State Pension Reform
Debate between Bob Stewart and Steve Webb(11 years, 10 months ago)
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Steve Webb
We do indeed believe that, as with a year of paid work paying national insurance, a year bringing up a young child or looking after an elderly or disabled person is an equally valuable contribution to society and should be recognised as such going forward.
Bob Stewart (Beckenham) (Con)
As I understand it, 750,000 women will be £9 a week better off under these pension reforms. Will a widow who married early, spent the vast majority of her life looking after the home and children and whose husband then died be better off under these reforms?
Steve Webb
As I said in reply to a question a moment ago, where someone has already become a widow and acquired prospective pension rights because someone has died, we will not take those away from them. In future, we want to make sure that every man and every woman builds up a pension in their own right, rather than depending on the contributions of a spouse. But where people have already got those entitlements, they will retain them.
Pensioner Poverty
Debate between Bob Stewart and Steve Webb(13 years, 9 months ago)
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The Minister of State, Department for Work and Pensions (Steve Webb)
I congratulate my hon. Friend the Member for Beckenham (Bob Stewart) on raising a serious and important issue, and on explaining its depth and breadth. On pensioner poverty, we talk too often about incomes and measuring the statistics, and therefore lose sight of its human side. No matter how immersed we get in the statistics or how much progress we may think has been made, we should all still be shocked by the example that my hon. Friend has given. The experience of the pensioner whom he visited is totally unacceptable. Notwithstanding anything I might say in the time available to me, one person in such a situation is, clearly, one too many.
My hon. Friend raised a broad spectrum of issues and I will respond to a number of his key themes. On fuel poverty, I want to talk about the support we aim to give and some of our new initiatives. I will also address the issue of non-take-up of benefit, which as he rightly says is one of the most significant causes of pensioner poverty. He raised the issue of investment returns, granny bonds, interest and so on during oral questions a few weeks ago. I am pleased that he has followed up on that and I will give him a bit more information on it. Finally, I will talk about some of the broader issues he raised—income, material deprivation, loneliness and so on—and the steps the Government can take to identify those problems and act on them. I will try to run through all those things.
On fuel poverty, my hon. Friend is absolutely right that it is a pretty basic need to be able to keep warm enough and healthy, particularly in such a bitterly cold winter. One of the very first decisions we had to take as a Government was, as he rightly says, to continue the winter fuel payment when there was some speculation that it might go or be cut in some other way. We also made a decision on the cold weather payments, which are specific, £25-a-week payments for when the temperature is below zero for a week. They were temporarily raised to £25, and the budget plans we inherited would have reduced them this winter to £8.50 a week. We took the view that when temperatures are below freezing spending money on relatively low-income pensioners, disabled people and families with young children was a priority. My hon. Friend rightly says that money is tight, but that was a priority for us. Instead of cutting it to £8.50, we held the rate at £25, and those who are eligible in his constituency will have received three payments of £25—a total of £75—towards the extra costs of heating in this bitterly cold winter. I think that he and I can be proud of that decision.
Obviously, that is a short-term situation and, ideally, we have to ask why we in Britain have what is known in the jargon as “excess winter deaths.” Why is a cold winter killing people in Britain when, essentially, it does not in Scandinavia, which is a much colder region? It does not get the spikes that we do in the winter, but one of the fundamental reasons is the poor standard of our existing and new housing stock. Even the houses that we are now building are often not good enough. The Department of Energy and Climate Change is leading on those issues and it is requiring the energy companies, as part of their carbon reduction commitments—the carbon emissions reduction target scheme—to target the most vulnerable households. The idea is that the energy companies will pay for things such as home insulation, loft insulation, cavity walls, draft-proofing and so on because, yes, we need to make sure that pensioners can afford their heating bills, but it would be far better if we could make sure, through a properly insulated home, that those heating bills were not so large in the first place. If we can make sure that more elderly people have cosy homes, they will be able to afford to heat them and everybody will gain. We are requiring the energy companies to do more on that front.
We also experimented—this is an interesting point in relation to take-up—with the energy rebate scheme earlier this year. The electricity companies made payments to pensioners based on data-matching between the data held by the Department for Work and Pensions and the energy companies’ customer data. We brought the two together, identified people on the guarantee credit element of the pension credit and simply credited them with £80 on their electricity bills. The previous Government initiated the scheme and we did it as an experiment earlier this year. We targeted those aged over 70, so the elderly and the vulnerable got £80 credit on their electricity accounts. It was a one-year pilot and most of the delivery costs were paid by energy suppliers, and I sense that it was pretty successful. I had a few letters about people who were not sure why they did not qualify when their name was on the bill, and we had a few teething problems. However, overwhelmingly, that scheme put cash in the pockets of people living in vulnerable households. That has worked well, so we are now proposing something called a warm home discount scheme that will build on that success. We propose that energy suppliers should again pay a rebate to vulnerable pensioners, who have been identified through data-matching. That scheme was a useful precedent and we want to build on it.
