House of Commons - Work and Pensions

Select Committee on Work and Pensions Written Evidence

Memorandum submitted by Citizens Advice Bureau (PC 14)

SUMMARY

1. Citizens Advice welcomes the establishme of the Pension Service as the delivery arm of DWP for people over the age of 60. The Pension Service has a clear focus on ensuring that older people get the benefits to which they are entitled. The take-up target for Pension Credit provides a clear (but unduly modest) incentive for the Pension Service staff to adopt a positive approach to their customers.

2. We consider that the business model is excessively telephone-based, and makes inadequate provision for the significant proportion of pensioners who are unable or unwilling to use the telephone.

3. We welcome the Government's commitment to increase the incomes of poor pensioners, but are concerned that the complexity of Pension Credit, and the fact that it involves a means test, puts many eligible older people off applying. We are disappointed with take-up so far, and consider that the Pension Service take-up target, 75% by 2008, is much too modest. There is a need for much more face-to-face work with older people to increase take-up, which the Pension Service may be unable to deliver because of the proposed job cuts.

4. We consider that the Government was over-ambitious in introducing the Pension Service as a new organisation, Pension Credit as a new benefit and direct payments—all over a very short period. The Pension Service has struggled to cope, leading to delays and mistakes.

5. The Government's decision to close 10 pension centres is very worrying, and is likely to result in further disruption, delays and lost case files. There is still a great deal to do, with over 1 million eligible households not receiving Pension Credit.

6. The Government should simplify the policy and procedures on Pension Credit, to: pay savings credit from age 60, exempt all pension credit recipients from health charges, reduce the assumed income from capital, remove the housing benefit savings limit for all pension credit recipients, relax the overseas travel rules and provide automatic flow-through from income support at 60.

7. We welcome the concept of local authorities and voluntary organisations being partners of the Pension Service, but consider that the concept was inadequately thought through before it was applied. DWP and the Pension Service should review the ways in which they relate to "partners" to allow consultation at an earlier stage, and to develop more reciprocal relationships.

1. INTRODUCTION

1.1 The Government introduced Pension Credit in October 2003 to respond to pensioner poverty that arose from:

— The declining relative value of the basic state retirement pension;

— The failure of more than a quarter of the pensioners who were eligible for Income Support (branded as Minimum Income Guarantee) to claim it.

1.2 It sought to achieve this through a benefit that met a number of policy aims:

— To target available resources on the poorest pensioners;

— To lessen the disincentive to save for retirement that was provided by the Minimum Income Guarantee means test;

— To provide a benefit for older people that did not incorporate the work-seeking conditionality being brought in for most benefit recipients of working age; and

— To administer the new benefit more cheaply, having regard for the stable circumstances of most pensioners.

1.3 The establishment of the Pension Service in April 2002 was an important part of the preparation for Pension Credit. The concept of a DWP delivery agency devoted to providing benefits for older people is very positive, because it enables staff to have a wholly committed approach to ensuring that their customers get the benefits to which they are entitled. The introduction of take-up targets for Pension Credit means that Pension Service staff actually encourage their customers to claim benefits—a world away from the old approach of the Benefits Agency.

1.4 Research was carried out to determine how the new Pension Service should go about its business. This showed that most older people hated going to Benefits Agency offices, and most of them had telephones and some form of bank account. So the Pension Service was set up as a largely telephone based service, operating out of 26 newly established pension centres where processing would be carried out and which would deal with most customer queries. There are no pension centres in London or the South East—these parts of the country are served from distant locations such as Glasgow, Cwmbran and Newcastle on Tyne. These centres have been phased in over a two-year period, during which time the pattern of service has varied across the country, with some processing continuing in local social security offices. The implications of the decision to phase 10 of the new centres out over the next 18 months are discussed in Section 7.

1.5 The Pension Service recognised that some older people would be unable to do business with them by telephone, and established a local service to run drop-in surgeries and conduct home visits. Local service has no caller offices and customers can only gain access to local service through the pension centre that serves that area. It appears to be variable whether Jobcentre Plus offices are prepared to offer pensioners any practical assistance with their benefits—for example, the provision of forms, use of the telephone to contact the pension centre, and document verification. We consider that Jobcentre Plus offices should be geared up to provide assistance to pensioners who approach them, and we suggest that the Pension Service and Jobcentre Plus should develop and publicise a protocol to achieve this.

1.6 From its inception, the Pension Service has had a policy of working with "Partners" at national and local levels—that is with local authorities and any other organisations that work with or involve older people. Citizens Advice is a National Partner, and individual Citizens Advice Bureaux are local partners. We welcome the concept of partnership, but have been disappointed in some aspects of its implementation.

1.7 To the extent that the Pension Service has consulted and involved partners in making its plans and carrying them through, we welcome this as a valuable new approach. We have valued our involvement in the group Partnerships Against Poverty, England and Wales, and its Pension Credit Subgroup. But we believe these groups could have been much more valuable if DWP and the Pension Service had been willing to share and discuss proposals at a much earlier and more formative stage.

1.8 For example, all the national organisations participating in the Partnerships Against Poverty Pension Credit Subgroup pointed out that the Pension Service needed to initiate local face-to-face take-up work, in addition to the direct mail and mass media promotion, in order to get claims from harder to reach groups, but it took a long time for this advice to be accepted. Sometimes it has felt as if the key decisions have already been made, and partners are being consulted only about the detail, or worse simply informed of decisions that have been made already. We consider that the Pension Service still has some way to go to operate the partnership in the reciprocal manner that is the essence of real partnership.

