House of Commons - Work and Pensions

Select Committee on Work and Pensions Third Report

6 Take-up

101. In its first Pension Credit inquiry, the Committee identified high take-up levels as a necessity if the Credit was to be considered a success and urged the Government to set clear and achievable targets.[228] Levels of take-up of means-tested benefits amongst pensioners are lower than amongst the population as a whole.[229] The most recent figures show that in 2002/03 between 26% and 37% of pensioners entitled to the Minimum Income Guarantee (which was replaced by Pension Credit) did not take it up.[230]

102. The Committee was concerned, in its first report on Pension Credit, at DWP's inability to produce reasonable estimates for take-up and urged the Government to set out 'clear and achievable targets for take-up of Pension Credit.'[231] DWP now has a target to have 3 million households claiming Pension Credit by 2006 and 3.2 million by 2008. These targets imply a take-up rate of some 75% for Pension Credit[232] (although this figure should be treated with caution as the projections of eligibility are subject to a margin for error of some 100,000 to 200,000 on either side.[233]) Within the overall target, there is a target to be paying Guarantee Credit to 2.1 million households by 2006 and 2.2 million households by 2008.[234]

The introduction of Pension Credit

103. Pension Credit came into force in October 2003. 1.8 million households were transferred across from Minimum Income Guarantee (MIG) and others were invited to claim.[235] At the end of December 2004 there were 2.653 million pensioner households receiving Pension Credit. 2.08 million were receiving Guarantee Credit (the equivalent of MIG).[236]Table 2 Pension Credit claimants by benefit entitlement 2003-04 (thousands)

All claimants Guarantee Credit and Savings Credit Guarantee Credit only Savings Credit only

November 2003 2,066.0 1,127.2 718.5 220.3

February 2004 2,264.1 1,179.3 733.7 351.1

May 2004 2,492.6 1,265.6 751.1 475.9

August 2004 2,602.3 1,298.1 759.8 544.5

December 2004 2,653.2 1,312.9 768.0 572.2

Pension Credit Quarterly Report: August 2004 and HC Deb, 2 February 2005, col 68WS

104. Definitive National Statistics figures on Pension Credit take-up will not be available for some time. However, the Government estimates that 2.08 million households getting Pension Credit guarantee awards represents take-up of 'in excess of 80 per cent'.[237] Take-up among those entitled to Savings Credit only is much lower - just 572,200 households are claiming out of some 1.2 million estimated to be eligible (see Annex C),[238] implying a take-up rate of some 48%.

Take-up by the poorest pensioners

105. The Pensions Policy Institute points out that the pattern of take-up is clearly higher for the 'poverty avoidance' part of Pension Credit than for the 'savings reward' part.[239] The Secretary of State said that his concern was to ensure the Department concentrates on take up of the Guarantee Credit and that he would be worried if they were a long way off target on that. However he was not worried that they were missing out on these pensioners 'to any enormous degree'.[240] The Committee was particularly interested to probe the extent to which the poorest pensioners were actually claiming and whether it is indeed the case that most of those failing to take-up their entitlements are entitled to relatively small amounts.

106. DWP says that 'the number of households now benefiting by over £50 a week has exceeded initial projections'. However, it considered the available evidence insufficiently robust to enable it to provide further details of the sorts of amounts going unclaimed, although it hopes this evidence will improve.[241] This means that we do not know how many of those pensioners not claiming Guarantee Credit are missing out on relatively large amounts, £20 a week for example. Citizens Advice said it was 'still regularly seeing people' who thought they had to live on a state pension.[242] They were entitled to Guarantee Credit, but did not realise this. Lancashire County Council Welfare Rights said that it continued to identify pensioners entitled to both large and small amounts and that there was 'no sign from our work that the level of awards was trailing off.'[243] The average amount of award for relatively new claimants (under three months) is £61.49, compared to an average of £41.78 overall.[244]

107. We do not know how many of those who are not claiming their entitlement to Savings Credit are claiming Housing Benefit and Council Tax Benefit and therefore only missing out on small amounts overall (although entitlement to Savings Credit also has the advantage of acting as a passport to the Social Fund ).[245]

108. The Chief Executive told us that she would favour a target that focused on the amount of money unclaimed, on the basis that this would focus attention on ensuring that those who are likely to gain most received Pension Credit.[246] She said there were difficulties measuring this, given uncertainties about data, but that the Service was continuing to work on establishing an adequate baseline.[247]

109. The Committee endorses the focus on the poorest pensioners, with a specific target for take-up of Guarantee Credit. However, we are concerned that little detail is available about the sorts of amounts those not yet claiming would be entitled to. We recommend that by 1 October 2005, the DWP establishes a target based on the amount of Pension Credit unclaimed, and that the Family Resources Survey be used to gain a better understanding of overall take-up of means-tested benefits by pensioner households (including Pension Credit, Housing Benefit and Council Tax Benefit) in order that resources to increase take-up can be focused on those who are missing out on the largest amounts. Government estimates suggest that about one and a half million people are not receiving the Pension Credit to which they are entitled[248]. The current strenuous efforts to increase take-up must continue to ensure this figure is reduced.

