Select Committee on Work and Pensions Written Evidence

Memorandum submitted by the Department for Work and Pensions (PC 01)

1.  SUMMARY

  1.1  The Department's memorandum to the Select Committee's last Inquiry into Pension Credit, which reported in April 2002, described in detail the policy objectives and design of Pension Credit. Pension Credit was successfully introduced in October 2003. This Memorandum does not rehearse in full the background to Pension Credit but rather focuses on progress since the Committee's last report, the impact that Pension Credit is having on pensioners' lives, the coverage it is achieving, and how it is being delivered.

Pension Credit Introduction and Progress

  1.2  In 1997 around two million people aged 60 and over were living at or below Income Support levels and the gap between the incomes of the richest and poorest pensioners was growing. The pension system was also failing to provide security in retirement for future generations of pensioners. The priority when the Government came to power in 1997 was to take rapid steps to tackle pensioner poverty. It did this by introducing the Minimum Income Guarantee in April 1999, and other measures such as the Winter Fuel Payment and above-inflation increases in State Pension, to get more money to all pensioners, but most to the poorest pensioners, as quickly as possible.

  1.3  The Minimum Income Guarantee, though effective, was only intended to be a short-term measure pending more fundamental reform. This came in October 2003 with the introduction of Pension Credit. Whilst continuing to tackle poverty, Pension Credit for the first time rewards people who have saved for their retirement, ensuring that it pays to have saved on top of the foundation of the full basic State Pension.

  1.4  To ensure that those already receiving the Minimum Income Guarantee saw no break in their payments and that The Pension Service could deal effectively with the new claims generated, the introduction of Pension Credit followed a carefully planned and managed take-up campaign, starting in April 2003. By 6 October 2003, all 1.8 million Minimum Income Guarantee households had been successfully transferred to Pension Credit. This included 50,000 households identified as eligible for Minimum Income Guarantee for the first time as a result of the Pension Credit campaign. An 18-month take-on period, coupled with generous backdating arrangements, also ensured that The Pension Service dealt effectively with the large volume of applications and that no pensioner lost out on their entitlement.

  1.5  As at 31 August 2004, 3.17 million individuals in 2.61 million households were getting Pension Credit, with 2.36 million individuals in 1.94 million households getting extra money compared with the Minimum Income Guarantee. The average weekly award is £41.71 and the average gain compared to the old system is now £16.33 per week. Of the 2.61 million total, 2.06 million pensioner households were receiving the guarantee amount, combating poverty and reaching more people than under the Minimum Income Guarantee.

Impact on Pensioner Poverty

  1.6  Huge inroads were already being made into pensioner poverty following the initial reforms set out in paragraph 1.2. Figures[1] published on 30 March 2004 showed that measured by income after housing costs, pensioner poverty had fallen by almost a fifth in relative terms and two thirds in absolute terms between 1996-97 and 2002-03, lifting 1.8 million older people out of absolute poverty. For the first time in two decades, pensioners were no more likely to be in low income households after housing costs than other age groups.

  1.7  Pension Credit is making further significant improvements to pensioners' income and targeting help on the very poorest. Nearly 60% of the extra £2 billion spent each year on Pension Credit goes to the poorest third of pensioners, and around 80% to the poorest half. The poorest third of pensioners will be, on average, around £600 a year better off than if an equivalent amount of expenditure had been spent on raising the basic State Pension.

  1.8  Women's historical working patterns and the pension system itself have meant that a disproportionate number of the poorest pensioners are women. Around half of those eligible for Pension Credit are single women. When partners are included, around two thirds of the people who benefit from Pension Credit are women.

How Pension Credit fits with Other Benefits

  1.9  Steps have been taken to ensure that the measures to improve pensioner income fit coherently together. The Pension Credit reforms increased the Housing Benefit and Council Tax Benefit applicable amounts to ensure that pensioners would not see all their gains from Pension Credit clawed back. The Housing Benefit/Council Tax Benefit income test for pensioners has been simplified to mirror Pension Credit. As a result around two million pensioner households will qualify for more help, or get help for the first time, with their council tax and/ or rent.

  1.10  Receipt of Pension Credit may entitle the customer and their partner, even if under 60, to other benefits, including some provided by the NHS. Customers may also be entitled to enhanced amounts of Pension Credit if they are entitled to Attendance Allowance and Disability Living Allowance. The income customers receive from Attendance Allowance or Disability Living Allowance is ignored in the calculation for Pension Credit.

Take-up of Pension Credit and Other Benefits

  1.11  The Government wants as many pensioners as possible, particularly the poorest and hardest to reach, to claim their full entitlements. In the 2002 Spending Review the Department for Work and Pensions signed up to a Public Service Agreement target to be paying Pension Credit to at least three million pensioner households by 2006. The Department is on track to meet this target. In the 2004 Spending Review the Department agreed a new and more challenging target to pay Pension Credit to 3.2 million pensioner households by 2008, with 2.2 million of these in receipt of the guarantee element to maintain a focus on the most disadvantaged.

  1.12  A comprehensive Pension Credit advertising and media campaign continues to raise awareness of the new entitlement. Efforts are now being focused on contacting pensioner households that are believed to be eligible for Pension Credit, but which have not yet taken up their entitlement. Data-matching techniques and lessons learned from a series of Hard-to-Reach Pilots in July 2003 are enabling The Pension Service to target more effectively important groups of vulnerable pensioners, including single women pensioners and older people from ethnic minority groups.

  1.13  Partnership is key to ensuring that older people are aware of all their entitlements. To promote this, the Department for Work and Pensions is offering short-term funding to local and national organisations, including the voluntary and community sector, to establish and manage initiatives that increase the take-up of benefits by older people, particularly the vulnerable and those in harder to reach groups.

Delivery of Pension Credit

  1.14  Delivering Pension Credit in modern, effective ways that meet customers' needs and preferences is the key both to maximising take-up and therefore reducing pensioner poverty, and to releasing efficiency savings that will enable the Department to focus spending where it is most needed. The service delivery vision for Pension Credit is of a telephone-based application process backed up by a Local Service which is increasingly operating in joint teams with local partners.

  1.15  At 31 August 2004, the freephone Pension Credit application line had issued 1.85 million application forms. Of these, 1.33 million, representing approximately 72%, were completed during the call. In the remaining 520,000 cases the customer asked to be sent a form for self-completion. The average length of a call to the application line for that month was around seven minutes and the average time to complete an application was less than 20 minutes.

  1.16  The option of a face-to-face appointment with The Pension Service Local Service remains. The Local Service works closely with its partners to provide a dedicated service for older people that goes beyond assessing and paying financial entitlements. It provides information points and sessions in appropriate locations and home visits, if required. Since April 2003, over a million older people have had contact with their Local Service either at home or during a session.

  1.17  A significant development is the creation of joint teams through integrating partners from local authorities and the voluntary sector into multi-skilled teams with a single operational management structure. Joint teams are reaching pensioners who have not yet engaged with The Pension Service and delivering on customers' wishes not to have to provide the same information many times over to access entitlements and services. As at August 2004, 136 local authorities in England, Scotland and Wales, have agreed in principle to forming joint teams with Local Service, with eighteen joint teams now up and running. The aim is to achieve full national roll-out of joint teams by April 2006.

  1.18  Further improvements will be delivered through Alternative Offices, where other organisations, such as local authorities and voluntary sector, are authorised by the Secretary of State for Work and Pensions to receive and verify social security claims made by older people. This is now permitted following an amendment to the Social Security (Claims and Payment and Miscellaneous Amendments) Regulations 2003[2] and the Department is piloting the concept in partnership with Age Concern. The Government has set out its strategy for further joining up services for older people across and beyond government in Link-Age: Developing networks of services for older people[3] and is now consulting on the document's proposals.

  1.19  The Pension Service is entering a period of further modernisation to deliver better services to customers by eliminating duplication and inefficient processes. With the planned workload reduction following the initial take on of Pension Credit, this means that in future The Pension Service will provide a more effective and efficient service to pensioners from a smaller number of pensions centres.

