State Pension Credit Pilot Scheme Regulations 2010
(Limited Text - Ministerial Extracts only)
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Lord Freud
That the draft regulations laid before the House on 10 March be approved.
Relevant Documents: 11th Report from the Joint Committee on Statutory Instruments, Session 2009-10; 16th Report from the Merits Committee, Session 2009-10.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I confirm that in my view the statutory instrument is compatible with the European Convention on Human Rights.
Britain used to have a pensions system to be proud of but, due to years of neglect and inaction, we are left with fewer people saving into a pension every year, and the value of the state pension has been eroded, leaving millions of people in poverty. We are taking action to address that and will deliver on our responsibility to reinvigorate the pension landscape. But too many of today’s pensioners are already paying the price exacted by allowing the value of the basic state pension to be eroded over time.
We will halt that decline by ensuring that the basic state pension rises in line with whichever is the greatest of earnings, prices or 2.5 per cent. But for those who are already paying the price—those who have been let down by the pensions system—it is absolutely critical that they get the help that is available from pension credit.
Pension credit means that no pensioner needs to live on less than £132.60 a week—or £202.40 for couples. Those with severe disabilities, caring responsibilities and/or qualifying housing costs may be entitled to more. But, like other social security benefits, pension credit has to be claimed, and we know that significant numbers of pensioners are not getting the help that they are entitled to.
Latest figures show that some 2.7 million pensioner households, which equates to 3.3 million individuals, are in receipt of pension credit. However, it is estimated that more than 1 million pensioners could be entitled to the benefit who are not claiming it. Research shows that this is due to a range of factors. Predominantly, these include pensioners incorrectly thinking that they are not entitled to any help. Others are reluctant to go through what they see as a demeaning means test whereby they are required to open up their bank books to the state to verify the details of their personal finances. This is in many ways unsurprising. Due to what my honourable friend the Minister for Pensions has called “the curse of incrementalism”, the system of support for older people in this country has under successive Governments become one of Byzantine complexity. Although pension credit can be claimed with one simple telephone call, it cannot surprise us that many older people are bewildered by the system and that many still do not claim what is rightly theirs.
It is quite clear that we have to explore new approaches, but we have also to be sure that taxpayers’ money is properly targeted. For some time, lobby groups such as Age UK have argued that we have all the information that we need to do away with the need for pensioners to make claims at all, and to make automatic payments.
Data that we already hold about people’s financial circumstances have been used to help target take-up activity. However, this information is not specifically collected to decide entitlement to income-related benefits. The indications are that the department is not yet in a position to estimate entitlement with sufficient accuracy to offer a fully automated pension credit payment system now. Indeed, I think it has been generally accepted that the study that we are now planning to conduct is not intended to see whether a system of automatic payments can be rolled out in the near future. The previous Minister of State for Pensions acknowledged this when she said, in reply to a Question, that the previous Government had,
“no current plans to introduce wholesale automatic payments of pension credit”.—[Official Report, Commons, 21/7/09; col. 1316W.]
I am not interested in what we cannot do, but rather in what we may be able to do by using more effectively the information that is already available to us. We need to start from somewhere, and this study will help us to understand what might be possible in the short to medium term. It will help us to explore what opportunities there are to use data more innovatively to drive take-up in the longer term, while ensuring that, in this difficult economic climate, taxpayers’ money continues to be properly targeted on those in the greatest need.
We therefore propose to take forward a modest research study later this year in which awards of benefit will be made for a limited period of 12 weeks to a random sample of some 2,000 pensioners resident in Great Britain based on the information that we already hold and without the need for a claim. The study is being designed with a view to meeting the following objectives: to provide information about how a system that makes more use of personal information that the Government already hold to pay people pension credit might be received by potential recipients; to evaluate ways of using the data available to us to improve take-up under the present pension credit regime; and to deliver evidence about how, in the long term, a reshaping of the benefit or acquisition of better data might enable us to radically streamline the process for awarding pension credit. On the study's conclusion, there will follow an extensive and detailed evaluation of the pilot to see how it has delivered against those objectives.
The regulations make provision for the study. In particular, they set out the provisions for identifying potential participants, calculating the amount of any benefit payable and the manner of subsequent payments. We have spotted that the reference to the regulations coming into force should be in accordance with Regulation 1(2) and not “2(2)” as drafted. That typographical error was noticed after the regulations were laid. While it makes no difference to the content or the effect of the regulations, I assure noble Lords that we will of course amend the reference prior to publication.