However, crucially, that brings me on the second point: take-up. Of course, eligibility for the scheme I mentioned is dependent on the person concerned getting pension credit. As my hon. Friend rightly says, too many people who are eligible do not get the money. I absolutely endorse his comment that the payment is not charity; it is a right. People have paid their taxes and their national insurance and they are entitled to the money. I would not want any pensioner to feel that claiming money that the law says they are entitled to is anything other than a right. I am grateful to him for how he expressed that. As he rightly says, one of the things we are looking at—I view this as a two-stage process—is getting people to claim what is there now and simplifying the claims process. The second step, which I will come on to, is to reduce the reliance on means-testing and use more of the benefits and pensions that we know people will get. We should regard means-testing as a safety net, a residual part of the system, rather than a mainstream part of the process, as it is now.
As my hon. Friend rightly says, we are running a pilot scheme. We are trying to use the data we already hold to indentify the people who are eligible but not claiming. I sense that that will be more difficult than we might think. Eligibility for pension credit depends not just on one’s own income but on one’s spouse’s. It also depends on the whole household’s housing costs, and on all its savings in different accounts with different institutions. One of the problems we have in Government is bringing all that together. On my hon. Friend’s point about identifying people approaching pension age who might be about to become poor, the pilot will tell us how far we can draw together the disparate information that different bits of Government hold. People might have three different pensions from three different providers, and, two years before pension age, might not have even crystallised the pot into a pension. We therefore do not yet know how big the pension will be.
Bob Stewart
Perhaps those who work for charities could be used as additional social workers to help those people and give information back to Government. We would all win by doing that.
Steve Webb
I am grateful to my hon. Friend for stressing the valuable contribution of charities, such as Age Concern Bromley. Many other charities that do their work in people’s front rooms have a crucial part to play. The Pension, Disability and Carers Service is a local service that works with local authorities and does home visits. It goes into people’s front rooms and does similar sorts of work. Such work is very valuable, but I want to be as systematic as I can, so that we can catch the folk who fall through the net.
Steve Webb
Absolutely. That work is a very valuable complement to the process. I want to ensure that the Government are as systematic as we can be, so that we can get as much money automatically to people as we can. As I said, we have been running a pilot scheme and have identified a sample of 2,000 people who, on the face of it, appear to be entitled to pension credit and are not claiming it. We have made payments to those people of what we think they should get. We have contacted them and said, “The money that’s arriving in your bank account is what we think you could get as pension credit. Would you like to make a claim?” As my hon. Friend says, that has been going on and we are closing the study in the middle of March. We are hoping to learn from that how far we can use the information we have to ensure that people get what they are entitled to. We will certainly be reporting back to the House on that.
What we have to do—and what the Government are doing—is to ensure that the money people definitely do claim is better. Let me give an example. The state pension, which has virtually 100% take-up, is worth having. My hon. Friend will know that, after 30 years of the link with earnings being broken, we restored the earnings link this year. Over the lifetime of their retirement, a typical pensioner retiring this year can expect to get an extra £15,000 in state pension compared with the old price link. That money is guaranteed and we know they will claim it. My goal for the longer term is to try to rebalance the system, so that we do not have, as he rightly says, a wholly inadequate basic pension—someone cannot live on £97 a week—and a mass means-testing system that results in many people failing to claim. There will always be a need for a safety net and a catch-all, but I would rather ensure that the pension is at a decent level. Restoring the earnings link is the first step towards that, but I hope we can go further.
My hon. Friend rightly raised the issue of investment income and set out a very important context. In fact, many pensioners, particularly poorer pensioners, have next to no investment income. He quoted some figures. Regarding the poorest fifth of single pensioners, who are living on £136 a week, just £4 of that is coming from investment income. So even if I could magically double interest rates, I would be giving them an extra £4 a week. That clearly matters for those who have structured their finances to depend on interest income. I will say a word about that in a moment. However, for us as a Government, getting pensions, pension credit and so on right will have a substantial effect.