  1.20  Following efficiency measures to implement the Budget announcement on staffing, the work of 10 pension centres will migrate to other sites. For staff, the aim will be to re-deploy all those affected. Although not ruled out, compulsory redundancies will be kept to a minimum. Customers will be able to contact The Pension Service in the same way as they do now.

Customer Experiences of Applying for and Receiving Pension Credit

  1.21  The Department for Work and Pensions aims for a high quality customer experience from initial contact through to receipt of payments. Independent research[4] commissioned in 2003 to assess levels of satisfaction amongst callers to the application line found that customer reaction to this primary method of applying for Pension Credit was very positive.

  1.22  The Department for Work and Pensions has a target for 85% of all customer payments to be made by Direct Payment in 2005. The move to Direct Payment increases choice and reduces fraud: over 100 pensioners have their order books stolen each week and some £50 million is lost each year though lost or stolen order books.

  1.23  People who wish to continue collecting their cash at a Post Office can do so: many bank accounts can be accessed at Post Offices as well as the Post Office card account. For customers who are not able to change to Direct Payment, cheque payments will be available from October 2004.

2.  PENSION CREDIT INTRODUCTION AND PROGRESS

  2.1  This section recapitulates some of the primary reasons for the introduction of Pension Credit, describes its successful implementation in October 2003 and sets out the latest position on numbers receiving it.

Background

  2.2  In 1997 around two million people aged 60 and over were living at or below Income Support levels and the gap between the incomes of the richest and poorest pensioners was growing. The pension system was also failing to provide security in retirement for future generations of pensioners. The Government's strategy for pensions is designed to ensure that all pensioners, today and in the future, have a decent and secure income in retirement and share fairly in the rising prosperity of the nation.

  2.3  Pension Credit is a key plank of that strategy and a major reform of the welfare system. Its three main objectives are to:

—  tackle pensioner poverty;

—  reward those who have saved; and

—  make it easier for pensioners to take up their entitlement.

  2.4  The Government's aim is to target help on the poorest pensioners who need it most. Pension Credit does that through its guarantee credit and also rewards people aged 65 or over who have saved for their retirement.

Implementation of Pension Credit

  2.5  Pension Credit replaced Minimum Income Guarantee on 6 October 2003. The Government recognised that a smooth transition to the new Pension Credit would be the key to its success. A controlled and measured marketing campaign was designed to produce a steady build-up of Pension Credit applications. Lessons from previous campaigns were taken into account, as was the advice of the National Audit Office in the report Tackling Pensioner Poverty: Encouraging take-up of entitlements. [5]An 18-month take-on period enabled The Pension Service to manage the increased workload successfully and special backdating arrangements ensured that no pensioner lost out.

  2.6  The Pension Credit campaign began in April 2003. Known factors of pensioners' circumstances were taken into account to allow for tailored communications. These factors included age, gender and marital status, census-derived information on residential neighbourhood wealth and whether Housing Benefit and/or Council Tax Benefit were being paid, given that a pensioner known to be in receipt of Housing Benefit is highly likely to be also eligible for Pension Credit.

  2.7  By encouraging pensioners to apply in advance for Pension Credit during the months April to September 2003, many households were identified as being eligible not only for Pension Credit when it came into effect, but also for the existing Minimum Income Guarantee. Through this early campaign activity an additional 50,000 poorer households received the financial assistance they were entitled to, with the overall number of households receiving Minimum Income Guarantee increasing from 1.75 million to 1.8 million during this six month period.

  2.8  Independent research suggests that pensioners generally are aware of and satisfied with Pension Credit. A recent Age Concern report on Pension Credit[6] showed that levels of awareness of Pension Credit were high (89%) and that for most (70%) the application process was easy and simpler than for the Minimum Income Guarantee, with 85% saying that they would recommend applying for Pension Credit to others.

Progress: Latest Data on Numbers Receiving Pension Credit

  2.9  As at 31 August 2004, 3.17 million pensioners in 2.61 million households were getting Pension Credit, with 2.36 million in 1.94 million households getting extra money every week compared with the Minimum Income Guarantee system. The average weekly award is £41.71 and the average gain compared to the old system is now £16.33 per week.

  2.10  Of the 2.61 million total, 2.06 million pensioner households were receiving the guarantee, combating poverty and reaching more people than under the Minimum Income Guarantee.

  2.11  Since 6 October 2003, an extra 260,000 households have been receiving the financial assistance they need but did not receive with Minimum Income Guarantee. As at 31 August, the average weekly rate payable to new households receiving guarantee credit was £39.39. This significant financial improvement for large numbers of the poorest households is a notable success of the take-up campaign to date.

  2.12  As well as the guarantee element, Pension Credit rewards people who make modest provision for their retirement, ending the old pound-for-pound deductions. As at 31 August 2004, a total of 1.85 million pensioner households were receiving the reward for saving. This represents 71% of households receiving Pension Credit, with levels increasing each month. Take-up figures for the 11 months to August 2004 also show that 85% of all new households during this period are being rewarded for making provision for their retirement.

  2.13  Overall around 548,000 households who would not have been entitled to anything under the Minimum Income Guarantee are now being rewarded through the savings element. This marks a significant step towards meeting one of the primary objectives of Pension Credit, rewarding people who save for their retirement.

  2.14  Pension Credit incorporates generous rules on backdating payments to help ensure that no one loses out on their entitlement if they do not apply straightaway. Customers whose applications are successful in the period up to October 2004 may have their entitlement backdated to 6 October 2003 or to the date of entitlement if this is later. As from 6 October 2004, payment may be backdated to the date of entitlement for up to a maximum of 12 months. Significant sums of money, often hundreds of pounds, are being paid to pensioners as a result of these provisions. Analysis of the payments made during July shows that those gaining most are the poorest pensioners, with the average backdated payment for guarantee households amounting to around £1,400.

3.  CONTRIBUTION OF PENSION CREDIT TO INCOMES OF CURRENT AND FUTURE PENSIONERS

  3.1  This section sets out what Pension Credit means for the reduction of pensioner poverty.

The Impact of Pension Credit on Pensioner Poverty

  3.2  Even before the introduction of Pension Credit, the Government's basic strategy of getting more money to pensioners, particularly the poorest, was making significant inroads into tackling pensioner poverty. The latest figures available[7] show that by 2002-03 absolute pensioner poverty, the number living below the 1996-97 low-income threshold, had fallen by two-thirds, or 1.8 million. The number in relative poverty, those below the contemporary low-income threshold, had also fallen by half a million, which shows that reforms have actually helped the poorest pensioners, narrowing the gap at a time of rapid income growth. As the Institute for Fiscal Studies[8] reported earlier this year, measuring incomes after housing costs, for the first time in almost twenty years, a pensioner drawn at random from the population is less likely to be in poverty than a randomly selected non-pensioner.

  3.3  Pension Credit has had a direct impact on pensioner poverty by giving around 1.94 million households, 2.36 million individuals, more money. Some 75% of all households receiving Pension Credit at the end of August 2004 were getting more than under the previous system. The number and proportion of households gaining have risen in each of the months since October 2003 and this positive trend is set to continue with increased take-up levels.

Figure 1

THE GROWTH OF THE PENSION CREDIT CASELOAD FROM OCTOBER 2003

  3.4  Pension Credit targets help on the poorest pensioners. Nearly 60% of the extra £2 billion spent each year on Pension Credit goes to the poorest third of pensioners, with around 80% going to the poorest half.

Help for Women Pensioners

  3.5  Women's earning and employment patterns in the past, as well as the pension system itself, have meant that women are less likely to have their own State Pension entitlement, less likely to have savings, and more likely to be in poverty. Women's greater longevity contributes to the fact that about three quarters of single pensioners are women, and single pensioners are also likely to be the most deprived. The 2002 Pensions Green Paper, Simplicity, Security and Choice, [9]included a chapter on the position of women and their pension needs and the Department has undertaken to produce a further report for next year.

  3.6  Some steps taken in the past are now beginning to help younger women pensioners and more action has been taken that will help future women pensioners. Since 1978, people—mostly women—who take breaks in their working life to look after children under 16 years old have their basic pension rights protected through Home Responsibilities Protection.

