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Baroness Turner of Camden: I thank the Minister for that explanation, but we are not talking about fraud in the amendment. We are talking about an overpayment that has arisen as a result of an error, not because of a dishonest claim. We tabled the amendment because an error could occur, and a repayment period of up to five years could be rather a heavy commitment for a pensioner. In view of what the Minister has said, I beg leave to withdraw.
Amendment, by leave, withdrawn.
Clause 9 [Duration of assessed income period]:
Lord Hodgson of Astley Abbotts moved Amendment No. 61:
- Page 6, line 28, leave out "5" and insert "3"
The noble Lord said: My noble friend Lord Higgins said how much the debate would be illuminated by the presence of regulations, so that we could see the practical implications of what we are discussing. I may have missed them but the noble Baroness, Lady Greengross, put down half a dozen helpful Questions for Written Answer, to which I have not yet seen replies. I would be grateful if they could be made available before Report, because they illuminate several of the issues that we have discussed tonight and at the prior sitting of the Committee. The amendment would reduce the period from five years to three. It takes us over ground covered in the context of recent amendments. I do not wish to weary the House with a long further discussion of the issue.
We live in a period of extreme financial volatility. Although deemed income—the concept that is the centrepiece of the Bill—does something to damp down that volatility, it is at its most beneficial to pensioners at a time when interest rates and returns on savings are falling, as they will receive the pension credit on the higher amount rather than the lower. However, as we know, what goes down will eventually come up again. Those circumstances are less advantageous for them.
The Minister talked about the need to break with the weekly report. It is quite a big move to go from a weekly report to a 260-weekly report. I would hope that there might be something in between. I may have misunderstood the exchanges that have gone on in the past 45 minutes. The Minister talked about a win-win
situation for pensioners in that they can always apply for a reassessment during the five-year period, but I am concerned that many of them will not. I am not clear as to how they will be notified or encouraged to make that reassessment at a time of rising capital values on which they could get a higher pension credit. It is an extremely complicated piece of legislation, and we have spent a great deal of time getting our mind around it. I fear that many people will just take the money and say, "Thank goodness". It will be hard for them to work out precisely what they are entitled to, particularly if their savings have, in time, increased in value in which case the deemed value that they will get will be rising as well.Above all, it is the least sophisticated who will be most affected, those who most need our help and protection. Wherever possible, we should keep in touch with reality. The Bill is full of assumptions—the first £6,000 has a nil return, the next amount has 10 per cent and so on—but we should try to keep people who are in receipt of the credit in touch with reality. Above all, we should try to protect the less sophisticated members of our society, who may be disadvantaged.
I am not sure that I have this exactly right, and the Minister may be able to tell me that people will be told clearly when they are being disadvantaged. If they are not, if it is not absolutely clear, a three-year period of assessment would have a better effect in ironing out the volatility of financial markets without taking us back to the weekly assessment, with which, I accept, the Minister wishes to break. I beg to move.
Baroness Noakes: We are not convinced that five years is the right period, for the reasons that my noble friend Lord Hodgson of Astley Abbotts has adduced. He made a powerful case for a shorter period, and I hope that the Minister will consider it. Whether the assessed period is three years or five years, the Government should be wholehearted about it. In speaking to Amendments Nos. 63, 64 and 65, which are grouped with Amendment No. 61, I would like to outline a different approach.
Amendment No. 63 would remove subsections (2) and (3). Subsection (2) allows the Secretary of State to specify a period of shorter than five years or not to specify one at all if the claimant's income is not expected to be typical. A pensioner will be given the prospect of a five-year settlement only to have it whisked away at the whim of the Secretary of State or, in fact, the local official. We cannot see that that is necessary. If the policy is five years, why not just stick with it? There are several other powers to reopen cases, to deem increases or deal with the issue in other ways.
Amendment No. 64 tackles subsection (4), which sets out the life events that lead to an assessed income period coming to an end. That is fine, but why do the Government need a power to override that in prescribed circumstances? Amendment No. 64, tabled on a probing basis, would remove that power. I shall be interested to hear from the Minister why she thinks that the Government need it.
