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10 Dec 2009 : Column 148WHcontinued
The second issue that I will concentrate on is people in retirement who are carers. More men than women are carers in retirement, and that gives rise to all sorts of issues that we address in the report and which I will talk about in more detail. As the Chairman said in his introduction, we investigated what groups were vulnerable to poverty in old age. They include older pensioners and
women, and often older women: those aged 85 and over who did not build up an entitlement to the full state pension, and who often do not take up the benefits to which they are entitled.
Other vulnerable groups include black and minority ethnic and disabled pensioners-again, a lot of pensioners with disabilities do not take up as many benefits as they ought to-carers, whom I will discuss in a little while, and people in care homes. We often forget about those individuals, but their personal allowance for expenses is minimal. We think somehow that everything is provided for them, but it sometimes is not, so we need to remember them as well.
On simplification, it is important that we consider take-up and how to make the system more accessible and understandable for people, both before retirement age and on retirement. We received a lot of information about reasons for non-take-up of pension credit, which are discussed on page 35 of the report. One reason is lack of knowledge. Many people who retire had no contact with the benefit system while they were of working age and have little understanding of what they can claim.
Some people also believe that they are ineligible for benefits, especially owner-occupiers. I represent a constituency with a high percentage of pensioners who are owner-occupiers. Many people who choose to retire to the seaside buy bungalows by the sea. As the Chairman said, when they first retire, they often have a reasonable income, and they furnish their homes and have a nice lifestyle. But 20 years later, that is not always the case, and they do not always realise that they can claim additional support.
Mr. Nigel Waterson (Eastbourne) (Con): The hon. Lady is absolutely right, not least about people retiring to seaside towns. However, I urge her also to make a point about council tax benefit, to which the same considerations apply in spades. It has the lowest take-up of any of the means-tested benefits. My constituency-I am sure that hers is the same-is full of widows who live on their own and own their homes but are cash-poor, but who do not imagine for a moment that they are entitled to any help with their council tax.
Mrs. Humble: The hon. Gentleman is absolutely right. I will come to the issue of council tax and housing benefit in a moment.
People are reluctant not only to claim but to give out personal information. Many pensioners are proud and do not want to talk to people about their financial circumstances. We need to convince them that they ought to, because it involves their entitlement, something that the state thinks that they deserve to have. There is a difficulty, or a perceived difficulty, in claiming and there is a lack of support, particularly face-to-face support. We identified areas of non-take-up of pension credit and we must consider how we can make improvements.
The Select Committee looked at automaticity, although I dislike that word and am sure that there must be a nicer way of putting it. There are automaticity pilot schemes that are looking at whether people have an automatic entitlement. We looked at a pilot in Motherwell in which people who were in receipt of income support
were contacted five months before they reached the age of 60. They were asked to arrange a telephone call to claim pension credit. Our recommendations called on the Department to undertake a prompt evaluation of that pilot. The Department said that to bring in automatic entitlement, it might be necessary to change legislation. We all know how difficult that can be. However, adopting the approach of the Motherwell pilot would not require a change in legislation, although it would require work by officials in the Department. I hope we will hear more about that so that we can maximise the ways of simplifying the system. If we can identify the people who should be entitled to pension credit, we should do so. We should be proactive to ensure that those who should get the credit do get it.
The Select Committee considered council tax benefit and housing benefit. The Institute for Fiscal Studies told us:
"Pension Credit and Council Tax Benefit are the most significant benefits for the 65-and-over age group".
There is a long list of recommendations in the report on increasing take-up. The clear way forward that we identified was having a single phone line for all three benefits. However, the response from the Department said:
"It will sometimes be more efficient for both the pensioner and the decision-maker to direct the pensioner to the local authority rather than a PDCS phone line."
Why? It seemed to me and the Committee that having a single phone line would be a lot easier for pensioners.
Blackpool council in my constituency works closely with the Department and tries to simplify the interaction between council tax benefit and pension credit. That does not always happen, so we must do more to simplify the process.
Kelvin Hopkins (Luton, North) (Lab): I agree entirely that the process should be simplified. I think that Britain is the only country in Europe in which three major Departments are responsible for distributing benefits, and there are agencies below that. I have suggested many times that we ought to combine all benefits in one Department. That would solve the problems of complexity and difficulty for claimants, and save a lot of Government money.
Mrs. Humble: I refer my hon. Friend to the various Work and Pensions Committee inquiries on housing benefit. The Government are considering that issue and perhaps there is a way forward. The Department has a simplification unit that is aware of the complexity of the benefits system and is trying to simplify it. Every time the Committee looks into the matter-as we did in our report on benefit simplification, which suggested ways forward-we find that it is not easy to have a simplified system, particularly a simplified benefits system, because it tends to lead to a broad-brush approach that does not deal with the detail found in people's lives. We must therefore look at compromises. For example, we could respond to people using less detail and ensure that they get as much as they can, rather than have the situation in which some people do not claim and so do not receive anything.