  3.7  In 2001 the Government introduced the State Second Pension, reforming state provision especially to help carers, parents of young children and low-earners, all of whom are often women, build up a second pension. It benefits up to around 15 million low and moderate earners, 2.5 million carers and 2.5 million disabled people. A higher proportion of women than men are now accruing State Second Pension, helping to close the gender gap for the next generation.

  3.8  From April 2000, the starting point for National Insurance contributions was separated from the lower earnings limit for employees and aligned with the personal allowance for income tax. From April 2004, National Insurance contributions only became payable on earnings from £91 per week, whereas entitlement to National Insurance benefits including State Second Pension started accruing at £79. This helps some low earners, including many women, gain National Insurance benefits without having to pay National Insurance contributions.

  3.9  Because record numbers of women are in work, more women than ever will be benefiting from occupational pension provision. For those working full time, there are now as many women as men building up entitlement.

  3.10  Other measures in place or proposed will improve the position for people with fragmented working lives, who are predominantly are women. For example:

—  full transfer values for early leavers, allowing people in short-stay jobs to take the full value of their pension with them when they leave;

—  Trivial commutation covering small amounts of pensions, whereby the maximum amount at which pension funds can be taken as a lump sum payment on retirement is being increased from around £2,500 to £15,000;

—  informed choice measures, such as work-place financial advice, will be of most help to those excluded in the past.

  3.11  However, these measures, even those dating from 1978, came too late for many current female pensioners. Pension Credit is doing much to tackle poverty for women today. Around half of those eligible for Pension Credit are single women. When partners are included, almost two thirds of the people who benefit from Pension Credit are women. As at 31 August 2004, there were already 2.11 million women within Pension Credit households, compared to 1.06 million men (rounded to the nearest 10,000). Figures two and three illustrate the comparative extent to which Pension Credit benefits female pensioners.

Figure 2

PENSION CREDIT RECIPIENTS BY GENDER FROM OCTOBER 2003

Figure 3

PENSION CREDIT RECIPIENTS BY GENDER, AUGUST 2004

  3.12  Taking into account all the Government's measures for pensioners, analysis of the Department for Work and Pensions' data on Households Below Average Income shows that the number of female pensioners in absolute poverty is down by 1.3 million since 1996-97 (on an after housing costs basis).

The Implications of Pension Credit for the Private Pensions and Insurance Industries

  3.13  The Government is determined to continue tackling pensioner poverty to ensure that all pensioners have a decent and fair income in retirement and that they share in the nation's rising prosperity, while at the same time ensuring that the state pension system remains sustainable. Securing good pensions all round will mean people saving for their own retirement, as well as employers providing for their workers. So the Government aims to promote saving for old age and to ensure people have opportunities and incentives to do so. It has taken a number of important steps in this direction.

  3.14  In its response last year to the Department for Work and Pensions Select Committee's Third Report on The Future of UK Pensions, [10]the Government recognised that it is important to improve its understanding of how people make decisions about saving and how savings incentives work. Saving behaviour is determined by a wide range of factors. Research[11] suggests a number of barriers to saving for retirement, including affordability, the complexity of pensions and the difficulty of understanding the choices on offer. Current reform programmes in private pensions focus on the role of the workplace in providing appropriate information to employees so people can make the best possible, informed, choices about providing for their retirement, as well as boosting confidence in saving in occupational pension schemes. [12]

  3.15  It is important, too, that people are confident that the tax and benefit system will ensure it pays to have saved. Pension Credit was designed with this consideration in mind. Whilst tackling pensioner poverty, Pension Credit eases the very steep marginal deduction rates faced by many pensioners (which could have dampened the incentives to save).

  3.16  It is this extra money payable to people aged 65 and over who have saved that has made Pension Credit such a big step forward. In considering the introduction of Pension Credit, the Financial Services Authority said, "The Pension Credit will now mean that for most people most of the time it will pay to have saved." [13]

  3.17  The issue of incentives to save, and the role of taxes and benefits within it, is a complex one. Whilst the potential disincentive effects of income-related benefits are much discussed, the potential disincentive effects of less targeted benefits—such as the State Retirement Pension—tend to be ignored. It could be argued that all forms of State income will tend to displace private saving both because people will be able to achieve their desired replacement rate with less need for private income and because the contributions required to fund State income reduce the affordability of private contributions. Pension Credit aims to strike a fair balance between rewarding and promoting saving, and delivering most money where it is needed most, at a sustainable cost. The Government's wider policy on saving will continue to be developed on the basis of the evidence. The Government wants to engage with academic and other experts to explore how best to assess the influences on savings behaviour. It has established the independent Pensions Commission to monitor and keep under review the voluntary system of private pensions and long-term savings.

Evaluation

  3.18  The Department for Work and Pensions is finalising plans for its own evaluation of Pension Credit policy, thoroughly examining the performance of Pension Credit using the statistical information at its disposal. It is intended that this evaluation will take the form of a series of reports to be published over the next 18 months and will focus on how successful Pension Credit has been in tackling its three policy objectives set out in paragraph 2.3.

4.  HOW PENSION CREDIT FITS WITH OTHER BENEFITS

  4.1   Looking at Pension Credit in isolation does not tell the whole story about the help that is available to pensioners. This section examines how Pension Credit interacts with other benefits including Housing Benefit and Council Tax Benefit, and with Local Authority care charging policies to deliver security for older people in retirement.

Housing Benefit and Council Tax Benefit

  4.2   Council Tax Benefit and Housing Benefit make an important contribution to the financial security of over 4.5 million people on low incomes.

  4.3   Customers who are entitled to the Pension Credit guarantee will be entitled to maximum eligible Housing Benefit and Council Tax Benefit. A customer receiving only the reward for saving will have their additional income taken into account in the local authority's assessment. Local authorities are required to accept The Pension Service income assessment data in these cases so that the customer does not need to provide it twice.

  4.4  The Housing Benefit and Council Tax Benefit applicable amounts for people aged 65 and over have been increased to reflect the maximum savings reward, and the more generous income and savings rules in Pension Credit also apply to Housing Benefit and Council Tax Benefit. This means that gains through the Pension Credit savings reward are protected. To target resources most efficiently the Housing Benefit capital limit of £16,000 capital has been retained for people aged 60 or over who do not qualify for the Pension Credit guarantee.

  4.5   Pension Credit therefore means that around two million pensioner households now qualify for more help, or qualify for help for the first time, with their council tax and/ or rent. This includes around 300,000 pensioner households who will be newly entitled to Council Tax Benefit.

Interaction of Pension Credit and Local Authority Charging for Residential Care

  4.6   In general, the financial assessment for residential care takes account of an individual's income and savings, leaving each resident with an amount of money for their personal expenses of £18.10 per week (£18.40 in Wales). Local authorities fund the difference between the resident's contribution and their care home fees.

  4.7  Pension Credit is taken into account in the financial assessments of those residents who require local authority funding. However, those residents who qualify for a reward for saving are provided with a savings disregard of up to £4.65 per week (£6.95 for couples). This disregard also applies to those supported residents who have made provision for their old age but have too much income and/or capital to qualify for the savings reward. They receive up to £4.65 per week (£6.95 for couples) on top of their personal expenses allowance, meaning that people living in care homes who have made modest provision for retirement will see some benefit from having done so. Residents in receipt of Pension Credit who do not require local authority support, continue to receive Pension Credit in full.

  4.8  An estimated 210,000 care home residents who are supported by local authorities are better off due to this provision which allows older people living in care to keep more of their savings. The disregard enables older people in residential care to have a little more disposable income.

Interaction with Attendance Allowance and Disability Living Allowance

  4.9  Attendance Allowance and Disability Living Allowance are non-income-related, tax-free, extra-costs disability benefits. They are a contribution towards the extra costs severely disabled people incur because of their disability, and receipt of Pension Credit has no effect on entitlement to, or payment of either Attendance Allowance or Disability Living Allowance. As well as being ignored in the calculation of Pension Credit, people in receipt of these benefits may also be entitled to enhanced amounts of Pension Credit. As at May 2004, 22% of all Pension Credit recipients were receiving the severe disability addition.