Take-up of disability benefits

110. At the end of August 2004, there were 985,400 people aged 60 or over receiving Disability Living Allowance and 1.4 million receiving Attendance Allowance.[249] Entitlement to these benefits can in certain circumstances attract the severe disability addition in Pension Credit.[250] Some 22% of all Pension Credit recipients were receiving the severe disability addition.[251]

111. In its report on Pensioner Poverty, published in 2000, the Social Security Committee concluded that a take-up campaign for Income Support among pensioners cannot fully succeed unless undertaken in tandem with identification of those eligible for Attendance Allowance.[252] There is considerable uncertainty around the extent to which take-up of Attendance Allowance and Disability Living Allowance, if increased, would impact on the projections of those entitled to Pension Credit. Research published in 1998 estimated take-up of Attendance Allowance to be between 40 and 60% and of the care component of Disability Living Allowance to be between 30 and 50%.[253] However, these figures have not since been updated.[254]

112. A number of witnesses to the inquiry thought more should be done to encourage take-up in this area.[255] Richard Wilson of Age Concern argued that it was important to have a target in order to focus the Department's efforts on increasing take-up.[256] On the question of setting a target, the Minister for Pensions told us: 'We are very concerned that those eligible for Attendance Allowance should receive it, so we are happy to look at that again and discuss that with the Minister responsible.'[257]

113. We recommend that the Government undertakes and then publishes research providing estimates of eligibility for Attendance Allowance and Disability Living Allowance, and of the potential impact of this on Pension Credit eligibility, and soon thereafter announces a take-up target for disability benefits.

Are the targets sufficiently ambitious?

114. Jim Dickson of Lancashire County Council Welfare Rights Service told us that 'this is the first Government that has ever introduced a target for take-up of benefits and for me that was quite a development and something to be welcomed. From our point of view it is hats off to them for that.'[258] Other witnesses argued that the target should be made more ambitious. The Pensions Policy Institute argued that 'the elimination of poverty depends on take-up of Guarantee Credit being 100%.'[259] Citizen's Advice and Help the Aged argued for the target to be set at 90%.[260]

115. There is evidence of progress made to date, with the Department having achieved more than two thirds of the increase required in a third of the time available.[261] The Chief Executive told us that a large increase in claims in March 2004 (with the caseload increasing by 138,000[262]) was the result of a 'big effort on our part to make sure we processed cases and it was driven by a target at that point, but it was part of a very long campaign we have been running since April 2003 for take up.'[263] There has since been a considerable slowing down in the rate of increase, with only 30,000 additional households starting to claim in the three months from 1 October to 31 December 2004.[264]

116. Reliable take-up statistics on Pension Credit in the first six months will be available in autumn 2005 (and for the first full year in 2006).[265] DWP says it is on course to meet the target for 2006[266] but considers the targets to be challenging. It argues that to make the target more ambitious, for example, by increasing the 2008 target to 3.85 million households (90% of those estimated as eligible) would involve a substantial increase in the marginal effort required to identify and successfully convert potential new customers, with a 'corresponding impact on our resource requirement.'[267] The Committee notes that 4.25 million households are expected to be eligible in 2008/09[268] so even if the 2008 target is met there will still be around a million pensioner households not claiming. The Committee acknowledges the value of take-up targets for Pension Credit but recommends that they should be set at a more challenging level, supported by the necessary resources to make them attainable.

DWP's take-up strategy

Factors influencing take-up

117. A number of recent pieces of research have helped clarify steps that could be taken to maximise take-up. A National Audit Office report, Tackling pensioner poverty: Encouraging take-up of entitlements, identified three types of factors influencing take-up.[269] These included:

The system: complexity of the overall system (including rules that are variable and complex linkages between benefits) and means testing (requiring pensioners to provide sensitive information about income and capital).
Administration: leaving the initiative to the pensioner to start the claim process and unresponsive or inaccessible channels of communication and perceived difficulties in obtaining information.
Customer level: ignorance of and misconceptions about benefits available, difficulty completing forms, fear of stigma or humiliation, fear of losing independence and a perception that claiming is not worth it.