My hon. Friend is right: falling interest rates are an issue. He mentioned the granny bond or, as I gather it used to be called, the pensioner guaranteed income bond. That bond was withdrawn by National Savings and Investments in 2008, when it was paying an interest rate of 3.9%. That was a few years ago. Obviously, when there is a base rate of 0.5%, one might think that savings rates had plummeted so far there would be nothing like that out there. I have done a bit of research and, for example, today on the market 3% interest rates are available for a one-year bond, and for three-year bonds 4% interest rates are available.
However, people do not necessarily know about that. When I responded to my hon. Friend in the House a little while ago and mentioned the issue of shopping around, we discussed the fact that, if someone has access to the internet, dealing with such issues is straightforward. Moneymadeclear and so on are good websites. However, the Consumer Financial Education Body also offers a helpline that people can ring up. If someone is not sure whether they are getting the best interest rate and they want to know what is available, they can ring the helpline number. I shall read that number into the record: 0300 500 5000. People can simply phone that number and say, “I’ve got this amount of savings. What sort of options do I have?” As I mentioned, with savings rates of 4% or more and increased limits on individual savings accounts available, decent rates are out there. However, too many people are trapped in receiving very poor interest rates. Let me give an example. I noticed this morning that a high street building society is offering what it calls an e-savings plus account that pays 0.1% interest, and a high street bank is offering what it calls a premier saving account, also offering 0.1%.
Bob Stewart
That is exactly where people who work for charities that go into people’s homes can help. If they have such things in their quiver, they can say, “Let’s have a look at your savings and see if we can get you a better return.” That does not cost them anything.
Steve Webb
Indeed. I certainly would not downplay the role of face-to-face conversations. I fully accept that many older and more vulnerable people will not have internet access. We need alternatives, such as charities or visitors going into people’s homes and talking about savings rates and giving phone numbers of the sort I have mentioned. That is all part of getting the message across that people who have suffered a big fall in their savings rate need not necessarily face such a situation. There are options out there for them.
In the final few minutes of my speech, I shall talk about the broader issues that my hon. Friend raised. He mentioned carers and social care. As he will know, the Department of Health has an independent care commission headed by Andrew Dilnot, which is due to report in the summer. Although that commission’s formal consultation process finished on Saturday, I am sure it would very much welcome my hon. Friend’s input if he has further comments to make about the role of older carers, whom he mentioned. The Government are seeking to ensure that those who are doing full-time care of, for example, 50 hours a week or more can get far more respite. Perhaps 1 million people are in that category. He also raised the issue of claim forms. I entirely agree: there is always a lot more to be done. I should stress that people can ring a free phone number—0800 882200—and can claim over the telephone. As he rightly says, that might help people who cannot read or deal with the forms. It is great if those people have someone do the form for them or with them. We also try to enable people to complete the form over the phone if that is more helpful to them.
Finally, my hon. Friend properly raised the much wider issues of pensioner poverty. It is not just about income; it is about loneliness and what happens if the cooker breaks and so on. When we publish the figures on households with a below average income—the poverty figures—I am keen for our Department not simply to publish table after table about income, but for it to look much more broadly at deprivation. I have a list of the things we are studying and publishing figures on: for example, whether someone can replace a cooker, take a holiday away from home or go out socially at least once a month. As he rightly says, loneliness, isolation and financial insecurity are important facets.
Steve Webb
I am about to conclude as there are only a few seconds left.
I congratulate my hon. Friend on raising a vital issue and I look forward to having an ongoing conversation with him. Like him, I congratulate the voluntary sector and our front-line staff on their work. They are bringing these messages to vulnerable people, whom we are determined to help.
Oral Answers to Questions
Debate between Bob Stewart and Steve Webb(13 years, 10 months ago)
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Bob Stewart (Beckenham) (Con)
12. What assistance his Department provides to pensioners who rely on fixed-interest income bonds.
The Minister of State, Department for Work and Pensions (Steve Webb)
For pensioners with savings, the Government ignore the first £10,000 of their capital when assessing them for pension credit, as a result of which almost nine out of 10 pension credit applicants have no capital taken account of at all. In addition, to support all pensioners the basic state pension will rise by £4.50 this April and the standard minimum guarantee for pension credit by £4.75.
Bob Stewart
About one third of my constituents are on pensions, which are often very small. What plans do the Government have to help older people who live on small incomes for which they have saved all their lives to build up?
Steve Webb
My hon. Friend raises the very important point that falling interest rates and rates of return on savings tend to affect older people in particular. When we look at state pension reform, the return to saving and the reward for saving will be a particular priority for us. Many pensioners have their savings in very low-interest accounts, sometimes paying as little as 0.1%. There are much better rates out there, and I encourage all pensioners to shop around extensively to find the best rates possible.