Westminster Hall
Tuesday 23 February 2010
[Mr. Roger Gale in the Chair]
Pensioner Poverty
Motion made, and Question proposed, That the sitting be now adjourned.-(Angela Eagle.)
9.30 am
Jo Swinson (East Dunbartonshire) (LD): I am pleased to have secured this debate on pensioner poverty, although it is depressing that such a debate should be necessary. It is surely a scandal that, in one of the world's most developed and prosperous nations, one in five elderly people still live below the breadline. That is a total of more than 2 million individuals.
I wish to discuss some of the causes of pensioner poverty and say what more can be done to help one of the most vulnerable and deserving groups. Today, 1.3 million pensioners rely on the state pension as their sole source of income, but at £97 a week it clearly is not enough to achieve a standard of living that most people would find acceptable. Our state pension is among the lowest in the developed world. Among the 27 OECD countries, only Japan, Ireland and Mexico have a lower state pension measured as a proportion of the national average wage.
Had the link with earnings not been broken in the 1980s, the basic pension would now be £40 a week higher. It is only fair that pensioners should share equally in the growing prosperity of the society that they helped to build. The Government recognise that pensions must be re-linked to earnings but they are not committed to doing so until 2016. Even then, we will be left with a state pension system that Ros Altmann, the pensions expert and former adviser to Tony Blair, described as one of the lowest and most complicated in the developed world.
Women are hugely over-represented among the poorest pensioners. Not only are they far less likely to have savings, but thousands do not receive the full basic state pension. Even after the lowering of the threshold for national insurance contributions later this year, a quarter of women will still not qualify for a full basic state pension, mostly because of gaps in their NI contributions as a result of bringing up their children. To make matters worse, with life expectancy for women exceeding men by more than five years, increasing numbers of women are left living alone. I hope that the Minister agrees that we should be working towards a fairer system-one in which individuals who have lived in this country for their entire lives should be guaranteed at least the full basic state pension.
I draw the Minister's attention to the outrageous sums that are left unclaimed by some of the UK's most vulnerable pensioners. One of the main reasons for the unacceptable level of pensioner poverty is the under-claiming of pension credit and housing and council tax benefits; as much as £5 billion is unclaimed every year. That is £13.9 million every day.
Lorely Burt (Solihull) (LD): I am grateful to my hon. Friend for giving way so early in her speech. Is it not the case that much of the problem is caused by a sense of pride? Many pensioners do not want to make a claim for means-tested benefits. They see it as some sort of personal failure. Pensioners should automatically receive a citizen's pension that takes account of all the benefits to which they should be entitled, including pension credit, without having to go cap in hand to the state.
Jo Swinson: My hon. Friend makes a valid point about one reason why many pensioners do not apply for or claim pension credit and therefore do not receive it. That is why I would like to see the basic state pension ultimately raised to such a level that the current system was not needed. For as long as the pension credit system exists, the Government should at least ensure that pensioners receive all the money to which they are entitled. However, Government figures show that that is not happening; the number of eligible pensioners not receiving their full benefits is rising.
Mr. Nigel Waterson (Eastbourne) (Con): I am following the hon. Lady's remarks closely. May I ask her to clarify precisely her party's policy on the citizen's pension? What level would it be fixed at, and how much would it cost over and above what is spent at the moment?
Jo Swinson: The hon. Gentleman, I am sure, takes a great interest in the policies of the Liberal Democrats. He will doubtless be interested to hear what my hon. Friend the Member for Northavon (Steve Webb) has to say later in the debate.
It was Liberal Democrat policy at previous elections to have a full citizen's pension at the level of the minimum income guarantee. That is still an aspiration, and we will work towards it, but everybody knows that in these straitened times that may not be immediately achievable. It is important that we should continue to have that aim, but the Government have not yet accepted the principle that a citizen's pension is the way forward. Frankly, that is something that the Minister ought to be able to do today.
The latest report from the Department for Work and Pensions on the take-up of income related benefits shows that 35 per cent. of people aged over 80 do not claim pension credit despite being eligible. Indeed, the Government's latest report shows that the amount of unclaimed pension credit rose by 3 per cent. between 2006-07 and 2007-08. The fact that such enormous sums are not being claimed each year indicates that the system is too convoluted for many people to understand.
Bob Spink (Castle Point) (Ind): The hon. Lady is right to bring such an important matter to the House before the election. It is something that people will be considering most carefully, and I congratulate her on bringing it to the attention of the House.
Will the hon. Lady put some meat on the bones? One in three pensioners fail to claim pension credit. They lose an average of £1,477 each year. It is often the poorest people who are disadvantaged, which is why the matter is so important.
Jo Swinson: I thank the hon. Gentleman for that intervention. He is quite right. Of course, by not claiming pension credit, those people become ineligible for other benefits, thus compounding the problem.
Age Concern Scotland describes as complex the system of calculations that a pensioner has to go through in order to work out their pension credit entitlement. The form to claim pension credit is 18 pages long. Once applicants have secured the guaranteed part of the pension credit, they become eligible for full help with housing and council tax-but to get it, they have to complete another form that is 40 pages long and takes three weeks to process. The Government's proposals to pilot the automatic payment of pension credit, set out in the Welfare Reform Act 2009, could begin to address the problem. Those proposals are important, and I hope that the Minister will say when secondary legislation will be introduced to allow the pilots to go ahead.