1.9 The operation of the partnership approach at local level is discussed in section 6.

1.10 The introduction of Pension Credit has involved a great deal of work for Citizens Advice Bureaux—explaining how the complex rules affect an individual's eligibility, helping people to claim, sorting out problems with claims that have been made and incorrect awards, explaining obscure award letters, and taking urgent action on behalf of people who have been left penniless when their income support has stopped without warning at the age of 60. Bureaux have sent in well over a thousand reports of issues that have arisen for their clients. In the remaining sections of this document, we set out the experiences of CAB clients with Pension Credit and suggest improvements in policy and practice that we consider that DWP and the Pension Service should make.

2. POLICY ISSUES

2.1 In Citizens Advice's response to the Pensions Green Paper, we expressed concern about the long-term viability of the government's policies for financial support for low-income pensioners. [84]Broadly this policy is that the basic state pension will increase by 2.5% a year, or price inflation, whichever is the higher, and the Pension Credit guarantee level will increase by the percentage increase in earnings. People will be able to enhance their state pension through the State Second Pension, and also be encouraged to make their own provision through occupational and private pensions.

2.2 The effect of this approach, on the Government's own figures is that the proportion of pensioner households that will qualify for means tested Pension Credit will increase from the current 50% to 65% by 2050. Our experience is that most pensioners consider that their State Retirement Pension should provide an adequate basic income for their retirement, and they should not have to submit to a means test in order to have enough to live on.

2.3 In his speech on Reforming the Welfare State on 11 October 2004, the Prime Minister indicated that the Government would bring forward proposals for pension reform in the light of the final report of the Pensions commission under Adair Turner, and would seek consensus as far as possible. We welcome this approach. We hope that the Government will work towards raising the level of the Basic State Pension to that of the Pension Credit Guarantee Credit and up-rating in line with earnings thereafter. We also consider that the National Insurance contribution requirements for State Retirement Pension should be greatly simplified so that most people will qualify for the full pension, and that the practicalities of a citizen's pension should be fully examined. There should also be an enhanced pension for disabled pensioners and pension-age carers.

This approach would be:

— seen as fair by most people,

— make it easier for people to plan how to save for their retirement because they will have more clarity about the retirement income they will have from the state,

— avoid the problem of under claiming that causes means tested benefits to fail to reach many of the poorest people, and

— be much cheaper to administer than Pension Credit.

2.4 The resource implications of this approach will need to be addressed through the tax system, for example by reducing tax concessions surrounding pension contributions for wealthier people, re-examining the contracted-out rebate and reviewing the tax treatment of wealthier pensioners. The recent Pensions Policy Institute paper suggests that these radical changes that are manageable and affordable. [85]

2.5 For the immediate future, Pension Credit will continue to exist. We welcome:

— the extra money that Pension Credit is putting into the pockets of less well-off pensioners;

— the removal of the savings limit and the reduction of the tariff income on savings that applied to Minimum Income Guarantee; and

— the introduction of longer Assessed Income Periods, and the requirement for local authority housing/council tax benefit departments to use the Pension Credit assessment of means rather than submit pensioners to a further means test.

There are, however, a number of policy problems that we consider that the Government should address.

2.6 It is unfair that people who do not receive a full basic State Pension get no benefit, or less benefit than those with full basic State Pension, from any other savings or income that they have. The calculation of the savings credit should be amended so that people with less than the basic State Pension should get the same amount of savings credit as they would if they were getting full basic State Pension.

2.7 The different qualification ages for the guarantee and savings credits add to the complexity of an already over-complex benefit. Women in their early 60s who are living alone and have supplemented their basic State Pension consider the non-availability of the savings credit to be unfair. It is also a disincentive to their doing some part-time work.

A client of a bureau in Staffordshire had been receiving incapacity benefit when she reached 60, and moved on to State Retirement Pension. She had an occupational pension that made her income too high for the guarantee credit, but if she were over 65 she would have been entitled to receive savings credit. A man in similar circumstances would retain his IB to age 65 and then qualify for savings credit at the same time as receiving his State Retirement Pension.

We consider that the savings credit should become payable at 60.

2.8 The relaxation of the tariff income for savings is welcome, but the rate of £2 per week for each £1,000 of savings above £6,000 still represents over 10% per annum, more than double the income that the pensioner is actually likely to be receiving. Pensioners resent this, especially as this income has been re-titled "assumed income" which they consider dishonest. They point out that no financially literate person would make such an assumption.

A client of a bureau in Derbyshire had savings valued at £38,949 and his Pension Credit calculation showed an assumed income of £66 per week. The client felt this was very unfair as the actual interest he received (and which had been notified to the Pension Service) was far less.

The Government should reduce the assumed income on capital to a rate that reflects the income that is actually likely to be obtained. If it is not prepared to do this, and considers that pensioners with savings over £6,000 should have to run these savings down, it should revert to the old description of "tariff income".

2.9 The differential passporting arrangements from guarantee credit and savings credit are inconsistent and confusing.

— guarantee credit passports to full remission of all health charges, but savings credit recipients must submit themselves to the means test of the NHS low-income scheme. But the generally more restrictive Social Fund allows applications from all Pension Credit recipients. We consider that all Pension Credit recipients should be exempt from health charges.

— guarantee credit recipients are automatically entitled to full Housing Benefit and Council Tax Benefit, regardless of their savings, but people who are only getting savings credit are excluded if their savings exceed £16,000. This results in a cliff-edge, so that a small change of circumstances could lead to the loss of all housing benefit and council tax benefit. We consider that all Pension Credit recipients should be eligible for housing benefit and council tax benefit, subject to the usual income calculations but not the capital limit.

