Select Committee on Work and Pensions Fourth Report


306. Organisations representing or working with today's pensioners emphasised the importance of keeping their needs high on the policy agenda.[398] The National Pensioners' Convention argued that for any meaningful consensus to be achieved, the needs of current pensioners must not be ignored."[399] Help the Aged said that "Pensioners today see little in the [Pensions Commission's] report to cheer them, yet their situation demands to be addressed" [400] and added, once the White Paper was published, that "for older and retired people today, the White Paper holds precious little", a point also made by the Croydon retired people's campaign, which described the proposals as "failing today's 11 million retired people." [401]

307. The Secretary of State commented in the House that the fact that the Guarantee element of the Pension Credit would be uprated in line with earnings beyond 2008 would mean "up to 500,000 pensioners will not end up falling into poverty."[402] The Pension Reform Group commented that the success of Pension Credit meant:[403]

    "that for the first time politicians and policy makers have the opportunity to deliver a long-term and sustainable reform of pensions without simultaneously being concerned with a reform which also helps today's poorest pensioners."

308. While the focus of the Pensions Commission was on future pensions, it did comment that it would be: [404]

    "desirable to address some of the gaps and inequities which exist among today's pensioners as a result of the operation of the contributory system. The best way to do this in a targeted fashion and within tight medium-term expenditure constraints would be to make the BSP universal in payment above a specific age, such as 75."

309. This view received support from witnesses to the inquiry.[405] Christina Barnes of the Equal Opportunities Commission argued that: [406]

    "the most important group that will receive it are those women who currently do not get a full Basic State Pension and are not claiming their Pension Credit. It also sends out the important message that all women should get a full Basic State Pension in their own right rather than being dependent upon their husbands for their income in retirement."

310. However, the Government has decided not to implement these proposals, as we have already noted.[407]

311. Our predecessor Committee, in its report on the Future of UK Pensions, concluded that "there is nothing inherently wrong with a means-tested approach which focuses available resources on the poorest pensioners if the issue of 'take-up' is adequately addressed."[408] Evidence to the inquiry suggests that take-up continues to be a problem. Age Concern said that "despite major take-up initiatives, some 30% of older people entitled to Pension Credit are not receiving the benefit." Teresa Perchard of Citizens Advice said:[409]

    "we are still coming across today pensioners who are missing out on claiming Pension Credit. Their state pension income is a long way from the Pension Credit level and it can be quite a challenge to get people to claim means-tested benefits, they feel a huge loss of dignity and that they are begging for charity by doing so, plus there are quite a lot of administrative obstacles, even with the efforts that have been made to simplify the claiming process for Pension Credit."

312. The Department did not meet its SR2002 target to be paying Pension Credit to at least 3 million pensioner households by 2006. The Secretary of State said when giving evidence to us on the 2006 Department for Work and Pensions Annual Report that:[410]

    "I think the Pensions Minister would want to look very carefully at how we should take forward future work on Pensions Credit. It is very important, it is one of our PSA targets, we are doing all we can to try and reach it, but it is pretty clear now that we will probably fall short of the PSA target."

313. Evidence to the current inquiry suggested that achieving high levels of take-up looks set to become more challenging in the future. The White Paper includes an assumption that take-up of Pension Credit will remain "at the level in 2007/08, which is projected to be around 80%."[411] However, take-up is much higher among those entitled to Guarantee Credit only (between 70% and 81%) than among those entitled to Savings Credit only (between 43% and 50%) (see Table 3). The proportion of the pensioner population entitled to Guarantee Credit only is expected to fall (from 16% in 2010 to 6% in 2050), while the proportion entitled to Savings Credit only, stays at around 14% (see Table 4).

Table 3: Take-up of Pension Credit for 2004/05

Lower Bound
Upper Bound
Total Pension Credit
Guarantee Credit only
Guarantee Credit +Savings Credit
Savings Credit only

Source: National Statistics Estimates of Take-Up in 2004/05 (table supplied by Department for Work and Pensions)

Table 4: Projected proportion of pensioner households eligible for Pension Credit for selected years under the White Paper proposals.

Guarantee only
Guarantee & Savings Credit
Savings Credit only
Total Pension Credit

Source: Department for Work and Pensions

Projections of the proportion of pensioner households eligible for Pension Credit are sensitive to modelling assumptions and to projected changes in the distribution of pensioner incomes.

The estimates of proportions shown here are the mid-points of projections taken from two separate micro-simulation models. Modelling of the reform proposals does not include any increase in private saving from the introduction of personal accounts, which would further reduce the numbers eligible for Pension Credit.

Estimates are calibrated to the mid-points of the 2004/5 National Statistics range estimates of non-eligibility to Pension Credit, which adjust 2004/5 Family Resources Survey data to take account of possible biases in reporting. Although the estimates here are not presented as ranges, they are subject to a margin of uncertainty.

314. DWP acknowledges that it is "more challenging to reach those entitled to smaller amounts or to the Savings Credit only, who may be less familiar with the entitlement available to them." It points out that analysis derived from the Family Resources Survey indicates that "31% of those customers who fail to take up Savings Credit only would be entitled to less than £5 a week if they did so."

315. The Committee notes that recent attempts to increase Pension Credit take-up have had limited success in terms of making progress against the PSA target. The Committee concludes that achieving and maintaining Pension Credit take-up levels of 80% in the future looks challenging, and asks the Government to set out its analysis of how take-up programmes and procedures for claiming all means-tested benefits to which pensioners may be entitled could be made more effective. In this context the Committee believes that the Government should not completely ignore the Pension Commission's recommendation of considering a residency test for older pensioners, and recommends that it remain an option when considering simplification of the system in the longer term.

398   Ev 316, para 2.2; Ev 163 Back

399   Ev 142 Back

400   Ev 165, para 5.5 and 5.6 Back

401   Ev 190 Back

402   HC Deb, 27 June 2006, col 140 Back

403   Ev 142, para 4 Back

404   Pensions Commission, Second Report, November 2005, p 10 Back

405   Ev 123; Ev 253; Ev 295 Back

406   Q 119 Back

407   White Paper, p 127, Box 3c Back

408   Work and Pensions Committee, Third Report of Session 2002-03, The Future of UK Pensions, HC 92, para 63 Back

409   Q 504 Back

410   Uncorrected transcript of oral evidence taken before the Work and Pensions Committee on 3 July 2006, HC (2005-06) 1389, Q 34 Back

411   White Paper, Volume 2, para A.17 Back

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