According to Age Concern and Help the Aged in Scotland, the DWP and Her Majesty's Revenue and Customs already hold the information necessary for such a scheme to be implemented nationally. We should aim to provide those elderly people in most need with simple and accessible methods of claiming. The evidence that I have outlined shows that the Government are failing some of the most vulnerable and disadvantaged pensioners. The Government know that the state pension is too low, and they rely on benefits to provide pensioners with what the Government consider to be a minimum living income. It would be fairer to move away from this flawed system of benefits, and increase the pension to a decent level that would at least meet that minimum level of income.
John Penrose (Weston-super-Mare) (Con): The hon. Lady puts her case most clearly. Does she agree that it is not just a question of complexity, although that is a real problem, but the fact that the incredibly long and complicated forms that she eloquently described are perceived by many pensioners, including those in my constituency, as being demeaning? They feel that they are unnecessarily and unfairly being obliged to parade their poverty, particularly given that they have paid contributions throughout their working lives. They believe that they should not be put through that. They would far rather go for a restoration of the earnings link at an earlier date. Does the hon. Lady agree that one of the worst outcomes of the current financial crisis is that the Government's projected date of 2013 is drifting backwards in time, because the Government's finances are so tight?
Jo Swinson: The hon. Gentleman makes his point well. It is similar to that raised by my hon. Friend the Member for Solihull (Lorely Burt). Many elderly people feel demeaned by having to go cap in hand to the Government. Having a universal system would be much better. I agree that the earnings link should be restored as a matter of priority.
Malcolm Bruce (Gordon) (LD):
My hon. Friend made an important point in saying that if people do not claim some benefits they will not qualify for others. We are experiencing the coldest winter for many years, and many pensioners are cutting their heating. In areas such as my constituency, which are particularly cold, many do not get the cold weather payments because they have not applied for benefits to which they would otherwise
automatically be entitled. Is it not time that we gave the benefits to those who need them without making them claim?
Jo Swinson: My right hon. Friend anticipates me and moves me seamlessly on to the issue of fuel poverty. The plight of the poorest pensioners has been worsened recently by rising fuel prices. Pensioners are more likely to be fuel poor than any other group, and, tragically, are also the most vulnerable to the effects of the cold.
Recent research commissioned by Age Concern and Help the Aged in Scotland showed that in the winter of 2009 a third of people aged over 55 turned down their heating because of fears about their finances. Given that we have just experienced one of the coldest winters for many years, surely such a statistic should give us great cause for concern. Indeed, turning down heating can have dire consequences for the health and well-being of the elderly poor. It is estimated that fuel poverty contributed to the deaths of 36,000 people last year.
Last year, 2.7 million pensioner households-one in three-were living in fuel poverty. This year, with energy prices higher than ever and the prolonged cold weather forcing people to heat their homes for longer, the figures are bound to be worse. Meanwhile the Government's measures to tackle fuel poverty are condemned as "not fit for purpose" by the Institute for Public Policy Research in its report, "The Long Cold Winter: Beating Fuel Poverty". As has been mentioned, eligibility for cold weather payments depends on having applied for pension credit, so many payments go unclaimed. In my constituency of East Dunbartonshire, nearly 1,500 eligible pensioners have missed out on cold weather payments this winter.
Energy companies have, on the whole, not reduced their tariffs in line with falling wholesale energy prices, allowing them to rake in record profits. The cheapest energy tariffs are often only available online, to be paid by direct debit, which many older people are unable or unwilling to access. Many older people do not have a bank account, but use Post Office card accounts. Extending such accounts to allow direct debit payments would not only support our post offices but enable pensioners to reduce their bills. Although such a move would be a welcome first step, surely the cheapest energy should be available to pensioners with the lowest incomes in the form of social tariffs.
The most sustainable and cost-effective way to tackle fuel poverty is to invest in energy efficiency measures and better insulation and heating systems in people's homes, because that will cut fuel bills for years to come. The Warm Front programme in England and the energy assistance package, as it is now called in Scotland, could be very welcome interventions. However, many poor pensioners are still not reached by such schemes, and there is scope for both to be radically expanded. I am sure that other hon. Members also feel incredibly frustrated by such schemes. In Scotland, to be eligible for replacement central heating, a person's existing central heating must be broken beyond repair. At that point-a person will not be eligible if they apply before it is broken beyond repair-a company will agree to send someone out within a couple of weeks to carry out an assessment. Then it will decide whether the person is eligible, and then it can be weeks or months before new central heating is installed. If someone's central heating breaks beyond repair in November, then this scheme is not much good.
Many pensioners on low incomes rely on the interest they earn from savings to keep them out of poverty, but with interest rates currently near zero such people have seen their incomes decrease drastically over the past few years. Shockingly, the Government currently take no account of lower interest rates when calculating how much council tax benefit or pension credit a person receives. Income from savings is assumed to be 0.2 per cent. a week, which currently bears no relation to reality and means that thousands of pensioners are having their incomes overestimated.