2.10 The longer assessed income period, during which Pension Credit recipients do not have to report changes in circumstances, is welcome. However, cases are being reported to us of pensioners who lose their Pension Credit because they go on a holiday abroad that lasts for more than four weeks. To reinstate their Pension Credit they have to go through the full application process again. For example:

A client of a bureau in Norfolk illustrates the problems clients face if they go abroad for over four weeks. The family of a 76 year old client paid for her to visit them abroad, and as she would be away for six weeks she was obliged to inform the pension service. She was worried to hear that she would lose two weeks of Pension Credit and was especially concerned about the effect this would have on her other benefits.

The policy fails to recognise that it is quite usual for a pensioner with family abroad to go for an extended holiday visit to see them. It is likely to be a particular problem for pensioners from ethnic minorities, who are more likely to have family abroad. We consider that Pension Credit should remain payable in full during a 13 week absence abroad, and should only be suspended rather than cancelled, provided the pensioner returns to live in the UK within one year.

2.11 Pensioners who are local authority sponsored residents in care homes are amongst the poorest people in society, having only £18.10 a week personal expenses allowance. Those who receive savings credit are also allowed to keep whatever they get, up to a maximum of £4.65. Any additional savings credit up to the single person maximum of £15.51 is clawed back for the care home fees. This is contrary to the intention of Pension Credit, to reward people for saving for their retirement, and we consider that all savings credit should be disregarded when assessing contributions to care home fees.

2.12 In one respect the arrangements for Minimum Income Guarantee were better than those for Pension Credit. Recipients of Income Support moved automatically to Minimum Income Guarantee on their 60th birthday, receiving more money each week but not having to make a new claim. All people receiving Minimum Income Guarantee when Pension Credit was introduced in October 2003 were moved automatically to Pension Credit. But anyone on IS who has reached the age of 60 since then will only get Pension Credit if they apply for it. This is a step backwards, and we consider that all recipients of Income Support should be automatically transferred to Pension Credit when they reach the age of 60.

2.13 A number of inconsistencies apply to the new arrangements:

2.13.1 Notional capital. Regulation 21 deals with notional capital. It has already been changed in April 2004 to remove ambiguity, but there are still problems, particularly around Regulation 21(2). For example, it is unclear how disposal of capital by partners of claimants will be treated.

2.13.2 Notional income. If someone chooses to defer their state pension, the pension they would have received counts as notional income for Pension Credit. This is a disincentive to deferment.

2.13.3 One of a couple in a care home. People in permanent care who wish to pay occupational pension to their spouse cannot contribute more than 50% of the occupational pension. It is not clear how this income has to be treated in calculating the Pension Credit of the spouse at home. If it is treated as maintenance, it counts for guarantee credit but is ignored for savings credit—which is disadvantageous to the spouse at home. Couples in this situation usually have additional costs, for example for visiting the spouse in the care home, and would benefit if the 50% of occupational pension was ignored for assessing the Pension Credit of the partner at home.

2.13.4 Temporary care/Hospital. Couples where one is temporarily in care lose their severe disability premium of Pension Credit when the DLA/AA stops after 28 days, but this does not happen when one of a couple is in an NHS hospital. The difference is unfair.

2.13.5 Permanent care/Sheltered accommodation. If a person moves into permanent residential care, the AIP ends, and any equity from a house sale is counted as capital for the next AIP. This does not happen if someone goes into permanent sheltered accommodation. This is unfair on those going into residential care.

2.13.6 Pension Credit and Tax Credits. WTC is ignored for savings credit, which, for most people reduces the incentive to work. There may be a small number of people who benefit from the current rule but we consider that DWP should consider changing the current rules.

2.13.7 Pension Credit and housing benefit/council tax benefit. There has been considerable convergence between Pension Credit and housing benefit/council tax benefit for those aged 60 and over, but there are still differences. For example, in lone parent working disregards, and the treatment of maintenance. We consider that all the inconsistencies should be removed.

2.13.8 Pension Credit and housing benefit/council tax benefit. Some people aged 65+ have extra housing benefit/council tax benefit because of the up-rating of housing benefit/council tax benefit applicable amounts when Pension Credit was introduced. Some who would only receive savings credit feel that it is not worth the bother of applying, because 85% of their savings credit award will be clawed back from housing benefit/council tax benefit. This means lack of access to passported benefits from Pension Credit, such as the social fund.

2.13.9 AIP Requirements. The respective AIP systems run by Pension Credit and housing benefit/council tax benefit are a mess. For example, in a savings credit only case, a person does not have to tell Pension Credit if their capital exceeds £16,000, but does need to tell the local authority, even though an AIP exists from the local authority. This is very confusing, especially since the Pension Service and local authorities are supposed to be sharing information (as the housing benefit/council tax benefit Pension Credit Guide stresses). There is a lesson to be learned from the Tax Credits fiasco, that making complex reporting requirements is a recipe for disaster. Simple and consistent requirements for reporting changes of circumstances during an AIP need to be put in place.

2.13.10 Overpayments. The position on overpayments arising from the failure of the Pension Service to report facts to the local authority is unclear. We consider that they should always be non-recoverable, so that people do not face demands to repay housing benefit or pay back payments of council tax when the Pension Service has failed to inform the local authority of a revised Pension Credit assessment that reduces the person's housing benefit/council tax benefit entitlement.

2.13.11 When a couple separate. If a couple receiving Pension Credit separate, and one continues to live in their jointly owned home, the other may claim Pension Credit. The value of the property should be disregarded for six months from the date s/he left the property as this was due to relationship breakdown. Additionally, if the Pension Credit claimant is taking "reasonable steps" to dispose of the property, its value can be disregarded for as long as it is considered reasonable to do so. If s/he's taking no steps to dispose of the property, then half of its capital value will be taken into account for means tested benefits. This is likely to leave the partner who has moved out with insufficient income to live and unable to pay rent and council tax.