I am grateful to my hon. Friend for giving way again-she is most generous. She talks about ensuring that everyone gets the benefits to which they
are entitled ands says that it is simple. Would it not be simpler to have one Department with responsibility for benefits and a one-stop shop that can deal with all of the details for every person in one place, by one person and at the same time?
Mrs. Humble: The Committee's reports on simplification, on carers and on tackling pensioner poverty have considered a one-stop shop. The answer is not necessarily to amalgamate everything into one Department, but could be to amalgamate it all into one telephone line or one door that people can walk through so that everything is dealt with together and there is the clearest possible analysis and response to each person's situation by an official.
The second area I want to touch on is carers. "Tackling Pensioner Poverty" refers back to our report on carers because many carers are of retirement age. If ever a system needed simplifying, it is the interaction between the state retirement pension and carer's allowance. I am not the only Member of Parliament to whom pensioners have come, saying that they have applied for carer's allowance and have received letters from the pensions agency saying, "You are entitled to carer's allowance and your reward is £0.00." Do people understand that? Of course not.
Pensioners cannot receive two income-replacement benefits simultaneously. They therefore cannot receive the state retirement pension and carer's allowance at the same time. However, the Government changed the rules a few years ago, so an exception is that people can receive a reduced state pension topped up to the level of the carer's allowance. In general, the two cannot be received together. Despite that, if people want to get the carer's credit, they must first apply for the carer's allowance. That is difficult to explain to some carers.
In the report on carers, the Select Committee came up with the good idea of dividing the carer's allowance in two. The first allowance would be the carer's allowance and the second would be a caring costs allowance that reflected the cost to the carer of the caring work they do. We recommended to Government that the second element, which is not an income-replacement benefit, should be paid whether the carer is above or below retirement age. We returned to that recommendation in the pensioner poverty report. I am pleased to say that the Government did not dismiss the idea out of hand. In response to the report on carers, Ministers said that they would look at carer's allowance as part of an overall review of benefits and benefit simplification. Will they consider it further and give a concrete answer to the problem? If not, pensioners who receive pension credit will continue to not receive carer's credit because they do not want to go through, do not think they have to go through or do not know about the rigmarole of claiming for carer's allowance in order to be told that they cannot have it, but that they can have something else instead.
The Select Committee's reports on carers and pensioner poverty said some very nice things about carers' centres. That relates to the point my hon. Friend the Member for Luton, North (Kelvin Hopkins) made about having a single focus. They are a place where people can go to learn about their whole benefit entitlement.
This comprehensive report covers lots of other things, including the issue of disability living allowance and attendance allowance, the default retirement age, which
the hon. Member for Henley mentioned, age discrimination, financial advice and choosing the correct annuity. Last but not least, it covers the importance of health and well-being-many poor pensioners experience ill health. We need to look at all the issues that affect pensioners. If we can lift pensioners out of poverty, we can help them to lead much fuller and healthier lives. That is why the Committee's report is a good one. I am proud to be a member of the Committee and I fully support our Chairman and the report.
Kelvin Hopkins (Luton, North) (Lab): It is a pleasure to serve under your chairmanship, Mr. Williams. I am glad that we have time to debate these important issues at appropriate length.
I welcome the publication of the report and the speeches in support of it by my hon. Friends the Members for Bradford, North (Mr. Rooney) and for Blackpool, North and Fleetwood (Mrs. Humble). I have to say, however, that we still have not faced up to the fact that the basic state pension and pensioner incomes are simply a disgrace. Compared with the rest of Europe, they are very low indeed, and more than 2 million pensioners still live below the poverty line.
About 10 years ago, a comparison was made of pensions across Europe. At the time, Britain had the absolute rock-bottom basic state pension in the European Union for a single person with no qualifications. The next lowest state pension was in Germany, where people received £150 a week, which was about £60 a week more than in Britain. When I told a group of pensioners, they gasped-they thought that £160 a week was an enormous amount. I said that it was rather less than a Member of Parliament got paid in one day-I had to put it in a context that they would understand. We are still in that situation.
I have to say at this point that I regularly sponsor the annual lobby of Parliament by the National Pensioners Convention and I have publicly supported many of the things that it has said, particularly in the pensioners' manifesto that it recently published.
The reason why we have got away with a low basic state pension is that so many people have benefited from occupational schemes. Indeed, I am in receipt of an occupational pension, even though I am working. Millions of people are in such a scheme. As a result, the low basic state pension has not affected a high proportion of the population, because people receive incomes from elsewhere. Many people also save privately, and private pensions have been another way of cushioning the impact of our disgracefully low basic state pension.
However, occupational schemes are dying; they are being cut off at the knees or are disappearing altogether, and many schemes are preventing new entrants from joining. Occupational schemes will not be there by the time that people such as my children retire, and members of my family who work in the private sector-they are not that well paid, but reasonably well paid-will not have the benefit of an occupational pension, which was something that we could look forward to in the past. Occupational pensions offer guaranteed payments after people retire and even the possibility of retiring early and getting very comfortable payments, but that system is dying and will not be revived.