Interaction with Carer's Allowance

  4.10  Carer's Allowance provides a measure of income maintenance for people who provide regular and substantial care for a severely disabled person getting Attendance Allowance, the middle or higher rates of the Disability Living Allowance care component, or the equivalent rates of Constant Attendance Allowance under the Industrial Injuries Disability Benefits Scheme or the War Disablement Pension Scheme.

  4.11  Pension Credit has no effect on entitlement to, or the payment of, Carer's Allowance. Carer's Allowance is taken into account as income for Pension Credit though a pensioner getting Carer's Allowance will be entitled to an extra amount of Pension Credit. The carer's additional amount is doubled in the case of couple where both partners are entitled to Carer's Allowance.

  4.12  In October 2002, the upper age limit on claims for Carer's Allowance was abolished. This change means that carers aged 65 and over can now claim and gain entitlement to the allowance and to the carer's additional amount in Pension Credit. People with entitlement to Carer's Allowance will receive the carer's additional amount in Pension Credit even though they may not actually be receiving any Carer's Allowance due the overlapping benefits rules, for example, where they are receiving State Pension at a higher rate. As at May 2004, 5% of all Pension Credit recipients (households) were receiving the carer's addition.

Interaction with Other Benefits

  4.13  Recipients of the Pension Credit guarantee, and their partner, will be entitled to free NHS dental treatment, vouchers towards the cost of glasses or contact lenses, free NHS wigs and fabric supports and repayment of necessary travel costs to receive NHS treatment under the care of a consultant. This latter also applies to dependants. Partners under 60 of recipients of Pension Credit guarantee will be entitled to free NHS prescriptions and free NHS sight tests, which are already free for those over age 60.

  4.14  Pension Credit recipients have access to the Social Fund funeral and cold weather payments. Pensioners in receipt of Pension Credit also have access to Social Fund budgeting loans.

  4.15  The Government also recognises the special position of War Pensioners and £10 of the basic War Pension is disregarded when calculating Pension Credit. In addition War Pensions are treated as qualifying income for the savings reward.

5.  TAKE-UP OF PENSION CREDIT AND OTHER BENEFITS

  5.1  Entitlements that exist on paper only cannot improve people's lives. The Government wants to ensure that as many pensioners as possible, particularly the poorest and hardest to reach, claim their full entitlements. This section sets out progress to date on maximising take-up and describes plans for the future.

Pension Credit

  5.2   The Government wants all those who are eligible for Pension Credit to apply and is determined that its delivery arm, The Pension Service, should reach all groups and offer them the opportunity to take up their entitlement. To underline its commitment to this, in the 2002 Spending Review the Department signed up to a Public Service Agreement target of paying Pension Credit to at least three million pensioner households by 2006. The Department is on track to meet this target and in the 2004 Spending Review a new, more challenging, target was agreed—to pay Pension Credit to 3.2 million pensioner households by 2008.

  5.3  The Department has recently refined its estimate of the number of pensioner households eligible for Pension Credit, using more up-to-date information from the Family Resource Survey for 2002-03. [14]This shows continuing growth in pensioner incomes. The new estimates are that for the year 2004-05 an estimated total of around 3.75 million households are eligible for Pension Credit. This corresponds to and compares with earlier estimates of 3.85 million households or 4.9 million individuals. Despite these revised figures the Public Service Agreement will remain unchanged. Meeting the targets from this smaller number of individuals estimated to be entitled will require even higher rates of take-up, and will mean that to hit the target, more than three in four of those who are eligible will be receiving their entitlement. To maintain a focus on the most disadvantaged the new Public Service Agreement target requires that at least 2.2 million of the 3.2 million households receiving Pension Credit by 2008 must in receipt of the guarantee element.

  5.4  As at August 2004, 11 months after the introduction of Pension Credit, more than two-thirds of the increase required to reach the Public Service Agreement target for 2006 has been achieved, in a third of the time available. A planned, carefully managed and continuing take-up campaign has played a large part in this progress.

  5.5  Further targeting measures are planned for those pensioners yet to take up their entitlement. Steps being taken include using proven data-matching techniques to identify people most likely to qualify and targeting marketing activity accordingly. The Pension Service is writing again to the people most likely to be eligible and Pension Credit Application Line staff are telephoning customers who have yet to make contact. Local Service activity is focusing on one-to-one contact rather than events for large numbers as the individual approach is often more productive in generating applications.

  5.6  The Pension Service is working with a range of partners, not just with local authorities and the voluntary sector, to ensure that all possible avenues are explored to get the Pension Credit message to customers. For example, information about Pension Credit has been issued with utility bills to help maximise take-up.

Marketing Research

  5.7  Research has been carried out since March 2003 on the impact of the marketing messages on the pensioner population. A survey of over 1,000 pensioners has been regularly carried out, aimed at measuring the extent of awareness and understanding of the messages around Pension Credit. The marketing messages aim to alert pensioners and their families to the introduction of Pension Credit as a new entitlement for the pensioner population, its purpose, and whether they could be eligible to receive it.

  5.8  The survey gives valuable customer feedback on the success of the marketing messages and allows for opportunities for improvement to be identified and addressed. The survey has shown an increasing awareness of Pension Credit as the campaign has progressed. The June survey results showed that awareness of the term "Pension Credit" was at its highest level to date at 78% of those surveyed.

  5.9  The Department has recognised that, from a customer experience perspective, it is important for pensioners to realise what Pension Credit stands for. It is also important that a clear message is given about who is entitled to Pension Credit, so that pensioners understand that not everyone will be eligible. The survey findings show a consistently high appreciation of the main objectives of Pension Credit to increase the income of the poorer pensioners and to reward saving for retirement.

Hard-to-Reach Pilots

  5.10  Much effort has been put into ensuring that all eligible pensioners are contacted and encouraged to apply, including people known to be harder to reach. The term "hard-to-reach" is used to mean older people who are less likely to respond to the Pension Credit media advertisements and direct mailings, for example, because of physical, psychological, cultural or geographical reasons. This group includes people who may be socially excluded because of their disability or because they live in remote rural areas, older people from ethnic minorities[15] and single female pensioners.

  5.11  Pension Credit hard-to-reach pilots were carried out to establish and evaluate the most effective approaches for targeting these customers in order to encourage maximum take-up. The Local Service and its partner organisations ran 17 pilot events in nine regions during July 2003, reaching the following groups of older people:

—  carers and the cared for;

—  homeless;

—  isolated rural communities;

—  housebound;

—  sensory impaired;

—  poorer elderly; and

—  ethnic minorities.

  5.12  The pilots demonstrated the importance of good working relationships between the Local Service and its partner organisations. Existing partnerships were strengthened and new ones were formed. Older people valued the personal approach of face-to-face contact, personalised letters and the availability of private rooms to discuss personal affairs. They also welcomed the fact that the events were tailored to them and were held in safe, comfortable local environments.

  5.13  The evaluation of the pilots shows that a variety of approaches is needed to target the hard-to-reach customers. As a result, Local Service staff have been provided with a series of information sheets that set out the barriers faced by hard-to-reach customers, how those barriers can be overcome and the products available to support Local Service to assist their outreach work.

White—As with the term "ethnic minority", the generic label "White" should be used with some caution. The existence of distinctive ethnic groups within the "White" category is gradually being acknowledged: notably, in the 2001 Census of Population people of Irish descent are recognised as a separate ethnic group.

Local Service Take-Up Activity

  5.14  At the beginning of February 2004 more than 100,000 customers were contacted by Local Service through visits, telephone calls, surgeries, and through partner organisations to encourage applications for Pension Credit.

  5.15  Innovative ideas to contact the hard to reach older people included:

—  working with the Women's Royal Voluntary Service to distribute Pension Credit flyers through their meals on wheels service;

—  working with local authorities to issue Pension Credit flyers with Housing Benefit/Council Tax Benefit mailings;

—  working with local authorities to issue Pension Credit flyers when issuing concessionary bus passes; and

—  ensuring Pension Credit information was available at GP surgeries and health centres for older people receiving their flu vaccination.

The Partnership Fund—Supporting Initiatives for Older People

  5.16  The Department for Work and Pensions is offering short-term funding to local and national organisations, including the voluntary and community sector, to establish and manage initiatives that increase the take-up of benefits by older people, particularly the vulnerable and those in harder to reach groups.