3. TAKE UP

3.1 We very much welcome the commitment of the Pension Service to try to maximise take-up of Pension Credit, and the introduction of take-up targets, which are a desirable innovation in social security practice. However, we believe that the targets, which envisage take-up reaching 75%, are unduly modest. They do not appear to be higher than the take-up levels of MIG which the Government found unsatisfactory (see paragraph 1.1 above). We do not find it acceptable that, by 2008, over a million eligible households, around 1.3 million pensioners should not be receiving Pension Credit. DWP and some local authorities now have sophisticated data matching capabilities to identify people who are claiming, for example, housing benefit and/or council tax benefit but not Pension Credit. Some local authorities have run systematic take-up campaigns using data that they hold, and have achieved high take-up rates. For example, Tameside Council have achieved guarantee credit take-up above 91%. We consider that the Government should be seeking take-up of Pension Credit of at least 90% or higher.

3.2 Initially, the Pension Service adopted a cautious approach to the promotion of Pension Credit, concentrating on transferring people on Minimum Income Guarantee in the period before Pension Credit came into being on 6 October 2003. Some 1.8 million households were transferred automatically. Mostly this operation went smoothly, with few people not receiving their first payment of Pension Credit on time. There were, however, three areas of difficulty:

— Many people found the notification letters incomprehensible and were worried that they would get less money, when in fact they were going to get the same or more.

— Pension Credit is not paid for dependent children, and the 27,000 Minimum Income Guarantee recipients who had dependent children were also automatically transferred to Child Tax Credit in October 2003. This was poorly communicated. As a consequence people were getting letters that appeared to show huge reductions in their income—over £100 a week for bigger families. Many of these people consulted Citizens Advice Bureaux and we had the impression that a disproportionate number of people from ethnic minorities were affected.

— Many local authority sponsored residents in care homes received an addition to their Minimum Income Guarantee in the form of the Residential Allowance of £65.50 a week. They did not see any of this money as it was fully transferred as part of their contribution to the care home fees. With the introduction of Pension Credit the Residential Allowance was abolished, and the money paid directly to local authorities. Again the change was poorly communicated. Both by DWP to customers and by many local authorities to care home owners. As a consequence many care home residents were unnecessarily worried that they would no longer be able to afford their contribution to care home fees, with some fearing that they would be evicted. Many of these people and their relatives consulted Citizens Advice Bureaux about their worries.

3.3 At the start of 2003, about 1.8 million households were receiving Minimum Income Guarantee. A further two million households were reckoned to be eligible for Pension Credit. The Pension Service sought to manage the take up of these extra households by phasing publicity for Pension Credit so that it did not get swamped with more claims than it could process. A major part of the Pension Service's take-up effort was to write to every pensioner household to inform them about Pension Credit and invite them to apply if they thought that they might qualify. The letters were phased over the period from April 2003 to June 2004, with less than 20% being sent out in advance of the introduction of Pension Credit. All awards for applications made before 5 October 2004 will be backdated to 6 October 2003 or the date the person qualified, if later.

3.4 It is very welcome that DWP has published monthly take-up figures for Pension Credit. Unfortunately however, the figures themselves are not all easy to interpret since they are a mixture of activity figures (calls to claim-line, applications returned to the Pension Service) and to-date totals (household and persons receiving Pension Credit, average award). This is illustrated by the following table:

Month Total Applications Returned (monthly
applications)(thousands, totals rounded) Households Receiving (monthly addition)(thousands, totals rounded)

October 2003 370 1970 (82)

November 490 (120) 2060 (90)

December 590 (100) 2120 (60)

January 2004 700 (110) 2180 (62)

February 840 (140) 2260 (83)

March 1030 (190) 2400 (138)

April 1130 (100) 2450 (44)

May 1230 (100) 2500 (51)

June 1320 (90) 2550 (52)

July 1400 (80) 2580 (33)

August 1450 (50) 2610 (25)

3.5 The figures in the first column indicate the workload for pensions centres in processing Pension Credit applications, with the February and March figures presumably reflecting a push by the Pension Service to meet the target of 2.4 million households receiving Pension Credit by the end of March. The figures in the second column are less easy to interpret, as they are net figures of awards made minus households leaving Pension Credit (presumably mainly through death). In our view it would be preferable for DWP to publish the number of new Pension Credit awards made every month and the number of awards ending.

3.6 The total number of households receiving Pension Credit is disappointing. 3.75 million households are estimated to be eligible, so that 1.14 million eligible households (1.68 million pensioners) were not receiving their entitlement at the end of August 2004. The number of households being added each month is in decline, with only 25,000 added in August 2004. The numbers of eligible households is set to increase by 350,000 to 4.10 million over the next three years, [86]so that a net 10,000 households need to be added each month just to keep up with the newly eligible. It is clear that large numbers of eligible pensioners have not been persuaded to apply for Pension Credit by the Government's direct mail campaign.

3.7 Belatedly the Pension Service has recognised that much more focused work is required to attract applications from many of the pensioners who are entitled to Pension Credit. We welcome the establishment of the Partnership Fund to provide financial support for local take up work by voluntary agencies and local authorities. [87]We also hope that the introduction of Joint Teams of local authority and the Pension Service staff will increase take-up of Pension Credit, and also attendance allowance, housing benefit and council tax benefit by older people. Work by the Pension Service to use its databases to identify people who are likely to be eligible for Pension Credit, to send them further material about Pension Credit and, in some cases to visit them, has the potential to be valuable.