Similarly, Amendment No. 65 would take away the power in subsection (5) to regulate for yet more cases in which an assessment period comes to an end beyond the life events specified in subsection (4). If the Minister thinks that the power is necessary, I should be interested to hear about the cases in which it might be appropriate.
4.30 p.m.
Baroness Hollis of Heigham: I shall do my best. In response to the noble Lord, Lord Hodgson of Astley Abbotts, I would say that, at the end of the day, we believe that five years is the right period. Our research shows that, after the first year or so of retirement, there is relatively little change in income that cannot be predicted or built into the retirement pension situation.
The noble Lord said that there was one thing that was unpredictable—growth in savings, given capital markets and so on. I am sure that he is right, but I must make two points. First, 85 per cent of those on pension credit have savings of less than £6,000 and need not report anything to us. As the noble Lord knows, we could have gone for a much lower deemed return from capital if we had not had that first tranche of exempt moneys. However, we listened to representations from Age Concern, Help the Aged, CABs and other organisations—I hope that I am not attributing views to them improperly—which stated that they would prefer to take out of the system the vast majority of those pensioners who do not make any claims to financial sophistication. That we have done.
The noble Lord pressed me on the question of how those pensioners holding higher capital—perhaps because their capital has grown—would know that that might lead to a higher element entitled to reward. Pensioners will be notified each year at around the time of uprating of their pension credit entitlement, how it has been worked out and how and when they should let us know about any changes. I have not consulted on this, but I would be happy to ensure that, closer to the time that the provisions come into effect in October 2003, examples of the draft letters are placed in the Library so that noble Lords can reassure themselves of their explicit, transparent and simple qualities.
It is my experience that all such communications tend to be drawn up in conjunction with the relevant organisations such as Help the Aged and Age Concern because it is in everyone's interests that the situation is made clear.
Perhaps I may turn to Amendment No. 63, spoken to by the noble Baroness, Lady Noakes, which seeks to remove the power of the Secretary of State to set and assess an income period of under five years or not to set one at all. The point of the subsection is because often, during the first year, there may be irregular earnings or an unpredictable income. The pensioner will then not be in a position to tell us what they expect their income to be. For that reason, we accept their income for one year and then we undertake the five-year assessment once their income has stabilised. That is the reason for
the power and perhaps I do not need to explain it in any further detail. Amendment No. 64 would have the effect of always bringing the assessed income period to an end, with no exceptions, in circumstances where the composition of the household changed. The reason for the power is that it could be that one of the changes does not result in a change of income or the appropriate minimum guarantee—for example, where a pensioner does not receive an occupational pension on attaining the age of 65. In that case, it would be wrong to stop the assessed income period, thereby re-examining the pensioner's financial circumstances and removing them from the advantage of having their income fixed for a five-year period, when they know that basically what we are dealing with is RP rising to the £100 fulcrum figure.We therefore intend to prescribe in regulations that such a situation should not end the assessed income period and that is the purpose of subsection (4) as drafted. I believe that, in all of these circumstances, our changes work to the advantage of the pensioner.
Amendment No. 65 would remove the power to set out in regulations the times at which or the circumstances in which an assessed income period would end. I have already described those, which cover not only changes in household composition but also include situations where pension credit entitlement ends. That could happen, for example, where the pensioner and/or their partner went to live abroad permanently. A further example could be where a partner, aged under 60, of a pensioner becomes entitled to a social security benefit which is sufficient to increase the couple's income above the pension credit upper limit. I cite here contribution-based JSA or IB. Changes could also take place which, while not ending pension credit entitlement, could produce a significant change in the pensioner's overall income stream—for example, if the younger partner of a pensioner starts work. If that were the case, it would be necessary to stop the assessed income period so that the amount of earnings could be regularly checked until a consistent pattern could be established.
At the moment, all parties are reasonably confident that, once stable incomes have been established, the five-year period can kick in. But there are circumstances above and beyond the re-formation of the household, either through a new relationship or if someone dies—one partner could go into hospital on a permanent basis, or move into long-term care—which might affect the moneys to which they would be entitled. We need powers in the regulations to meet those circumstances.
Perhaps I could enlarge on some of the examples requested by the noble Baroness, but I hope that I have now sufficiently addressed her points.
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