  5.17 The scheme, known as the Partnership Fund, also aims to:

—  encourage, improve and integrate joint working between partners to improve older people's access to services;

—  promote independence in older people; and

—  gain a better understanding of older people's needs in a specific community, or region, including those of ethnic minority elders.

  5.18  Funds are available for the current and next financial years and will be awarded for proposals that meet the above aims, and create links between services such as health, housing, benefits and social care for older people.

Improving Take-Up by Single Female Pensioners

  5.19  The Pension Service has identified that single female pensioners are likely to be amongst the poorest. The marketing strategy for Pension Credit identified the appropriate single occupier households and a tailored mailing pack was sent to them, inviting them to apply. Prior to the introduction of Pension Credit, 1.13 million single-female households were receiving Minimum Income Guarantee. An additional 413,000 single-female households are now receiving Pension Credit as at August 2004 and this accounts for over half of all the additional households newly entitled over the last 11 months. Single-female households now account for 59% of all households receiving Pension Credit and are evidence of the campaign's success in ensuring that single women take up their entitlement.

  5.20  The vulnerable group of single female pensioners aged 80 and over has also been targeted by the campaign for take-up of their entitlement. Prior to October 2003, there were 528,000 in receipt of Minimum Income Guarantee in the age group 80 years and over. As at 31 August, 11 months since Pension Credit was introduced, an extra 217,000 single-female households in this age group, an additional 41%, have taken up their entitlement. As at August 2004, there are now around 953,000 households aged 80 and over, and single female households account for 74% of this total.

Improving Take-Up Among Older Ethnic Minority People

  5.21  The Department for Work and Pensions commissioned BMRB Social Research to carry out a qualitative research project[16] which aimed to understand the barriers to the take-up of benefits among older ethnic minority people. Strategies were found to be most effective when developed in partnership between the Department, the local authority and with the voluntary and community sector. Partnership working is the key to the development of joint teams.[17]

  5.22  Findings from the research will be used to ensure that the needs of ethnic minority groups are incorporated into plans and processes. Outreach and the provision of face-to-face services were emphasised by both older people and those working with them as being central to increasing take-up.

  5.23  The Pension Credit marketing campaign has ensured that, in addition to all ethnic minority pensioner households being included in the national mailing and advertising programme, ethnic minority groups have been targeted through specific activities and communications. Communication materials were designed to meet the needs of ethnic audiences across the range of communication media. This included:

—  targeted English and translated press articles appearing in ethnic press titles, with one advert per month across 20 different publications from September 2003 to April 2004;

—  Asian, Chinese and Black Caribbean pensioners appearing in TV advertisements and direct mail packs, with 28 advertisements being aired per month across 12 different ethnic minority TV channels;

—  specific radio advertisements on five ethnic minority radio stations, targeted at ethnic minority pensioners and their friends and family;

—  information leaflets containing translated information; and

—  at a local level, working with ethnic minority partner organisations to help raise awareness of Pension Credit.

  5.24  The Department recognises that it is important to know the extent to which pensioners from ethnic minority groups are responding to the invitations made to take-up their entitlement to Pension Credit. To this end, a customer research initiative took place during May and June 2004 aimed at callers to the Pension Credit application line as the main route for customer applications in the first year of Pension Credit implementation. A total of around 13,000 calls were monitored at random during the period and customer reaction to the initiative was very encouraging, with a participation rate of over 99% of the callers sampled. Information was gathered on caller levels across 16 different ethnic minority groups and the results were then compared against the ethnic mix data for people aged 60 and over in the 2001 census.[18]

  5.25  The initiative concluded that callers to the application line closely matched and in most cases exceeded the census ethnic mix levels. Analysis showed that, overall, 4.6 per cent of callers to the application line were non-white as compared to the level of 3.3 per cent in the 2001 census. According to census data, the two largest non-white ethnic groups in the pensioner population aged 60 and over are Indian and Black Caribbean. The number of callers from the Indian ethnic group accounted for 1.04% of all callers sampled as compared to the census figure of ethnic mix of 0.98%. Similarly, callers from the Black Caribbean ethnic group accounted for 0.97% of all callers sampled compared with a census figure of ethnic mix level of 0.84%.

  5.26  Further work is being considered to examine take-up amongst people from ethnic minorities using other application routes, for example through the Local Service, and a continuation is planned of front-end ethnic monitoring at the application line. However, it is encouraging at this stage that the response levels found during the customer application line research study offer some evidence that pensioners from ethnic minority groups are responding to the take-up invitations specifically addressed to them.

  5.27  The Local Service in every region has carried out many initiatives aimed at promoting take-up from pensioners in ethnic communities. For example:

—  In Cardiff the largest single group of immigrants are Somalians. The Local Service there has made inroads via the community elders and now provides an outreach service to this community.

—  A regular information session is run from the Bolton Asian Elders Centre, one Local Service officer being from the Asian community herself. Both sides feel the partnership is bringing success, especially in tackling hard-to-reach customers directly through the Centre and through its regular newsletter.

—  In Birmingham the Local Service provided a presentation at the Parji Shree Pragati Mandal Temple to older people from the Hindu community; this proved so successful that it generated two surgeries to handle the queries and benefit information required by this community.

—  In Reading Local Service staff are members of the Reading Refugee and Asylum Seekers Forum, which meets quarterly. They have a partnership agreement with the Indian Community Centre in Reading.

—  In Glasgow the Local Service provides fortnightly information sessions to the Senior Asian Welfare organisation and to the Wing Hong Elderly Forum. Working in partnership with Local Service the host organisations provide interpreters to assist with benefit information.

Regional Take-Up

  5.28  The Government wants to ensure that pensioners in all parts of England Scotland and Wales and in all types of area are equally able and likely to take up their entitlement. The Pension Service and the take-up campaign reaches all areas throughout Great Britain. Regional take-up is set out in Table 1.

Table 1: Breakdown of Pension Credit Households by Country/Government Office Region

Region	Pension Credit Households as at 31 Aug 2004	Pension Credit Households as % of National Pension Credit Households	Average Pension Credit award (£)
Eastern	212,000	8.1	39.20
East Midlands	187,000	7.2	39.50
London	275,000	10.6	57.90
North East	154,000	5.9	37.10
North West	347,000	13.3	41.50
Scotland	272,000	10.4	40.30
South East	268,000	10.3	38.60
South West	216,000	8.3	38.60
Wales	153,000	5.9	41.90
West Midlands	270,000	10.3	41.80
Yorkshire and Humberside	252,000	9.7	38.30
National	2,607,000		41.70

  Household totals have been rounded individually to the nearest thousand. Monetary levels have been rounded to the nearest £0.10.

  5.29  As part of the national coordinated take up campaign for Pension Credit, the Local Service is making best use of data matching to identify customers who are likely to be eligible for Pension Credit but have not applied. The Local Service is using an intranet-based interactive tool to target local authority areas where potentially entitled pensioners live. This is proving to be a most effective way of reaching the most vulnerable. The system will initially be used to support Local Service staff to identify individuals or geographical areas where targeted action to increase Pension Credit is likely to be more successful.

Council Tax Benefit and Housing Benefit

  5.30  It is not just Pension Credit that makes the difference to older people's incomes in retirement. Because of Pension Credit, around two million pensioner households will qualify for more help, or get help for the first time, with their council tax and/or rent.

  5.31  Based on 2001/02 figures, the latest available, there are estimated to be up to 2.3 million people who are still missing out by not claiming Council Tax Benefit—up to 1.7 million of whom are pensioners. Up to £1 billion of Council Tax Benefit is going unclaimed, up to £770 million of this by pensioners. This means that up to four out of 10 pensioners are entitled to, but are not claiming, Council Tax Benefit, compared with fewer than two out of 10 pensioners who, it is estimated, are entitled to, but are not claiming, Housing Benefit.