The development of these draft regulations has involved the ongoing input of a number of external stakeholders such as Age UK, to name but one. However, I express my gratitude to all those who have been involved in getting these regulations into the shape we see before us today. I commend them to the House.
Lord McKenzie of Luton
Indeed, among the advocates of that I include the noble Lord and possibly even the Pensions Minister, although we shall see what will flow from that.
We note that the limited consultation that the DWP undertook before the election showed general support for the pilot, although, as ever, with some reservations. Clear communications are, as the DWP’s response to the consultation acknowledges, of paramount importance. We are likely to be dealing with many people who are vulnerable and who could be distressed at seeing ad hoc credits appearing on their bank statements.
A condition of eligibility of receiving benefit under the pilot is that a person must receive retirement pension that is paid by way of direct credit transfer to a bank or other account, a point that the noble Lord, Lord Kirkwood, probed. I am not sure whether the Minister has information to hand—if not, perhaps he could write—but we would be interested to know what percentage of people in receipt of retirement pension are now paid other than by these means. Are there data covering the extent to which such people are underrepresented or overrepresented in the entitled non-recipient category? We ought to know that.
The noble Lord, Lord Kirkwood, also touched on a question that arose about the design of the pilot, which involves the payment of just three four-weekly amounts. Is that sufficient to provide the information to satisfy the objectives of the pilot? Given the set-up costs of the pilot, it would be a pity if the opportunity were missed to provide a secure evidence base. On what basis is the Minister satisfied that the three-month period is sufficient to meet the objectives for which the pilot is designed?
The pilot is to cover both the guarantee credit and the savings credit, so the spread of amounts of payments could be quite wide. Is the Minister also satisfied that the proposal to select 2,000 at random from the entitled non-recipient population will pick up a sufficient range of circumstances to enable a comprehensive evaluation of the differing reasons for lack of take-up?
Of course, the pilot has to be seen in the context of other campaigns that are under way to improve the take-up of benefit. Perhaps the Minister could give us an update on these. Specifically, could he tell us about the outreach programmes and the current volumes of face-to-face visits that are being undertaken? What progress is being made on the programme that allows one phone call to access three benefits—pension credit, council tax benefit and housing benefit? Will this continue alongside the pension credit pilot payment?
The noble Lord will recall our deliberations towards the end of the Welfare Reform Bill on the renaming of benefits and the campaign by the Royal British Legion to improve the take-up of council tax benefit by designating it as council tax rebate. If memory serves, we had common cause on this; the noble Lord indicated that it had the support of his party, particularly the now Prime Minister. Will the Minister tell us what progress has been made on this and the current timetable to bring it to completion?
The relationship between pension credit and housing and council tax benefit is important. I understand, for example, that no capital limit is applied to the latter two if a person is in receipt of the guaranteed credit. Both elements of pension credit can be the passport to social fund payments, both discretionary and regulated. Do the amounts paid under the pilot not count for these passporting purposes? If this is the position, is there a risk that, by claiming housing benefit separately during the course of the pilot and/or refraining from claiming pension credit until the end of the pilot period, an individual might miss out, albeit for a short period?
We welcome the pilot. As I have said, it is another means of improving the take-up of pension credit. It is encouraging to see it move forward, notwithstanding the more disagreeable rhetoric that typically emanates from this coalition Government around the welfare system, focusing on fraud and error and itself creating a climate that will deter some people from claiming their just entitlement. This is all against the backdrop of draconian cuts to be visited on government departments and local authorities, with knock-on effects for the voluntary and third sectors—collectively, the support system for helping the most vulnerable to obtain their rights. It is to be hoped that the benefits of this pilot will not be swept away in the deluge of cuts, which would impair the functioning of those whose efforts are directed at helping the poorest and most disadvantaged.
Lord Freud
My Lords, this has been an interesting debate. Several points have been raised, which I will endeavour to respond to. I start with the question of my noble friend Lord Kirkwood on means-testing and the signal that it gives out. Whatever system we end up adopting—whether we go for a higher basic pension, as he suggested he supported, or stay with means-testing—there will always be the need for some sort of safety net, given that it is a contributory system. That does not send a message that the Government want more means-testing at the heart of their vision. Nevertheless, it remains the case that we want to ensure that pensioners get what they are entitled to.