It is hard to express the frustration that is felt by savers, so I want to share a few comments from some of my constituents. Mr. C said:
"I have just retired and planned to use the interest from my savings to live on, however with the latest cut in Bank Base Rate, I will be struggling."
"So many pensioners and others rely on small amounts of interest on saving to make the difference between poverty and a reasonable existence... The Government seems to be helping those groups who have failed in business and many people who have made no effort to live a responsible life, and is ignoring those who have made every effort possible."
That sums up the feelings of many savers in this country.
Furthermore, the compulsory annuitisation of pension funds at the age of 75 is forcing struggling pensioners to accept far lower rates of annuity than they might receive if they could wait for the financial situation to improve. One 74-year-old constituent told me that having saved all his life, he felt that he was now being penalised by having to purchase an annuity at the worst possible time, and that his personal and private savings plan had been "shot to pieces" as a result.
Retirees buying an annuity today are getting pension incomes of almost half that of their counterparts back in 1994. Alternatively secured pensions, the only alternative to annuitisation, are highly taxed and can be withdrawn only at 70 per cent. of an annuity, making them not a financially viable option for the poorest.
The Economic Secretary to the Treasury acknowledged in a letter to me that ASPs are "not suitable for everyone" and advised that people seek independent financial advice before taking one, which is a luxury that many cannot afford. I can see no good reason to continue to require people to annuitise their pension savings by the age of 75.
A culture of inequity in the treatment of our aged, together with discriminatory Government policy, have led to a troubled end to some elderly people's working lives. Research by the Third Age Employment Network before the recession showed that only 31 per cent. of over 50s made redundant succeed in getting a new job within three months. Only 32 per cent. of those manage to keep their former level of pay, and on average they had to take a pay cut of more than a quarter. In the past year, long-term unemployment among men over 50 has doubled. Such an exit from the job market, coupled with the default retirement age, leaves some pensioners who have worked all their lives in a desperate situation. They are being forced to retire earlier than they had planned, which many cannot afford.
Government policy that disadvantages our elderly community in the workplace plays a major role in exacerbating pensioner poverty. I refer here to the default retirement age of 65 for men and 60 for women.
Jeremy Corbyn (Islington, North) (Lab): Does the hon. Lady acknowledge that one of the major problems is that employers obsessively employ younger workers and do not recognise the value of older workers, particularly those with previous experience? There is anti-discrimination legislation and she should at least acknowledge that.
Jo Swinson: I welcome the hon. Gentleman's intervention. Part of the problem with the current legislation is that it does not apply to older workers. I agree that often older workers in the workplace are undervalued. A more flexible approach to retirement could benefit older workers and employers. By retaining older people in work, perhaps on a part-time basis and on a sliding scale towards retirement so that they are not facing a cliff edge, employers will ensure that skills and experience are passed on to younger workers.
In its fifth report, the Work and Pensions Committee was pretty damning of the default retirement age, describing it as "discriminatory and unnecessary" and stated that the Committee looked forward to its being abolished. It is still legal to force a worker aged 65 to retire against his or her will purely on the basis of age. It is similarly legal to refuse employment on the same grounds. It is outrageous that only a third of people retire voluntarily, while the rest face an often depressing end to a life of valuable contributions to this country. The anger felt over such a policy is reflected in the fact that almost nine out of 10 people over 50 think that the default retirement age is unfair.
I ask the Minister to consider changing the draconian and wholly unfair law on older people's right to work. The Equality Bill could be a good vehicle to do that, but given the current discussions, it looks like the Government do not plan to take that step.
The Minister for Pensions and the Ageing Society (Angela Eagle): Will the hon. Lady at least acknowledge that we brought forward a review of the default retirement age this year? The call for evidence on that has now closed and we are considering the evidence even now. In the interests of fairness, she should at least have acknowledged that. Clearly, there is a great deal of support in general for the idea that we should end the cliff edge of retirement, and we are even, as she speaks, examining the evidence that has come in from both employers and employees on this important matter.
Jo Swinson: The Minister clearly puts her points on the record, but they are not much consolation to those individuals in the job market who are currently facing discrimination and being told to retire before they wish to do so. We hope that, as a result of the review, people turning 65 will not be discriminated against in such a way. It is worth noting that when the Government were taken to court last October by Age Concern and Help the Aged over the compatibility of this policy with human rights legislation, they were allowed to uphold the law only because of their promises to review the system. In his judgment, Mr. Justice Blake said:
"I cannot presently see how 65 could remain as a default retirement age after the review."
I very much hope that after the review the default retirement age will change.
I know that there are many right hon. and hon. Members here who wish to speak, so I would like to conclude by saying that if we take these issues together-the pitiful state pension rights, the fact that thousands of
elderly people are missing out on money that is rightfully theirs, the concerns about heating homes in the winter and the fact that savers are being hit by plummeting interest rates-it is no wonder that many pensioners feel abandoned by Government. So I will finish with the words of one of my constituents, Mrs. M, who wrote to me to say:
"Elderly people do not seem to have a voice."
I hope that this debate today goes at least some way to providing that voice.
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