  5.32  The Department for Work and Pensions has already taken steps to support local authorities in promoting awareness of Council Tax Benefit, and will continue to give priority to this issue. Earlier this year the Department launched a national awareness campaign and issued local authorities with a Best Practice Guide to help maximise take-up. Levels of awareness of Council Tax Benefit were measured before and after the press publicity campaign, which took place between 8 and 26 March, to coincide with the issue of council tax bills. Overall, the research suggests that the campaign had a positive effect in raising levels of awareness amongst the main target audience with the proportion of those aged 65 years and over who had seen or heard something about paying less council tax rising from 19% before to 29% after the campaign.

  5.33  The Pension Service considers eligibility to Housing Benefit and Council Tax Benefit as part of its holistic approach to take-up of entitlements by pensioners. It issues a Housing Benefit/Council Tax Benefit claim form to everyone who calls the Pension Credit Application Line and wishes to claim. Visiting officers will complete the Housing Benefit/Council Tax Benefit claim form when they visit pensioners to take an application for Pension Credit.

  5.34  The Department has launched a tailored Housing Benefit and Council Tax Benefit claim form for pensioners which reduces the existing form from 36 to 24 pages to make completion easier, and is now looking to shorten it even further. The Department is also looking into the feasibility of issuing a separate, Council Tax Benefit only, claim form for owner occupiers.

  5.35  The Department is looking at further ways to streamline the claims procedure, so that for example, where a person claims Council Tax Benefit together with other benefits information on personal and financial circumstances has to be provided just once.

  5.36  The voluntary sector plays a pivotal role in helping to promote take-up. The Department for Work and Pensions is building closer and more effective partnerships with the voluntary sector, backed up with funding to support innovative pilots to increase the take-up of benefits across the board, including Housing Benefit/Council Tax Benefit.

Attendance Allowance and Disability Living Allowance

  5.37  The number of people over State Pension age who receive either Attendance Allowance or Disability Living Allowance has increased by more than 18% in the last five years and, as at February 2004, stands at over two million people. This represents nearly 20% of the overall pensioner population. New, simpler and better focused Attendance Allowance claim forms were introduced nationwide in October 2003 and are making the claiming experience more customer-orientated.

  5.38  The Department acknowledges that one of the most effective ways of increasing awareness of these extra-costs disability benefits amongst those potentially entitled is via their contacts with local authorities and welfare rights organisations. These organisations are important partners in maximising take-up of Attendance Allowance and Disability Allowance. The Disability and Carer Service's contacts with a wide range of local, regional and national voluntary and welfare rights organisations, and the personal front-line service provided by The Pension Service have had a positive influence on the numbers of people over State Pension age claiming Attendance Allowance and Disability Living Allowance. The Pension Service Local Service staff consider eligibility for Attendance Allowance at all face-to-face contacts with customers. This is particularly the case with joint teams who look at the customer's whole social care needs.

  5.39  As at August 2003, there were 933,500 households in receipt of Minimum Income Guarantee who were also recipients of Attendance Allowance/Disability Living Allowance. Five months after the introduction of Pension Credit this had increased by 6% to 985,900, an extra 52,400 households.

Carer's Allowance

  5.40  The increase in the number of carers over State Pension age who have claimed and gained entitlement to Carer's Allowance to over 175,000 as at February 2004 stems mostly from the removal in October 2002 of the upper age limit of 65 years on Carer's Allowance claims. Where The Pension Service identifies a possible entitlement to this allowance pensioners are encouraged to claim.

6.   Delivery of Pension Credit

  6.1  Customer service is at the heart of Pension Credit policy. Delivering Pension Credit in modern, effective ways that meet customers' needs and preferences is the key both to maximising take-up, thus reducing pensioner poverty, and to releasing efficiency savings that will enable the Department to focus spending where it is most needed. The service delivery vision for Pension Credit is of a telephone-based application process backed up by a Local Service which is increasingly operating in joint teams with local partners. This section examines how these approaches are working so far and sets out plans for the future. It also describes the implications of the Department's plans to reduce its workforce and the number of pension centres.

Delivery of a Telephone-Based Service

  6.2  The Department decided at an early stage that the normal way of applying for Pension Credit would be by telephone to a freephone application line. The application line became operational on 7 April 2003. During the advance application period, which ran until 6 October 2003, the application line received some 842,000 calls, which resulted in some 236,000 advance applications. By the end of August 2004, the application line had received 4.48 million calls.

  6.3  Staffing levels in the application line have been flexible, to ensure that the line could deal with the forecast number of calls at any given time. At its peak, the application line had approximately 1,300 whole-time equivalent staff handling customer contacts. At the end of August 2004 the number of whole-time equivalent staff handling customer contacts was just over 650.

  6.4  Under published performance standards, The Pension Service aims to answer telephone calls within 30 seconds. For the 16 months ending August 2004, 94% had been answered within 30 seconds.

  6.5  The average length of a call to the application line during August and the immediately preceding months, was around seven minutes and the average time to complete an application for Pension Credit was less than 20 minutes. The application line deals with general enquiries as well as taking applications.

  6.6  At 31 August 2004, the application line had issued 1.85 million application forms in response to customer requests. Of these, 1.33 million (approximately 72%) were completed during the call and the completed form was sent to the customer to sign and return for processing. In the remaining 520,000 cases the customer asked to be sent a form for self-completion.

  6.7  The Department has introduced a customer promise to ensure that customers know what to expect once they have made an application. The promise is for customers who call the application line to have their application dealt with in four to six weeks of all necessary documents being received by the appropriate pension centre. The Pension Service aims to ensure that customers calling the application line understand the application process and their part in it.

  6.8  Pension Credit applications are being handled more quickly than was the case for the Minimum Income Guarantee. Since April 2004 the application handling time, once a complete application form is received at the pension centre has been around nine days on average. This represents a significant improvement in the customer experience.

  6.9  The Department continues to review and improve the application process in the light of experience, including comments from customers or their representatives.

Helping People Whose First Language is not English

  6.10  For Welsh-speaking customers, the Department's recently launched Welsh Language scheme outlines how it implements the Welsh Language Act 1993. This means making it as easy for the public to use Welsh, or access information in Welsh, as it is in English. The Local Service in Wales has 23 Welsh speakers and has met all customer requests for home visits by a Welsh speaking member of staff. Customers who wish to make their telephone application in Welsh are handed over to Welsh speaking staff at the Cardiff site.

  6.11  For other languages, The Pension Service has a contract with the Language Line, enabling the application line to offer a telephone interpreting service, in up to 150 languages, to customers whose first language is not English. Between April 2003 and August 2004 there were 371 requests for an interpretation service.

  6.12  The application line also offers a textphone service for customers with hearing difficulties. All staff operating this service receive training approved by the Royal National Institute for the Deaf. These services are standard in The Pension Service.

Other Options

  6.13  The Department has recognised that the telephone application line is not suitable for everyone and offers alternatives to suit individual circumstances. If customers prefer, a paper application pack can be issued which they can complete in their own time. A pack can be obtained either through the application line or by returning the tear-off slip included in the Pension Credit leaflet and in press advertisements. In addition, the paper application pack has been made available through Local Service outlets of The Pension Service and from partner organisations. The paper application pack is also available on the Pension Service website, where customers can either print out the application form or complete an interactive version and then print it out for signing.

Delivery of Local Services

  6.14  A further alternative, is for The Pension Service Local Service to arrange to see a customer face-to-face at a mutually convenient location, such as a local information session or in the customer's own home. Customers, or people phoning on their behalf, can use the application line number to ask to be referred to the Local Service, who will get in touch with the pensioner or his or her representative. Information regarding how to contact The Pension Service is now available on the Internet.

  6.15  The Local Service is working closely with a range of partners to provide a dedicated, holistic, face-to-face service for older people. This is in line with the 2001 Manifesto commitment that the Government would develop an integrated service to provide a joined-up gateway to health, housing, transport, financial benefits and social care for older people. This future service will provide the holistic information that older people need to ensure they have more choice and control over the services they use.

  6.17  Overall, the views that have been expressed on partnership working, both by statutory and voluntary organisations and by customers, are very positive, not only in relation to the effectiveness of the Local Service, but in relation to the overall commitment of staff to improving services for older people.

  6.18  It is clear that if the gaps in services for older people are to be closed and services better co-ordinated, then improved forms of joined-up planning and service delivery are required. Services used by older people need to be responsive, flexible, customised, integrated, holistic, seamless and of high quality.

