Examination of Witnesses (Questions 192-199)
MS ALISON
O'CONNELL AND
MR CHRIS
CURRY
24 NOVEMBER 2004
Q192 Chairman: Ladies and gentlemen,
can I reconvene the hearing this morning and welcome Alison O'Connell
and Chris Curry from the Pensions Policy Institute. Thank you
very much for your help and written evidence and your continuing
work in the area which I think helps to deal with some of these
issues of complexity which we are all struggling with. Alison,
to make the best use of the time, could you just say a little
bit about the Institute itself just to set the scene for the record.
Ms O'Connell: Of course, Chairman,
thank you. The Pensions Policy Institute is an independent
organisation set up to make factual contributions to the pension
policy debate. In other words, we provide facts, analysis and
commentary with no particular axe to grind. There is no particular
solution that we are pushing for. I suppose we are best known
for our work on state pension reform because that is where we
have spent most of our time working and because we concentrate
on the policy angle we have less to say about the practical delivery
aspects, but I guess your questions will reflect that.
Q193 Ms Buck: The figures that you have
analysed confirm what we already knew, which is the differential
in take-up between the poverty alleviation element of Pension
Credit and the Savings Credit. I wonder if you could tell us a
little bit more about that and, in particular, what you understand
about this relatively low Savings Credit take-up, what that tells
you about the people who are applying and who are not applying
and why.
Ms O'Connell: It is difficult
to know, but I think it is clear that Guarantee Credit is working
much better and in a way that is inevitable because there is a
very simple message with Guarantee Credit, ie if you are on a
low income your income will be topped up, and so it would seem
likely that that would have a higher take-up than the Savings
Credit which is very complicated to understand, it is difficult
to know whether you are in the right ballpark to claim or not
and it seems to be expanding up the income scale to people who
have never thought that they would need to be means-tested for
a benefit before. It is a combination of the difficulty in accessing
the people that might be eligible and the fact that we might be
talking only about a very small extra amount anyway, £10
is the average Savings Credit entitlement, which is very different
from the Guarantee Credit where there is a simple message and
probably more to claim.
Q194 Ms Buck: What do we know about the
people who are not applying? You have explained the motivations
behind it, but I think we could know more if we were burrowing
down into the figures and finding out whether these people are
owner occupiers as opposed to tenants, whether they live in particular
parts of the country and what some of their characteristics are.
I have one of the highest overall Pension Credit award levels
in the country and that tells me a great deal about the nature
of my population, which is that I have an awful lot of people
who do not qualify for the basic state pension. I do not know
from those figures yet what that breakdown is between the Savings
Credit and the Guarantee Credit. Is it not possible to investigate
those figures further and tell us a little bit more about the
kind of people that we should be targeting our information at
and promoting take-up with?
Mr Curry: I think it will be at
some point. One of the things that we tried to address in our
written evidence was to provide some estimates of take-up. As
of yet I have not seen any official estimates of take-up which
tend to be estimated from a different source and take much longer
to feed through and to be calculated by the Government. What we
have got in our written evidence is something we have put together
from our best estimate of the sources that are available. The
detail that I think you are right needs to be looked at as to
who it is is not claiming the Savings Credit or Guarantee Credit
or the combination of both can be done with a more detailed data
set and I think should be done when the Government does its first
analysis of this bit of the take-up issue of Pension Credit. I
think it is important that there is still some early indication
of whether things are working or not. I think the read across
from previous means-tested benefits work suggests that it is likely
to be people who are only entitled to one particular benefit and
a small amount are not likely to have been reached. This goes
back to some of the points Alison was making about only having
a small entitlement, not being aware that you are even in the
right income range to be thinking about means-tested benefit.
Whereas means-tested benefits have always been perceived as being
for the poorest pensioners or for someone who has a particular
need with the help of Housing Benefit or Council Tax benefit,
now it has been extended to people who have done some saving who
previously thought they could not claim anything. It is trying
to target those people who are completely unaware of their entitlement
that will be the interesting part.
Q195 Ms Buck: Do you know anything about
people who make a speculative call? Do we know anything about
the number of people who might ring the Pension Credit hot-line
or make another inquiry and are told they do not qualify? I would
have thought you could say to people that there is a cut-off point
and the simple message is that if your total income is below that
you may get something. That does not seem to me to be a terribly
complicated message to get over.
Mr Curry: I do not think it is
as simple as that because it depends on each individual's
circumstance, what type of income they have, where that income
comes from, what are their needs, whether they do any caring for
anybody, whether they are disabled, singles or couples. It is
not necessarily that straightforward.
Q196 Ms Buck: Of course it is not straightforward,
but it is more straightforward to say that above a certain level
you are not going to qualify and less straightforward to say that
you may qualify for more than you think.
Ms O'Connell: You could certainly
say that everybody below a certain income—and maybe leave
a margin of error—should be applying, but applying requires
getting together all the evidence, the original proof of all your
savings and everything to The Pension Service, it requires quite
a lot of work. It would be very expensive to do that and you would
not just do it once, you would have to keep doing it at different
points through someone's retirement because of the indexation
issue that generally income rises in line with prices at best,
whereas the thresholds at the moment are going up with earnings
or faster. So it is not just a one time question, it is something
that would have to be repeated throughout retirement.
Q197 Ms Buck: That is an entirely reasonable
theory, but is it not just a theory? Has nobody sat down with
groups of pensioners and done qualitative research in different
parts of the country that says, "Do you know about this?"
and "Why are you not claiming it?" Is that what people
are saying in response to the question? Should we be saying to
the Government, when we talk to the Government Minister on this,
why are you not doing the kind of research that should be necessary
to find out why six and a bit out of 10 pensioners who should
be entitled to something from the Pension Credit are not even
bothering to make an application?
Ms O'Connell: I said in my introductory
comments that we are not really involved at the delivery end and
I know you have taken evidence from people who are. We would say
the data is not just sufficient to understand even what the official
take-up rate is let alone who should be claiming and who is not.
Q198 Ms Buck: Should the Government be
setting (a) a higher target and (b) a differential target for
Savings Credit and Guarantee Credit?
Ms O'Connell: I think it would
be very helpful if the Government set differential targets for
the three types, Guarantee Credit, Savings Credit only and both
together, and published those take-up figures monthly.
Q199 Ms Buck: Specifically on the phasing
out of the credit entitlement over time for the 60 to 65 year
old group which I think you are concerned about, can you tell
me why you are concerned? If we are talking about raising the
retirement age for women to 65, does it not send out an extraordinarily
odd and complex message that you may otherwise still be entitled
to Pension Credit at that stage?
Ms O'Connell: Absolutely. I think
it is entirely rational that the Guarantee Credit level should
rise from 60 to 65 in line with the State Pension Age for women.
We wanted to mention it to make sure it was brought to people's
attention that the Guarantee Credit scope was being limited and
also to make the point that it does really cast doubt over the
logic of what is being argued against, on raising the State Pension
Age. This is an entirely separate issue about making pensions
better by raising the State Pension Age. The one argument that
is brought against that is that it would be wrong because it disadvantages
people in lower income groups who tend to have a shorter life
expectancy. The raising of the Guarantee Credit age from 60 to
65 directly impacts on that group and therefore is even more discriminatory
in that sense than in the way it is being used in the State Pension
Age argument.
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