The noble Lord asked this pointed question: if there are no plans to roll the system out nationally, what is the point of spending a goodly sum, £1 million, in the present climate? When you look at the scale of the problem, with 1 million pensioners not getting the help that they are entitled to, despite the efforts of PDCS and third sector organisations, we need to think innovatively. Clearly, we are not in a position to roll out a fully automated system today, and we need to build up the evidence base to establish what kind of information we need to get people more of the help that they deserve. The cost of the study was queried by my noble friend Lord Kirkwood. The current revised estimate of the cost of the whole study is £800,000.
Will we have the necessary information to evaluate at the end of the study? There are several elements to the evaluation. We will be asking a sample of the customers to participate in a face-to-face interview and using research contractors who know how to encourage participation. The interviews will be carried out in the place most convenient to the participants—probably in their own homes. Then we will track the take-up of the pension credit of people who have participated in the pilot. Those data are gathered automatically as part of the administrative system. Finally, we will gather the claims data from those who claim pension credit as part of the pilot. Again, that will be done via our own systems.
Homing in on the point on which I touched just now on national rollout, there are no plans for a national rollout. This is a study to help build the evidence base to see what we may be able to do in this area in the future. The complexity and the staff training required are not as daunting as my noble friend Lord Kirkwood suggested. The study will be run by a centralised team rather than small groups across the country. The definitions of income and capital are very much based on the definitions used in standard pension credit. If there are any changes, these will be introduced to make them simpler. We do not have any concerns about our ability to train staff to administer these payments effectively.
My noble friend mentioned the Daily Mail in connection with possible stories about lots of money whizzing off to the Costa Brava. The pension credit is not an exportable social security benefit. Therefore, I assure him that we will select people to take part only if they are resident in Great Britain.
The noble Lord, Lord McKenzie, asked about process. Pensioners can claim housing benefit and council tax benefit alongside pension credit in a single phone call without the need for a signed claim form. Their calls to the 0800 claims number from a BT landline or from the six largest mobile phone networks are free. The noble Lord asked whether 2,000 was sufficient as a sample size. We are confident that 2,000 participants will deliver a sufficient range of circumstances to build a meaningful evidence base. He asked about recovery of money in different ways in terms of the interplay with other claims. I make it absolutely clear that under no circumstances will anyone receiving a payment under these regulations be asked to repay a penny. We will make sure that participants in the study are made fully aware of that fact.
Both the noble Lord and my noble friend asked about the 12-week length of the pilot. It was important to balance two factors; namely, to make the pilot long enough to collect enough meaningful information and to protect public funds which are in short supply. The determination is that 12 weeks is a reasonable compromise between those two objectives.
The noble Lord, Lord McKenzie, asked about passporting and the exclusion of housing benefit and council tax benefit, as it is called at the moment. If we had added in those two benefits, it would have added a significant level of complexity and cost to the pilot. From the outset it was never the intention that the interaction between pension credit and housing benefit and council tax benefit should be factored into this study. Clearly, we expect to learn more about issues such as people’s attitudes to receiving automatic payments of benefit, which may have wider application to other benefits such as housing and council tax benefits.
Lord McKenzie of Luton
Perhaps we can just be clear on this fairly narrow point. If somebody in receipt of payments under the pilot refrains during that period from making a claim for pension credit, is there a risk that they could be disadvantaged? If they have a claim for pension credit, I think it will open up some passporting opportunities. I was probing whether that passporting will exist in the interim if a payment is made under the pilot which is not the result of an actual claim to pension credit at that stage.
Lord Freud
I thank the noble Lord for that question. I will go back and double check this, but my understanding is that this pilot is entirely separate from any other activity. If an application which took in the passporting opportunities was made in the normal way during this pilot, there would not be a countervailing claim on the money paid by the pilot.
I have just received some support, for which I am more than grateful, confirming my understanding—it is therefore more than my understanding. The position is that there is no risk of disadvantage. If someone claims pension credit, they will get the full claim plus any passporting money, in addition to the pilot funds.
I turn to the question raised by my noble friend and the noble Lord on how many pensioners are paid directly into a bank account. More than 90 per cent of pensioners receive their pensions through direct payments into either a bank account or post office account. I refer to the standard pension to which they would be entitled. We are talking about a small group who do not receive their payments in that way.
I shall write to the noble Lord on his question about the number and content of visits to customers to encourage their take-up. I do not have that information to hand.
Let me draw my remarks to a close. The research study, through these draft regulations, will allow us to explore what potential exists to use data more effectively to improve the take-up of pension credit, to make more automatic awards of pension credit in the future when better data are available, or to simplify the benefit rules. Importantly, it would also help to throw light on whether people are happy about personal data being used in this way. I therefore commend these regulations to noble Lords.
Motion agreed.