  6.19  The Local Service, working with its partners currently provides information sessions and information points in partners' locations that are regularly visited by older people such as local community centres, Welfare Rights and Age Concern outlets etc. Appointment-based sessions offer a service that covers the full range of Pension Service benefits (State Pension/Pension Credit/Winter Fuel Payments and take-up of Direct Payment) as well as sign-posting to other benefits and local services where appropriate. Regular reviews ensure these sessions continue to meet vulnerable customers' needs.

  6.20  Where pensioners cannot attend a session and have difficulty conducting their business over the phone, the Local Service visits them at home. Since April 2003, over one million older people have had contact with their Local Service either at home or during an information session.

Joint Teams

  6.21  Since becoming fully operational in April 2003, the Local Service has been developing towards a network of services for older people. Part of this development is the creation of joint teams through integration with social service Fairer Charging staff or, in some teams, voluntary sector partners into a multi-skilled team with a single operational management structure.

  6.22  The development of joint teams is providing the opportunity to reach pensioners who have not yet engaged with The Pension Service. For example, referrals to the joint teams for a social care fairer charging financial assessment have captured a much wider customer base.

  6.23  By reaching potential customers who have not previously accessed the full benefit system, joint teams have made a significant impact on benefit take-up across all benefits. As an example, in Plymouth a joint team has been formed with the Social Services Financial Assessment Team, the local authority Housing and Council Tax Benefit Team and the Local Service. During an appointment or home visit, a customer's potential entitlement to a range of benefits is discussed.

  6.24  As at August 2004, 136 primary tier local authorities in England, Scotland and Wales (67%), have agreed in principle to forming joint teams with The Pension Service Local Service, with 18 joint teams now up and running. The aim is to achieve full national roll out of joint teams by April 2006.

  6.25  Prior to the introduction of joint teams, many older people who requested help for social care packages, such as Home Help, would not necessarily access the benefit system. These customers are some of the harder-to-reach, excluded pensioners. Social Services previously only dealt with the care elements and the fairer charging assessment.

  6.26  Local Service management information systems are now in place to capture not only volumes of activity but also the outcomes for customers. For the period April 2004 to August 2004 the total weekly award of benefit as a direct result of Local Service and joint team activity was £752,332.[19]

  6.27  Work undertaken with the Audit Commission on Fairer Charging[20] shows that joint teams are significantly reducing duplication of effort, and delivering on customers' wishes to provide information only once to access the services they need. This effectively increases the total capacity available to all partners for the delivery of services and therefore increases ability to contact and support the most vulnerable members of society. Building on this approach, on 26 August, the Government published Link-Age: Developing networks of services for older people,[21] which sets out its strategy for further joining up services for older people across and beyond government. It is now consulting on the document's proposals.

Alternative Offices

  6.28  Further improvements will be delivered through Alternative Offices, where other organisations, such as local authorities and from the voluntary sector, are authorised by the Secretary of State for Work and Pensions to receive and verify social security claims made by older people. This is now permitted following an amendment to the Social Security (Claims and Payment and Miscellaneous Amendments) Regulations 2003[22] and the Department is piloting the concept in partnership with Age Concern. The process means that the date the application is received by a partner organisation can be accepted as the date of claim, thus minimising any potential delay or loss of benefit to the customer. The Department is currently developing training and accreditation to increase the number of designated partners.

  6.30  The Pension Service is currently working with a range of organisations who have committed to developing partnership services with it. Over the next 18 months, it will be making opportunities available to selected partners with the necessary skills and knowledge to take part in this across England, Scotland and Wales, improving customer choice.

  6.31  Early work has shown this to be a sustainable approach for The Pension Service, partners and customers and further limited piloting is planned over the next six months to ensure the process is sufficiently robust and efficient.

The Consequences of the Department's Efficiency Plans

  6.32  The transformation of The Pension Service is part of the overall modernisation of the welfare system. It will deliver a business supported by new technology with changes to processes, IT, job roles and organisational structure that will enable the Department to deliver a service:

—  That is more accessible for customers—for instance, where customer needs will be captured at the earliest point such as the need for large print or Braille material

—  Where claiming is simpler—customers will be able to speak to one adviser who in most cases will be able to handle all of their needs

—  That is more efficient—unnecessary steps in the claim process will be removed to enable faster responses to customers

—  Continues to build on the success in increasing the take up of entitlement—improved use of customer information will support the identification of entitlement to benefits

  6.33  The initial take-up phase of Pension Credit has been successfully completed and The Pension Service is moving forward to achieve the Department's Public Service Agreement target of at least three million Pension Credit households by 2006. An increase in staffing levels was necessary at the start of Pension Credit implementation to launch the campaign and it was always planned to reduce the levels of staff once Pension Credit was up and running.

  6.34  Since the Budget announcement, detailed planning has been taking place across the Department. This has included discussions on the future size and shape of The Pension Service.

  6.35  As a result the work of 10 pension centres will migrate to other sites. Six pension centres (Derby, Norwich—Baltic House, Nottingham, Wolverhampton, Stockton and Wrexham) will transfer to Jobcentre Plus as part of its own programme to modernise benefit processing. The Appeals Service will take over Burnley and the Child Support Agency will take over Plymouth.

  6.36  Two pension centres, those in York and Liverpool, will no longer carry out Pension Service business from later this financial year. Opportunities to transfer these pension centres to other parts of DWP have been sought. To date no alternative businesses have been found to take over York or Liverpool. Efforts to secure alternative interest from other government departments and the private sector continue; however, if no opportunities arise these sites will close.

  6.37  The selection of those pension centres that would no longer continue to process Pension Service work was based on the Department's ability to re-deploy staff internally and a set of operational and economic criteria.

  6.38  There will be further reductions in the number of pension centres carrying out pension service work in the future. Decisions on which sites will remain will be based on robust, operational, economic criteria. Options for redeploying sites not required by The Pension Service in the longer term are being actively pursued. However, the possibility of some further centres closing in the future cannot be ruled out.

  6.39  The priority is to redeploy staff from pension centres that will either close or be transferred. Local structures are in place to identify redeployment opportunities across businesses and other government departments and The Pension Service has set up a Redeployment Unit to facilitate this. In the event that staff cannot be redeployed there is a risk of some localised redundancies. This option would be the last resort. The intention is to maximise voluntary redundancy schemes and a business case for this is being developed.

  6.40  The Pension Service is taking steps to ensure it sustains the high levels of customer service during this period of change. Customers should see no reduction in the service delivered by The Pension Service. Customers will still be able to contact The Pension Service in the same way they do now. The ability to meet customers' special needs through home visits remains.

  6.41  The Pension Service continues to be firmly committed to working with its partners. There remains an emphasis to create joint teams with local authorities. This will maximise potential for increasing take up and enables less invasive processes by gathering customer information at one contact point.

7.  CUSTOMER EXPERIENCES OF APPLYING FOR AND RECEIVING PENSION CREDIT

  7.1  With the introduction of Pension Credit the Department has aimed for a high quality customer experience from initial contact through to receipt of payments. In the latter case, this includes the move to Direct Payment which is taking place for all social security benefits. This chapter describes how the Department is going about providing a smooth and simple experience of the Pension Credit process, including Direct Payments, and sets out findings from research and feedback on this subject.

  7.2  The application process has been designed to be straightforward through a freephone telephone service where trained staff ask only those questions relevant to that particular caller. The Pension Service then sends the completed application form to them to check the information, sign the form and return it, with any documentation requested.

  7.3  In 2003 the Department commissioned independent research to assess the level of satisfaction with the application process among callers to the application line. Research[23] was carried out in late 2003, with over 400 callers interviewed about their experience. The research found that customer reaction to the Pension Credit application line was very positive. The main findings of this research are outlined in paragraphs 7.4 to 7.6 below.

  7.4  Most of the respondents said they were able to make contact with the application line at their first attempt and that their application was dealt with fully at that point. Respondents were overwhelmingly satisfied with each of a range of elements measured, with over four in five very satisfied. Particularly positive ratings were given for the manner, friendliness and politeness of the application line staff.