3.8 Citizens Advice Bureaux have a long history of encouraging people to take up benefits to which they are entitled. The Citizens Advice research report "CAB campaigns for benefit take-up among older people" (December 2002) drew together the experience of over 100 bureaux in carrying out targeted benefit take up campaigns with older people. Successful targeting involves advisers going to places where older people live or gather regularly, such as pensioner groups, sheltered housing and GP surgeries. Targeting is often most successful when it involves face-to-face contact to help overcome the perceived stigma of claiming. The average benefit gain from these campaigns was £85 for every £1 spent.

3.9 We consider that DWP should fund research to show what interventions with potential Pension Credit recipients are most cost effective. This research will need to identify the characteristics of the pensioners who are not applying, so that take-up strategies can be devised for these "hard to reach" people. We are concerned that the capability of local Pension Service staff to promote take-up will be adversely affected by the proposed staff cuts at the Pension Service—see Sections 6 and 7.

4. THE CLAIMING PROCESS

4.1 The Initial Claim

— Poor knowledge of Pension Credit premiums, leading to applicants being told that they do not qualify for Pension Credit because their income is too high, when in fact they do qualify.

A bureau in Lincolnshire reported that the telephone operator who dealt with their client's claim had no understanding of the Severe Disability Premium. The client had not received the money, two months after it was due, and an adviser had to spend 15 minutes explaining the entitlement to the call centre operator who had no idea how it worked.

— Poor knowledge of the rules for savings credit, with applicants whose income qualifies them for savings credit by virtue of their income being told that they do not qualify because they have insufficient savings.

A client of a bureau in Surrey was told on the phone that she would not qualify for savings credit because her savings are less than £6,000. But she does qualify because of her income—she would have missed out on £7 a week if she had followed the advice from the Pension Service.

— Poor understanding of the different effects that guarantee and savings credits have on the capital limit for claiming housing benefit/council tax benefit, resulting in poor advice.

— A bureau in the Midlands was concerned that the claim line agent insisted that a couple with savings of over £40,000, who qualified for savings credit, but not guarantee credit would be able to get Council Tax Benefit. In fact they do not qualify because their savings are more than £16,000.

— Staff who appear not to have been trained to quickly identify applicants who are struggling with the telephone claims process, so that they can offer them an alternative means of applying.

This lack of knowledge has caused many clients to experience difficulties in getting the money to which they are entitled.

4.1.2 The Pension Service says that the average claim call only takes 20 minutes. We find this surprising, given the large amount of information that the applicant must supply, especially with respect to savings. Citizens Advice Bureaux that have made claims for clients have often found the process straightforward, but there are also reports of claim calls taking one hour or more. Many frail older people would find such a long call a great strain.

4.1.3 Using the telephone is obviously not a feasible way to claim Pension Credit for those who are hard of hearing. Whilst a textphone number is provided, not all older people will be able to use this either.

The clients of a bureau in Surrey both had hearing difficulties and could not use a text phone. They had tried to submit an application for Pension Credit over the phone but had given up as they found that "the girl spoke too fast". With the help of the bureau they made a successful claim, but would have been unable to do this on their own.

4.1.4 Once a telephone claim has been made, the applicant is sent a completed claim form to check and sign. Problems at this stage include:

— Totally blank forms.

— Incorrectly completed forms, including in cases where advisers have made the claim and are certain that correct information was supplied.

— Long delays in forms being sent out, or no form being sent out at all.

4.1.5 No written claims were allowed before Pension Credit started in October 2003, which caused frustration to people who wished to apply early but were unable or unwilling to claim by phone. Citizens Advice Bureaux were not able to obtain claim forms during this period, although this would have been helpful in assisting some clients. For a number of months after October 2003, some Citizens Advice Bureaux reported continuing difficulties in obtaining paper claim forms. These difficulties have now been sorted out.

4.2 Submission of Financial Documents to Pension Centres

4.2.1 Applicants have to sign a claim form whether this has been generated by a telephone claim, or as a written claim by the applicant or an adviser. They must then submit the signed form to the pension centre that deals with their area. The Pension Service ask applicants to submit a whole range of original documents concerning income and savings to support the claim. Many people are understandably reluctant to do this, as they fear, with some justification, that the documents may be lost at the pension centre or in the post. People are also reluctant to part with items such as passbooks, even for a short time, because they will be unable to access any money without the passbook.

A client of a bureau in Devon visited the bureau after making an application for Pension Credit. She had been asked to forward financial information, including savings books, to the pension service. The client was worried about how safe this would be but was unaware that she could have visited her local Jobcentre to have these processed—had she not visited the bureau she may not have proceeded with her claim.

This is likely to be an increasing problem as the move towards the direct payment of benefits into bank accounts is completed early in 2005. These problems are likely to be a major reason why large numbers of pensioners fail to return telephone completed claim forms even though they appear to be eligible for Pension Credit. DWP has not published information on the numbers involved. It would be helpful if DWP did so, and also set out what action is being taken to help these pensioners complete the application process.

4.2.2 In order to meet its take-up targets, the Pension Service does offer alternative document verification procedures, but it only tells people about them if they object to sending valuable documents through the post. A statement that we received from the Pension Service about verification is reproduced in the Annex. We find the Pension Service's current policy and practice on document verification is obscure and unhelpful. We consider that there should be simple and accessible local document verification arrangements available to all pensioners, and that these procedures should be open and clearly publicised.

4.2.3 The CAB service is keen to assist clients who have concerns about document verification. We have agreed that bureaux will not be required to act as agents for the Pension Service, and will not verify the legality and authenticity of documents. However, they will continue to certify copies of documents and will gather the appropriate information about the client necessary to make the claim.

