House of Commons - Public Accounts

Select Committee on Public Accounts Twenty-Sixth Report

1 Benefit take-up rates and the reasons for unclaimed entitlement

1. Over the last decade the percentage of pensioners living in households below 60% of median income (the level used by bodies such as the Social Exclusion Unit and the OECD to indicate relative poverty) has fallen from 27% to 17%. There are however 1.8 million pensioners still living below this level of income and this number would be significantly lower if more pensioners claimed the main benefits to which they are entitled. In 2003, our predecessor Committee reported on the government's efforts to tackle pensioner poverty by encouraging take-up of entitlements. Since then, the position continues to be mixed.[5] Take-up of the basic State Pension is nearly 100%, but for Council Tax Benefit the figure is less than 60% and has decreased in recent years. Pension Credit has been introduced to raise pensioners' minimum income and is claimed by 61 to 69% of those eligible, leaving between £1.5 billion and £2 billion of unclaimed benefit (21 to 28% of the total entitlement).[6]

2. Pension Credit is now paid to around 2.7 million households, around a million more than its predecessor, the Minimum Income Guarantee. The Department was committed to a Public Service Agreement target to pay Pension Credit to 3 million households by the end of February 2006, rising to 3.2 million households by 2008. After an initial rapid rise, growth in the number of claimants has reached a plateau at around 2.7 million, although there are small monthly increases (Figure 1 below). The Department believes that it will eventually reach the 3.2 million target, and it has already met its target of paying the Guarantee Credit—the element of Pension Credit aimed at pensioners with the lowest incomes—to 2.1 million households by 2006.[7] In retrospect, the Department believes that the 2006 PSA target was unrealistic, although it was based on the best information available at the time it was set.[8]

Figure 1: Progress towards the Pension Credit target

Source: Department for Work and Pensions, Work and Pensions Longitudinal Study

Note: August 2006 figure is an early estimate.

3. The PSA target focused the Department's attention on raising take-up of Pension Credit. The target did not, however, cover other benefits, receipt of which is as important for reducing poverty.[9] The Department is currently considering a more general target relating to pensioner poverty and benefits for pensioners in the context of the 2007 Comprehensive Spending Review. It published baseline indicators of the independence and well-being of older people, including material well-being, in October 2006.[10]

4. The Pension Service believes there is a significant group of people who are entitled to Pension Credit but are not taking it up. The Pension Service's Local Service staff see about one million such pensioners a year. Where they do not wish to pursue a claim, the Local Service records the reason. Around one quarter of non-claimants said they had sufficient to live on, while 6% said it was not worth applying (Figure 2 ).[11]

2 Reasons for not applying for Pension Credit given by those believed to be entitled

Have sufficient to live on 26%

Confidential; do not wish to give reason 16%

Not worth applying 6%

Claim might impact on entitlement to other benefits 6%

Other reasons 46%

Source: Evidence Qq 78-79

5. The Department concludes that part of the reason for low take-up is that pensioners who are better off than before do not consider themselves poor, even though benefit rates have risen so that they are entitled to Pension Credit, Housing Benefit or Council Tax Benefit. In some cases, those not claiming are entitled to smaller amounts. While for example an estimated 30 to 40% of those eligible for Pension Credit fail to claim it, the amount they do not claim accounts for some 20 to 30% of the total entitlement. Take-up of both Council Tax Benefit (£13.10 a week) and the Savings Credit element of Pension Credit is low, and the average entitlement is lower than for benefits with higher take-up.[12]

6. Misunderstanding the way benefits work is also a factor affecting a minority of pensioners. The Department acknowledges that there is a relationship between the complexity of the system and non-take-up.[13] It considers that the 6% who believed claiming one benefit would adversely affect entitlement to others were almost certainly mistaken. In fact, claiming a small amount of one benefit may establish entitlement to others. When The Pension Service discusses entitlements with people, they explain the links between benefits. Their advice covers Housing Benefit, Council Tax Benefit, and Attendance Allowance (financial help for people over 65 who become disabled) if appropriate, as well as local authority services. Where people decline to apply, however, the Agency has to respect their decision.[14]

7. Take-up of the Guarantee Credit element of Pension Credit—which is available to the poorest pensioners—is high, suggesting that the Department has been most successful in reaching those in greatest need. However, there may be pensioners who are missing out on benefits but who do not have dealings with any government agencies and so are not in the system at all. It is inherently difficult to quantify how many such people there are, as no information is held about them.[15]

8. Housing Benefit and Council Tax Benefit take-up rates have declined in recent years despite rises in Council Tax (Figures 3 and 4 below).[16] This decline may in part be due to increases in the income thresholds for entitlement, which has meant that significant numbers of new customers have become entitled to these benefits. Many are entitled to relatively small amounts, or will be those who have not had any previous contact with the benefits system, so they may be unaware of their eligibility. The Department accepts that it does not however have a full picture on the reasons for declining take-up of these benefits. As estimates are at a national level, it is not possible to identify any relationship between take-up of these benefits and the performance of the local authorities who administer them. The Department has also made a number of efforts to increase take-up of Housing Benefit and Council Tax Benefit (paragraphs 13 and 14 below) which have not yet been reflected in the take-up rates.[17]

9. Although take-up of Attendance Allowance has been rising, it is difficult to determine the desired level of take-up of disability-related benefits because of the complexity of assessing eligibility for the benefits. The Department has commissioned the Policy Studies Institute to research whether it is possible to obtain sufficient and appropriate data to make an estimate of take-up. This research will be completed by spring 2007.[18]

10. There are gaps in the Department's knowledge of benefit take-up, such as those referred to in paragraphs 7 to 9 above. The Department is not planning to commission further external research but it is trying to exploit the information collected by the Local Service to make more effective contacts with pensioners who may be missing out. The Department is also carrying out specific research into barriers to take-up for black and minority ethnic groups.[19]

3. Housing Benefit: households receiving benefit, and take-up rates, have both declined

Note: Basis for recipient figures for 2004-05 are inconsistent compared with recipient figures for 2003-04 and earlier, which are based on an average through the year.

4. Council Tax Benefit: households receiving benefit, and take-up rates, have both declined

Source: All figures for 1997-98 to 2003-04 are from Department for Work and Pensions (2006) Income Related Benefits estimates of take-up. The 2004-05 figure for the number of pensioners in receipt of Housing Benefit comes from the Department for Work and Pensions Departmental Report 2005.
Note: Basis for recipient figures for 2004-05 are inconsistent compared with recipient figures for 2003-04 and earlier, which are based on an average through the year.

5 C&AG's Report, paras 1.2, 1.7; Committee of Public Accounts, Twelfth Report of Session 2002-03, Tackling pensioner poverty, HC 565 Back

6 Qq 5-6, 82-83, 91-93, Department for Work and Pensions, Income Related Benefits Estimates of Take-Up in 2004-05, 2006 Back

7 C&AG's Report, paras 2.3, 2.6; Qq 2-5 Back

8 Qq 25-28, 35 Back

9 C&AG's Report, paras 1.7, 2.8; Q 106 Back

10 Q 12, Department for Work and Pensions, Independence and well-being of older people: baseline report, (2006) Back



© Parliamentary copyright 2007	Prepared 17 May 2007