
failed to get the money to the poorest pensioners because of the
reliance on means testing, which is a point that is often made,
but the Government does respond by saying that nearly 60% of the
extra £2 billion going each year on pension credit goes to
the poorest third of pensioners. About 80% goes to the poorest
half. As the previous witnesses explained, older and poorer women
have benefited from the pension credit. In the light of all that,
can you explain your argument further?
Mr Lynes: It is true that a large
number of pensioners are now getting pension credit who were not
getting the minimum income guarantee previously. Many of them
are pensioners who ought to have been getting the minimum income
guarantee previously so they are among the poorest pensioners.
We are not obviously saying that pension credit has not done quite
a lot of good in terms of getting more money to the poorest pensioners.
What we are saying however, is that even if you look forward and
assume that the Government is going to meet the targets that it
set for itself as far ahead as 2008, there will still be very
large numbers of people not claiming the pension credit and a
large proportion of those will be among the poorest pensioners.
Our calculation from government figures is that in 2008 there
will still be between 0.4 and 0.5 million of the poorest pensioners
not claiming pension credit. They are people who are below the
guarantee credit level. In other words, they are among the people
who were not claiming minimum income guarantee in the past and
they will still apparently not be claiming it in 2008. That is
a very serious defect in the scheme, however much one may welcome
the good that it has done.
Q138 Mr Goodman: The Secretary of State
said recently that one of the main barriers to take-up might be
that some people who are entitled to claim do not claim because
there are small amounts involved. In other words, I think the
implication was that those who can claim larger amounts and need
the larger amounts are getting the larger amounts. Do you think
that the Secretary of State's analysis is right, first of all?
Are there ways round this problem?
Mr Lynes: I am pretty sceptical
about that argument because I do not think that most people can
begin to work out how much they are going to be entitled to. It
may be that some people think they are not going to get very much
and so do not bother to claim, but the idea that they do not claim
because they are only going to get £5 a week I think assumes
a level of understanding which simply does not exist. I would
like to say a bit more about that in terms of the whole way in
which the pension credit is presented in the legislation and in
the literature based on the legislation. Shall I do that now?
Q139 Mr Goodman: You are very welcome
to. My next question was going to be: given the apparent complications
of claiming, how could the literature be made clearer. For example,
should it explain how the savings credit element is calculated
or would that provide even more confusion by providing more detail?
Mr Lynes: I think the problem
goes right back to the legislation itself. The Government decided
that in introducing the pension credit it would not present it
simply as a modification of the existing income support rules,
which in my view is what it is. They would present it as in effect
being two benefits, one being the guarantee credit and the other
being the savings credit. What the pension credit did was to introduce
what we used to call a "disregard" into the calculation
of income support for older people. In principle, when you have
a means test, any other income that people have is deducted from
their benefit entitlement. In future, if you have income from
savings and so on, instead of the whole of that being deducted
from your benefit entitlement, only 40% of it will be deducted.
That could have been introduced into the existing legislation
very simply indeed. We have had disregards in the income support
system way back to the 1930s. That in itself is not something
new or difficult. I do not say everybody would understand it but
it is not a terribly difficult concept to explain to people. If
the Pension Credit Act had treated it in that way, the whole thing
would have been enormously easier for people to understand. You
would not have had to understand what the savings credit was because
there would not have been a savings credit. I have mentioned it
to this Committee before but if you look at section three of the
Act and attempt to understand it I guarantee that you will fail.
What we have also discovered is that section three of the Act
in some cases produces the wrong answer. The Department has admitted
to me that it produces the wrong answer, but it says there are
not very many people affected so it is not prepared to do anything
about it. I have submitted to your Clerk a considerable amount
of correspondence on this subject which I hope you may have a
chance of looking at. The system is much more complicated than
it needs to be and much more difficult to explain than it needs
to be.
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