Strategy to encourage take-up of Pension Credit

118. Pension Credit was introduced with a phased approach:[270]

Phase 1- April to September 2003. This was an advance claim period during which those households claiming Minimum Income Guarantee were converted to Pension Credit and 200,000 additional households invited to apply.
Phase 2 - October 2003 to October 2004. The Pension Service wrote to every pensioner household in the country to encourage them to apply. This was supported by a marketing campaign and local service partnership activity.

119. DWP has conducted surveys to measure the impact of its marketing messages and found that there was 'increasing awareness of Pension Credit as the campaign progressed.' Its current strategy includes: using proven data-matching techniques to identify people most likely to qualify and targeting marketing activity accordingly; writing to people most likely to be eligible; and PCAL staff telephoning customers who have yet to make contact. The Local Service is 'focusing on one-to-one contact rather than events for large numbers as the individual approach is often more productive in generating applications.'[271] A series of pilots has been run aimed at contacting the 'hard-to-reach'.[272] These pilots demonstrated the importance of good working relationships between the Local Service and partner organisations. They found that older people valued the 'personal approach of face-to-face contact, personalised letters and the availability of private rooms to discuss personal affairs.' Short-term funding has also been made available to local and national organisations through the Partnership Fund for take-up initiatives.[273]

120. The challenge, as DWP now perceives it, is to encourage take-up among those pensioners who have not previously been entitled to means-tested benefits and who may only be entitled to small amounts.[274] It is currently looking at ways to make claiming more attractive for this group, for example, by paying Savings Credit in a lump sum.[275]

Simplifying the System

121. One of the key objectives of Pension Credit is to make it easier for pensioners to take up their entitlement.[276] The National Audit Office (NAO) report outlines the action taken prior to the introduction of Pension Credit to tackle barriers to take-up.[277] These included only requiring claimants to report certain changes of circumstances every five years, reducing the length of claim forms and some alignment of Pension Credit rules with those for other benefits. Nonetheless, witnesses to the inquiry felt that more should be done to simplify the interaction of Pension Credit with other benefits (see Chapter 8). Furthermore, Age Concern argued that complexity of the Savings Credit calculation, in particular, made it difficult for people to know whether they would qualify and that this made them reluctant to attempt a claim.[278]

Developing a holistic approach to take-up

122. Levels of take-up of benefits by pensioners vary. Take-up of the state pension is close to 100%.[279] Among means-tested benefits, take-up of Housing Benefit is highest (with only around one in ten (between 16% and 10%) not claiming their entitlement). Take-up of Council Tax Benefit is lowest, with around two-fifths (between 44% and 38%) not claiming their entitlement.[280]

123. The Local Service plays a key role in encouraging take-up of Pension Credit and other benefits (see Chapter 4). However, there is also much that the Department can do, through its own processes and its links to other agencies delivering benefits. Sally West of Age Concern said that if take-up of income-related benefits were to increase significantly, it was necessary:

"to look at an approach that does not rely on older people making contact with one of the agencies or even being identified and then encouraged to claim; you need systems that actually are integrated. For example, anybody who has claimed Housing Benefit and Council Tax Benefit has given all their information about income and savings to the local authority, but currently that information is not automatically transferred to the pension service to check entitlement to Pension Credit."[281]

124. She argued that in the context of the current system, wherever somebody gets into the system 'they should be offered the full array of benefits and services.'[282] The Department's vision is to provide older people with 'easy access in their local area to information about the full range of services available - either through a single access point, or several access points which can offer advice across a range of issues.'[283] Measures under consideration include 'developing better arrangements for sharing relevant data' so that when a person enters one part of the system, information about them can be shared with other relevant agencies.[284] Both Age Concern and Help the Aged, however, expressed frustration that, despite the intention to make systems more integrated, little progress had been made.[285]

125. The vision of an integrated network of services for older people is described as a longer term aspiration towards which steps are being taken at present. Examples of such steps include the development of Joint Teams (see Chapter 4). Evidence presented to the Committee suggested there are other steps that can be taken to link different parts of the system in the meantime. These included bringing forward the relevant waves of the Pensions Transformation Programme, easing the transfer from Income Support at age 60, easing the process for accessing the carer's addition in Pension Credit and allowing the Pension Service to accept some local authority assessments of income and capital.