  7.5  The majority of respondents were aware that their call to the application line was free of charge. Callers were overwhelmingly happy with the amount of time they spent on the call, with the vast majority of calls lasting less than 20 minutes.

  7.6  Nine out of 10 respondents who were taken through the full application on the telephone said that the process and application form were well explained to them. Of those who were subsequently found to have no entitlement to Pension Credit, around 75% were told when they called that they were unlikely to be entitled. Of those told they would not be entitled, four-fifths said they were given a clear explanation of the reasons why.

  7.7  The results of this research suggest that a high quality customer experience is being delivered. This has been further recognised through a major industry award[24] for the successful development and implementation of the Pension Credit Customer Relationship Management System. The award recognises and rewards achievement in the field of customer relationship management. Industry recognition at this level supports the reported customer experience. It also reflects successful management of Information Technology projects in The Pension Service.

  7.8  The importance placed by The Pension Service on the customer experience is also reflected in the very low level of complaints made to the application line. Recognised complaint handling procedures have been in place since the beginning. By the end of August, the number of complaints was 13,500, around 0.3% of the total number of calls. (The industry average is 10 times this, at 3%.)

The Customer Experience of Receiving and Changing to Direct Payment

  7.9  Direct Payment into bank and building society accounts and the successful introduction of banking services at post offices provides customers with greater choice and flexibility over where, when and how they access their money than ever before. Direct Payment is a safe, convenient, and more modern way of paying benefits. Over the years, many pensioners have found order books to be convenient but Direct Payment will help move away from the situation where over 100 pensioners have their order book stolen each week and some £50 million is lost each year though lost or stolen order books. Each Direct Payment costs the Department around 1p compared to 68p for an order book foil and £1.47 for every girocheque.

  7.10  Direct Payment is already the normal method of payment of pensions and benefits. In the UK, 90% of pensioners already have an account suitable for Direct Payment. It is also evident that Direct Payment is becoming increasingly popular, particularly with pensioners. Around 91% of new pensions customers are choosing to be paid by Direct Payment.

  7.11  The large number of customers involved, over five million in the case of The Pension Service, meant that the Department decided to phase in the change to Direct Payment over a two-year period, which started in April 2003. This phased approach was also needed to deliver changes to computer systems to support the greater frequency and increased volume of Direct Payments.

  7.12  Existing customers are being invited to convert their method of payment from order book to Direct Payment and invitations are being issued to customers on a rolling basis. Customers can, on their own initiative, contact The Pension Service if they wish to change to Direct Payment. The contact process normally consists of one or more letters sent directly to the customer, followed up by a phone call if there is no response to the letter(s).

  7.13  Where special needs are identified, or a customer requires particular support or requests a more in-depth discussion, The Pension Service Local Service teams visit the customer. Addressing and resolving their concerns in this way generally leads to customers opting to move to Direct Payment.

  7.14  It has always been recognised that there will be a small number of people for whom Direct Payment is not suitable. The alternative of cheques issued on a weekly basis to home addresses, which are cashable at Post Office branches as well as being payable into bank accounts will be available from October 2004 for those customers who genuinely cannot use Direct Payment. They also offer flexibility for those customers who have a series of different people collecting their money for them.

  7.15  Almost all pensioners have now been contacted. The Department is now contacting customers who have not responded. They will be sent a further letter, pointing out that order books are coming to an end, and asking them to inform The Pension Service how they would like their money to be paid in future.

  7.16  The emphasis of the Direct Payment conversion approach is to ensure that each customer has the best account for his or her circumstances, with customers choosing the account they want.

  7.17  Early customer feedback suggested that two principal areas of concern were the ability to access money at Post Offices, and frequency of payment. Many standard bank and building society accounts, and basic bank accounts from the major banks and the Nationwide Building Society as well as Post Office(r) Card Accounts, can be accessed at Post Offices. Customers can also now choose to have their money paid weekly by Direct Payment, if they choose whereas previously, the option was four-weekly.

  7.18  When the programme started in April 2003 the number of pensioners choosing Direct Payment was 55%. Figures from July 2004 show this is now 84%.

DWP

September 2004

---

---

1   Households Below Average Income 2002-03 (DWP, March 2004). Back

2   Social Security (Claims and Payments and Miscellaneous Amendments) Regulations 2003, SI2003 No 1632. Back

3   Link-Age: DWP in conjunction with Department of Health, Office of the Deputy Prime Minister and Local Government Authority, 26 August 2004. Back

4   Pension Credit Application Line Customer Satisfaction Market Research Report, prepared by Continental Research on behalf of the Department for Work and Pensions for COI Communications (2003). Back

5   Tackling Pensioner Poverty: Encouraging take-up of entitlements, National Audit Office, HC37 Session 2002-03. Back

6   Age Concern, June 2004, The impact of Pension Credit on those receiving it: Report of a survey among older people. Back

7   Households Below Average Income 2002-03 (DWP, March 2004). Back

8   Mike Brewer et al, 2004 Poverty and Inequality in Britain, Institute of Fiscal Studies Commentary 96. Back

9   Simplicity, Security and Choice: working and saving for retirement, Cm 5677, December 2002. Back

10   Work and Pensions Select Committee Third Report: The Future of UK Pensions (14 April 2003). Back

11   Hedges, A, 1998, Pensions and Retirement Planning, DSS Research Report No. 83, CDS: Leeds; Mayhew, V, 2003, Pensions 2002: Public attitudes to pensions and saving for retirement, DWP Research Report No. 193, CDS: Leeds. Back

12   The document Simplicity Security and Choice: Informed Choices for working and saving (Cm 6111) sets out the Government's plans to ensure that people have the information that allows them to make the best possible choices when taking decisions on how to make provision for their retirement. The document Simplicity security and choice: Working and saving for retirement: Action on occupational pensions (Cm 5835, June 2003) sets out Government proposals to improve member protection by introduction of a Pension Protection Fund to give members a specified minimum level of pension when the sponsoring employer becomes insolvent. Back

13   Financial Services Authority: Stakeholder Pensions-introductory notes and decision trees. Back

14   Family Resources Survey 2002-03 (DWP, 30 March 2004). Back

15   Ethnic minorities-For the purposes of this memorandum, "ethnic minority" is meant to broadly denote a group which an ordinary person might consider to be in the minority in terms of ethnic representation in the country. Therefore, in the context of the United Kingdom, generally speaking this will denote people principally of Black African, Caribbean (specifically, Afro-Caribbean) and Indian sub-continental (ie principally India, Pakistan, Sri Lanka and Bangladesh) descent. Its use as a broad "umbrella" label is deliberate, to signify reference to a wide variety of ethnic minority groups. Where greater precision is required with reference to specific component groups within the ethnic minority population, allowances and departures from this term are made in the text. There is, inevitably, considerable debate and disagreement on the question of race, ethnicity and nomenclature. No specific political or sociological inference should be drawn from the use of related terminology in this report. For the sake of clarification, though, the relevant legislation (Race Relations Act 1976, section 3(1)) defines "racial group" as meaning a group of persons defined by reference to colour, race, nationality or ethnic or national origins. Back

16   Barnard, H., and Pettigrew, Nick, Delivering Benefits and Services for Black and Minority Ethnic Older People, Department for Work and Pensions Research Report 201, December 2003. Back

17   Joint team working is explained more fully in section 6. Back

18   National Statistics 2001 Census Data. Back

19   The Pension Service Management Information Local Service System. Back

20   Charging With Care, Audit Commission on Fairer Charging, The Audit Commission, 2000. Back

21   Link-Age: Developing networks of services for older people, DWP in conjunction with Department of Health, Office of the Deputy Prime Minister and Local Government Authority, 26 August 2004. Back

22   Social Security (Claims and Payments and Miscellaneous Amendments) Regulations 2003, SI 2003 No 1632. Back

23   Pension Credit Application Line Customer Satisfaction Market Research Report, prepared by Continental Research on behalf of the Department for Work and Pensions for COI Communications (2003). Back

24   "Pension Credit Project for the Department for Work and Pensions" won the "Public Sector CRM Project of the Year" at the UK CRM 2004 Industry Awards. Back

---

Prepared 9 March 2005