4.3 Assessing the Award

4.3.1 At pension centres, the details from the claim form have to be input to a computer system to calculate if the applicant qualifies for Pension Credit, and if so to calculate the award. This process has thrown up a lot of problems:

— Loss of forms.

— Claims classified as dormant or closed when they are not.

— Delays of weeks or sometimes months, and advisers told by pension centre staff that they have huge backlogs and several weeks of unopened mail.

— Long delays when the pension centre requires additional information or documents from the applicant.

— Incorrect entry of financial details leading to incorrect awards.

— Difficulty for clients and Citizens Advice Bureaux in finding out why a claim is delayed. Initially pension centres were often engaged. This is unusual now, but Citizens Advice Bureaux often find that a simple enquiry involves a lot of holding on the phone, and can take up to 20 minutes.

The Pension Service told a client of a London bureau early in 2004 that he did not qualify for Pension Credit. When the bureau followed this up, Glasgow pension centre said that the claim was still open but they were awaiting proof of the date of birth of the client's wife. The client had sent the information twice by registered post. Two months later the claim had still not been processed. Glasgow admitted that they could not locate the file, and said that they would arrange a home visit to complete another claim. This was only arranged when the bureau chased up two weeks later. Ten days after the visit the client received acknowledgement of his application, but he then received another set of claim forms. Glasgow told the bureau that the client would have to complete the third application as they could not locate the set of forms completed at the visit. This meant that this man was still without pension credit more than four months after his initial application, and he and his wife are forced to live on a small occupational pension and DLA, as he is not yet old enough to receive the state pension.

4.4 The Award Letter

4.4.1 People should not receive letters that are so poorly drafted and presented that they find the contents worrying and have to bring them to Citizens Advice Bureaux for an explanation. Yet many recipients of the Pension Credit award letter, generated by the DWP's "legacy" computer system, find the letters incomprehensible, confusing or just plain wrong. Common problems are:

— An inconsistent approach to informing the client of their total income from DWP after the Pension Credit award. Some letters simply show how much Pension Credit they will get, leaving the recipient worried that their State Retirement Pension has stopped. Other letters show the total of pension and pension credit payments.

— Internal inconsistencies, with the letter and calculation sheet showing different amounts.

— More than one award letter sent out on the same day presenting information differently.

— Clearly incorrect references to payments going back to the 19th century, for example—"from 22 January 1811 you will get £163,168.66 a week."

A bureau in the South West reported that their client, who they described as "very numerate" was left unsure of how much Pension Credit she would get after receiving an award letter. The client felt that phrases such as "we reward 60 pence of the pound of the qualifying income" were unclear and that less jargon should be used if the letter was to be comprehensible to claimants.

4.4.2. We have drawn these problems to the attention of DWP, and some of the problems have been addressed, but we are very concerned that DWP appears to give low priority to ensuring that these important letters are as well presented and comprehensible as possible.

4.5 Urgent Claims

4.5.1 It is regrettable that the old arrangement whereby Income Support recipients transferred automatically to Minimum Income Guarantee at the age of 60, no longer applies for Pension Credit. These benefit recipients, whose circumstances Jobcentre Plus is fully informed about, are obliged to claim Pension Credit from the Pension Service in order to continue to receive any income. This is a nonsense and we consider that an automatic flow through from IS (and when appropriate JSA and Incapacity Benefit) should be instituted.

4.5.2 The DWP foresaw that the current arrangements have the potential to cause client hardship and instituted a procedure for Jobcentre Plus to alert benefit recipients approaching their 60th birthday that they need to claim Pension Credit. In a number of places this procedure has not worked well. Citizens Advice Bureaux report clients in many parts of the country who have had their IS stopped when they reach 60 without receiving any advice to apply for Pension Credit. Most simply received a letter from Jobcentre Plus to say that their IS had stopped or would stop next week, with no reference to applying for Pension Credit. Some just discovered that there was no new order book when they went to collect it at the post office. In some cases this meant that disability benefits that were on the same order book also stopped being paid, leaving the client in severe financial hardship because of the incompetence of DWP.

A bureau in the North East reports the extreme hardship that a disabled couple suffered. Mr P is in his late 60s and receiving State Retirement Pension and DLA. Mrs P is in her 40s and, prior to the introduction of Pension Credit in October 2003, she was claiming IS for both of them and receiving DLA on the same order book. When Mrs P went to get a new order book at the beginning of October, she found that the post office did not have one. Jobcentre Plus said that Mr P had to apply to the Pension Service for Pension Credit for both of them. He did so quickly but the Pension Service failed to make regular payments and the couple's income fell by £115 a week. The bureau had great difficulty sorting the correct payments out because they had to deal with three delivery arms of DWP, none of which was keen to accept ownership of the couple's benefit problems.

A client of a bureau in Surrey had been in receipt of income support and disability living allowance, which were paid together. When she reached her 60th birthday her DLA stopped along with her IS. There was a delay in processing her Pension Credit claim, and due to this and other administrative errors there was a three-month delay between her income support ending and the client receiving all the benefit to which she was entitled.

4.5.3 In response to this situation the Pension Service has instituted a fast track procedure for people with an urgent need for Pension Credit payments. This aims to get Pension Credit into payment within about three weeks, rather than two months or more for a normal claim. This will still leave some people who have been let down by Jobcentre Plus forced to seek a crisis loan from the social fund.

4.6 Correcting Awards

4.6.1 When a Pension Credit award is incorrect, Citizens Advice Bureaux find that this can involve a need for lengthy phone calls to the relevant pension centre and substantial delay for clients in receiving a correct award.