I suspect that the real reason why companies introduced occupational pensions, which were not transferable, was to hold on to workers. I am older than almost everybody here, and when I grew up we had something called full employment. Every factory had lists outside of the jobs that people could go in and get-that was certainly true in the south-east, where I grew up. As a result, companies wanted to hang on to their workers, and one way in which they did that was by providing occupational pension schemes. It was the same in local government and the public sector, where pay has often been quite low and people have been attracted into jobs by the knowledge that they will get a decent pension at the end of it. Attacking public sector pensions will not be to our advantage in the long term. With great respect for what my right hon. Friend the Chancellor said yesterday, we should look at the problem with private pensions, which are disappearing and being broken down. That is the problem-not the public sector pensions.
On private savings, we have had the Equitable Life scandal. I am a member of the Select Committee on Public Administration, which has supported the ombudsman in calling for those who were affected to receive compensation because regulation failed to protect them. Light-touch or non-existent regulation has led to hundreds of thousands and possibly millions of people losing out. Every year, 30,000 people die who lost out as a result of the Equitable Life scandal.
A high proportion of contributions to private pensions go on advertising and administration. About one third of what would go back to pensioners in a well-regulated state scheme goes to meet just advertising and administration costs, so private schemes are not good value. They are also subject to the vagaries of the stock market and interest rates, so we cannot guarantee that an annuity will be at a particular level, because we do not know what the economic situation will be when the annuity is paid.
The future will not, therefore, be a good private sector or occupational schemes. Increasingly, we will have to rely on a state pension for our fundamental income; indeed, for many working people or those who are unemployed and never have the chance to build up savings, it will be their only income.
The state pension is crucial, but we have seen what has happened to it since Mrs. Thatcher broke the earnings link getting on for 30 years ago. The state pension has dropped from about 26 per cent. to about 16 per cent. as a proportion of full-time earnings-a massive drop in real terms. Had we kept the link to earnings, the figure would now be about 40 per cent. higher than it is, and we could be getting close to the German level of 10 years ago. We still would not be where we should be, but we would be a lot better off. Of course, there would have been more contributions.
Mr. John Baron (Billericay) (Con):
I accept that the state pension is important, as the hon. Gentleman says, but could the increase over the past 10 years in the number of pensioners living in poverty not be at least partly attributable to the fact that the numbers claiming housing benefit and council tax benefit have declined? If we could improve the take-up of the benefits that are
due, that could help to deal with pensioner poverty and to improve the numbers that the hon. Gentleman mentioned.
Kelvin Hopkins: Indeed. I should have said that the Government have taken some steps to improve pensioners' lot over the past 12 years, which I welcome. However, those steps have been marginal and, as the hon. Gentleman says, the numbers living in poverty have increased. With a high level of means-testing, however, there will always be these problems. The poorest and least able pensioners-those from ethnic minorities with poor language skills who feel nervous about claiming and who are not used to the system-will lose out. The report refers in particular to Bangladeshi and Pakistani pensioners, who are the poorest of the lot. I have a high proportion of Pakistani and Bangladeshi constituents, and they live in poverty. At this stage, most of them are young, but as time goes on they will become pensioners. Means-testing is part of the problem. The Government benefit to the tune of £5 billion a year because people do not claim benefits. Constantly urging people to claim benefits and giving help through citizens advice bureaux and advisers will not overcome the basic problem of means-testing. I would like us to move away from means-testing for pensions altogether and towards a much higher basic state pension. We should use the tax system, not means-testing, as a redistributive mechanism.
Mrs. Humble: I refer my hon. Friend and the hon. Member for Billericay (Mr. Baron) to page 11 of the report, which points out that the number of pensioners living below 60 per cent. of contemporary median income-the usual relative poverty line-has gone down from 29 per cent. in 1998-99 to 18 per cent. in 2007-08. Each of the three indicators that are used to describe poverty shows that the number of pensioners living in poverty has gone down.
Kelvin Hopkins: I thank my hon. Friend for that correction. I may have to look at the statistics more carefully, but the fact is that we still have more than 2 million living below the poverty line, and of course the number of pensioners is increasing. As we live longer, a much higher proportion of people will be of pensionable age. If we do not start to put the system right, and put more into it now, the level of poverty will inevitably increase. We need to do something serious about contributions.
Mr. Baron: I accept what the hon. Member for Blackpool, North and Fleetwood (Mrs. Humble) says, but the figures are open to dispute. Help the Aged, for example, would question those statistics, according to the evidence that I have. We must not just bandy figures around willy-nilly. The bottom line is, as the hon. Member for Luton, North (Mr. Hopkins) says, that the issue remains a key one. We can debate whether there have been slight rises or falls in number, but the simple fact remains: too many pensioners in this country live in poverty, and we must do something to put that right.
Kelvin Hopkins: As the hon. Gentleman says, we could debate the figures and argue about them, and no doubt the National Pensioners Convention has its own figures, although I do not have those to hand.
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