Pensions Transformation Programme

126. The Pensions Transformation Programme (PTP) (see Chapter 5) represents a significant opportunity in this respect. Waves three and four of this programme have potential to improve take-up of benefits other than Pension Credit. Listed as among the advantages of these waves, are 'continued improvement in take-up through better triggers and automated referral processes' and 'roll-out of processes for gateway referrals.'[286] The Chief Executive told us that under wave three 'an agent would be able to see straightaway all the benefits someone was getting.'[287] Proposed measures of success for these waves are 79,000 'gateway' referrals for Attendance Allowance and 95,000 for Council Tax Benefit and Housing Benefit, and that 85% of these referrals should 'pass the eligibility test of the other agency.' There are also advantages for Local Service take-up work. Staff would be able to do more automatically and input data at people's homes or at information points, rather than doing that on paper.[288]

127. However, the Pension Service told us it has not got funding for waves three and four, but is hoping to secure this in Spending Review 2006.[289] This means there will be a break in the roll-out of PTP, requiring it to be re-started after a break. Were funding available, work on design would start in another twelve months.[290] The Chief Executive said that in the meantime, they were working on 'linking together data-matching between the various systems and doing some of that as a clerical process.'[291]

The transfer from Income Support

128. Witnesses also identified problems in the transfer to Pension Credit from Income Support at age 60. While MIG claimants were transferred across automatically when Pension Credit was introduced, this no longer happens and people have to make a claim. Sally West of Age Concern told us that there were 'lots of delays and gaps.'[292] The Chief Executive accepted that there had been problems and said the Department was now working 'with Jobcentre Plus …to make sure there is not any break in entitlement or break in payment for these people.'[293]

The carer's addition

129. Carer's Allowance is awarded to a person providing regular and substantial care (at least 35 hours a week) to a person receiving Attendance Allowance or the middle or higher rate of the care component of Disability Living Allowance. Like the Basic State Pension, it is a non-means-tested earnings-replacement benefit. This means that the two cannot be paid at the same time (due to the 'overlapping benefit rules').[294]

130. The carer's addition in Pension Credit is paid to pensioners who are receiving the Carer's Allowance, or who would receive it were it not for the overlapping benefit rules. Under current arrangements, to gain entitlement to the carer's addition, a person has to make a claim for Carer's Allowance even if they know that they will not be paid it because they are receiving a State Pension. A number of witnesses identified this as a procedure that needed streamlining.[295] Jim Dickson of Lancashire County Council Welfare Rights Service told us that there should at least be a shortened form for this process.[296] In addition, he felt that communication between the Carer's Allowance Unit and Pension Service needed to be improved to ensure the additional amount was actually awarded in appropriate cases.

Local authority assessments of income and capital

131. Pensioners do not always realise they have to make a claim for each means-tested benefit separately, expecting that, if the Department has the information, it will make an award automatically. Analysis of Family Resources Survey data from 1997 to 2000, found that take-up of means-tested benefits varies by benefit, although most (90%) of those entitled to IS, HB, and/or CTB claimed at least one of them. In view of this, the researchers argued that there seemed to be a strong argument for making a claim for one means-tested benefit a trigger for others. While this effectively already happened for those who claim Income Support as a start point, it worked less well if the 'initial point of contact with the benefit system is Housing Benefit or Council Tax Benefit.'[297]

132. To increase benefit take-up by pensioners, the Government needs to work towards a situation in which there are multiple ways into the benefits system but that, once in, the process of claiming all benefits to which one is entitled is automated as far as possible.

133. Given the advantages for benefit take-up, the Committee recommends that guaranteed funding should be provided to enable the Pensions Transformation Programme to be implemented as originally planned, without a break between Waves 1-2 and 3-5.

134. The Committee recommends that the Pension Service should be allowed to accept recent assessments of income and capital made for the purpose of assessing claims for Housing Benefit and Council Tax Benefit.

135. The Committee recommends that the process for establishing entitlement to the carer's addition in Pension Credit should be streamlined.

136. The Committee recommends that the transfer from Income Support to Pension Credit should be automatic, with steps taken to contact individuals for any extra information required.

228 Work and Pensions Committee, Second Report of Session 2001-02, Pension Credit, HC 638-I, Summary and para 61 Back

229 NAO, Tackling Pensioner Poverty: Encouraging take-up of entitlements, HC 37 Session 2002-03, 20 November 2002, p 3 Back

230 DWP and National Statistics (2004), Income Related Benefits Estimates of Take-Up in 2002/03 Back

231 Work and Pensions Committee, Second Report of Session 2001-02, Pension Credit, HC 638-I, para 61 Back

232 HC Deb, 13 September 2004, col1394W Back

233 Q 359 Back

234 Pension Service Annual Report and Accounts 2003-2004, p 15; DWP PSA Technical Note for 2005-2008, www.hm-treasury.gov.uk Back

235 Department for Work and Pensions, The New Pension Credit, A Review of the Campaign to May 2004 Back

236 DWP, Autumn Performance Report: Progress against Public Service Agreement Targets, Cm 6397, December 2004, p 47 Back

237 HC Deb, 3 February 2005, col 68WS Back

238 HC Deb, 11 October 2004, col 46W Back

239 Ev 176 Back