A disabled widower who receives Attendance Allowance, Housing Benefit and Council Tax Benefit, in addition to Pension Credit consulted a Kent bureau. His pension credit award had not taken account of a private pension of £116 per month. This was pointed out to Liverpool pension centre, who then put in a figure of £355.12 per week as his private pension. They then informed him that he no longer qualified for pension credit and his housing and council tax benefits stopped as a consequence. The bureau is seeking to get the error corrected but was concerned to be told that the client's file has now been sent to Wolverhampton pension centre as part of the reorganisation of the Pension Service to deliver the staffing cuts.

4.6.2 Citizens Advice Bureaux have seen a number of overpayments of Pension Credit caused by errors by the Pension Service. Such overpayments are not recoverable, but many older people find the situation of receiving money that they are not entitled to extremely worrying and are concerned that they will get into trouble if they have spent this money.

A bureau in the South West reports that a woman who had been receiving her State Retirement Pension paid into her bank, started to receive further payments of Pension Credit plus State Retirement Pension. By the time she realised the mistake she had been overpaid by over £1,000. She was very perplexed about what to do when the Pension Service told her that it was "up to her conscience" whether to repay this.

A man in Wales was upset when deductions of £8.10 a week were made from his benefits for an alleged overpayment, and was then bemused to receive a giro for £324 from the Pension Service for an underpayment while the deductions were still being made.

4.7 The Pension Service has done much to make claiming Pension Credit as simple as possible. The free telephone claim-line is convenient for many applicants, and in many places the willingness of the local staff of the Pension Service to make home visits is helpful for people who cannot use the phone. But, inevitably with an elderly customer group, there will continue to be significant numbers of people who need an alternative to the phone when dealing with the Pension Service. We would like to see telephone staff at Ventura and the Pension Service much better trained to spot clients who are having difficulty with a telephone claim or enquiry, so that these people can be offered an alternative service.

4.8 It is also essential that staff who deal with the public are equipped to give accurate advice about all aspects of Pension Credit, including issues such as premiums, and the treatment of savings. The Pension Service attempts to monitor the accuracy of Pension Credit awards, and reports accuracy levels of over 93%. We are concerned that the checking systems may not identify all mistakes as we continue to deal with significant numbers of clients with incorrect Pension Credit awards. We suggest that the Pension Service seeks an independent audit of its arrangements for checking the accuracy of Pension Credit awards.

5. DIRECT PAYMENTS

5.1 The introduction of direct payments of benefits into bank accounts as order books are phased out on a timetable that overlaps with the introduction of Pension Credit has subjected both the Pension Service and its clients to stresses that it would have been better to avoid. Many pensioners are happy to have their state retirement pension and Pension Credit paid into a bank account. There are also a substantial number who like the order-book system because it allows them to collect cash at their local post office. Pensioners who find it difficult to get to the post office often rely on someone else to collect the money for him or her. Those who live alone may have to rely on a paid carer, who may not be the same person from week to week, to collect their money. For example:

A CAB in Yorkshire reported that a client who had contacted her local Pension Service office about continuing to be paid by order book had been told that there was no option but to be paid by direct payment. The client currently had home-helps from Social Services to collect her pension and get her shopping every week, but there was no guarantee that she would get the same person twice, so a second card on a card account would not be suitable for her. When the CAB phoned, the Pension Service agreed she could continue with her book for the present, if she wrote in to request it.

5.2 Many older people find it difficult to understand why the order book system, with which they are familiar, is being abandoned. Those without suitable bank accounts for direct payments may resent having to set up an account at such a late stage in life, and will need to have time taken with them to explain the pros and cons of their banking options, and of the post office card account. They may find having to make these changes worrying and stressful:

A CAB in Sussex reported that a woman in her 80s sought advice about the letters she had received from the Pensions Service about direct payment. She told the CAB that she wanted to continue with her order book, and not have to change. Occasionally the client needed someone else to go to the Post Office to cash her state pension for her.

5.3 The process for opening an account, especially the Post Office card account seems complicated to many people, adding to the stress of the situation.

A CAB in Cumbria reported that an elderly couple, both of whom were disabled, both needed to open a Post Office card account with a second card so that either could withdraw cash on behalf of the other. The clients were worried about being able to remember two PINs, and were concerned that joint Post Office card accounts were not possible. The husband came to the CAB for help phoning the Conversion Centre to set up his card account. The Conversion Centre insisted that he give security details before they could speak to the CAB. However, the client found it difficult to hear them due to deafness, and the stress caused him to have an asthma attack.

5.4 For some older people the problems are more acute. People with sight, dexterity or memory problems will find it difficult to key in a PIN number to get their money at the post office or from a cash machine.

5.5 The DWP has always acknowledged that there needs to be an alternative method of payment for those who genuinely cannot open or cope with any sort of account and for urgent payments of benefits which cannot wait to go through the bank clearing system. They delayed working on the details for some time to concentrate on the implementation of direct payment itself, and, in any case, the payment system would not need to be in place until October 2004 when the last order book will be printed. The DWP also wanted to use the time to consult groups working directly with benefit claimants so that their views could be taken into account in the design of the service.

5.6 The DWP has never intended that the alternative method of payment would be a payment option for all claimants, and so initially omitted any mention of it in their direct payment leaflets. As a result, advisers reported a large number of vulnerable and disabled clients worried about how they would cope with direct payment. Following representations from Citizens Advice and others, DWP has changed the text of the leaflet to encourage those who cannot cope with any kind of account to ring the Conversion Centre.

5.7 Following consultation with consumer and welfare groups, the DWP has recently announced the details of cheque payment. They have concluded that cheques will provide the flexibility needed, particularly for third party encashment. Cheques will be issued to the claimant at the same frequency as they used to receive their order book or giro payments. They have also announced that there will be no formal application process for cheque payment.

5.8 However, a purely cheque-based system will disadvantage those housebound benefit claimants who needed third parties, such as neighbours or home-helps, to collect their benefit for them. There is no guarantee that the cheque would arrive on the same day of the week and the third party might not be available to collect the money if the cheque was late one week. Several consumer groups, including Citizens Advice, have called on the DWP to continue to offer order books, or make advance cheque payments to those people who need their benefit to be collected by third parties. The DWP has rejected these suggestions as costly and have expressed concerns about security.

5.9 It is welcome that the DWP has clarified that all those who have not provided account details by April 2005 will be automatically transferred to cheque payment. However, the DWP have also pointed out that they want to restrict access to the cheque payment system only to those who genuinely need it.

5.10 It remains to be seen how cheque payment works out in practice. There will need to be rapid and straightforward arrangements to enable clients to obtain money urgently if the cheque fails to arrive, for example because of postal delays, or because the cheque has been intercepted and stolen. There will also need to be contingency plans for the eventuality of postal strikes.

6. LOCALLY BASED SERVICES

6.1 Staff of the local pension service have a vital role in promoting the take-up of Pension Credit, through:

— Working with local partner organisations in voluntary and community agencies and local authorities.

— Carrying out face-to-face work to promote an awareness of Pension Credit, and to facilitate take-up.

— Carrying out home visits to take claims from people who cannot claim by telephone.

6.2 Most local service staff appear to have been energised and motivated by the positive focus of their work. They find it fulfilling to help older people to obtain all the benefits and services to which they are entitled. This is a very positive development.

6.3 We have received reports that some local pension service staff are not fully conversant with all the issues on which they are expected to advise. For example, that an older disabled person must have care needs in order to qualify for attendance allowance. We suggest that the Pension Service should review the training that these staff receive.

6.4 Local service was in the vanguard in establishing relationships with local partner organisations such as Citizens Advice Bureaux. As far as we are aware, these staff received no training in what partnership involves, or how to work constructively and sensitively with other agencies with important values and agendas of their own. Consequently they got off to a mixed start as far as their relationships with Citizens Advice Bureaux were concerned. Some initiated a constructive relationship from the start, but others came across as rigid and overbearing—taking the line—"you are now partners of the pension service and this is what you must do". Local relations now appear to be mostly good, and the CAB service is pleased to have signed a Partnership Accord with the Pension Service. This is underpinned by a "Code of practice for Citizens Advice Bureaux and The Pension Service" (October 2004).

6.5 As part of the staff reduction programme in DWP, the local pension service is being reorganised into a smaller number of clusters. There have been rumours that this will involve staff reductions of 10-15% in the local service. In view of the huge job that remains to be done to increase take-up of Pension Credit, especially amongst harder to reach pensioners, we consider that any cutbacks in the local service would be a breach of faith.

6.6 DWP has recently informed the Partners Against Poverty England and Wales group about the way in which it is reviewing local pension service activity. This will include a critical look at surgery sessions. It is disappointing that these plans were not discussed with national partner organisations at an earlier stage. We have been assured that decisions to close particular local surgery sessions will not be taken before there has been consultation with local partners.

7. DWP STAFF CUTS

7.1 Citizens Advice is very concerned that the planned staff cuts at the Pension Service will have an adverse effect on take-up of Pension Credit and on the standard of service provided to pensioners on all their benefits. [89]At the end of June, the then Secretary of State announced that 10 pension centres would be transferred to non-pension work or closed, as part of DWP's programme to cut 30,000 jobs by 2008. He suggested that this reduction could be achieved because the bulk of the work of introducing Pension Credit had been completed.

7.2 This is not, in our view, a correct analysis of the position. At the time of the announcement, 1.2 million pensioner households who are eligible for Pension Credit were not receiving it. This shows that there is still a great deal more for the Pension Service to do in promoting take-up of Pension Credit. Also, we believe that there are significant numbers of incorrect awards that need to be corrected, and delays in the system—for both State Retirement Pension and Pension Credit also need to be addressed. We are concerned that the further reorganisation to which the Pension Service will be subjected is likely to lead to a repeat of the problems when pension centres were first set up—inexperienced and poorly trained staff, confusion about where a particular client's work is being done, and a loss of papers as they are sent around the country. We consider that the Pension Service should consult stakeholders on its reorganisation plans and then publicise those plans when they have been agreed.

7.3 The local pension service has a vital role to play in encouraging take up of Pension Credit and other benefits to which older people are entitled. The service can do this both through face to face work with pensioners at surgeries and at home visits, and through developing local partnerships with local authorities and voluntary agencies such as Citizens Advice Bureaux. It is clear that, as take-up work moves to harder to reach pensioners, targeted local work based on local knowledge and face-to-face activities will become increasingly important.

7.4 In our view it is essential that the capacity of the local pension service to contribute to this work is maintained and enhanced. Any move to reduce the number of staff working in the local service will call into question the government's undertaking that the civil service cuts will not affect front-line services. We consider that DWP needs to give an undertaking not to cut the local pension service.

84 "A Firm Foundation for Retirement", Citizens Advice, March 2003. Back

85 State Pension Reform: Managing the Transition, Pensions Policy Institute, September 2004. Back

86 Reply to Parliamentary Question, 14 June 2004. Back

87 DWP Touchbase Magazine, March 2004. Back

88 Hanging on the Telephone, Citizens Advice, September 2004. Back

89 Citizens Advice Press Release 29 June 2004. Back