House of Commons Work and Pensions Committee

Pension Credit

Third Report of Session 2004-05

Volume II

Oral and written evidence

Ordered by The House of Commons to be printed 23 February 2005

HC 43-II [Incorporating HC 1219 i and HC 1219 ii , Session 2003-04] Published on 9 March 2005 by authority of the House of Commons London: The Stationery Office Limited £21.50

The Work and Pensions Committee

The Work and Pensions Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department for Work and Pensions and its associated public bodies.

Current membership Sir Archy Kirkwood MP (Liberal Democrat, Roxburgh and Berwickshire) (Chairman) Ms Vera Baird MP (Labour, Redcar) Miss Anne Begg MP (Labour, Aberdeen South) Ms Karen Buck MP (Labour, Regent’s Park and Kensington North) Mr Andrew Dismore MP (Labour, Hendon) Mr Paul Goodman MP (Conservative, Wycombe) Mr David Hamilton MP (Labour, Midlothian) Mrs Joan Humble MP (Labour, Blackpool North and Fleetwood) Rob Marris MP (Labour, Wolverhampton South West) Andrew Selous MP (Conservative, South West Bedfordshire) Mr Nigel Waterson MP (Conservative, Eastbourne)

Powers The committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk.

Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at http://www.parliament.uk/parliamentary_committees/work_and_pensions_comm ittee.cfm.

Committee staff The current staff of the Committee are Philip Moon (Clerk), Gosia McBride (Second Clerk),Maxine Hill and Djuna Thurley, (Committee Specialists), Louise Whitley (Committee Assistant), Emily Lumb (Committee Secretary), John Kittle (Senior Office Clerk).

Contacts All correspondence should be addressed to the Clerk of the Work and Pensions Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 5833; the Committee’s email address is [email protected]

Witnesses

Wednesday 3 November 2004

Mr Alan Barton and Mr Steve Johnson, Citizens Advice and Ms Lindsay Isaacs, Citizens Advice Scotland Ev 1

Dr Katherine Rake, Fawcett Society and Ms Amanda Ariss, Equal Opportunities Commission Ev 10

Wednesday 10 November 2004

Mr Richard Wilson, Help the Aged, Ms Sally West, Age Concern Ev 18

Mr Jo Harris, Mr Tony Lynes and Mr Neil Duncan-Jordan, National Pensioners Convention Ev 29

Wednesday 24 November 2004

Mr Adair Turner (Chair), Ms Jeannie Drake and Professor John Hills, Pensions Commission Ev 34

Ms Alison O’Connell and Mr Chris Curry, Pensions Policy Institute Ev 43

Thursday 2 December 2004

Ms Carol Habberfield, Mr Terry Patterson, Local Government Association, Mr Jim Dickson, Lancashire County Council Welfare Rights Service and Ms Janet Gurney, Leicestershire County Council Welfare Rights Service Ev 48

Mr Paul Vizard, Pensions Service Trade Union Side, Mr Keith Wylie, Public and Commercial Services Union Ev 62

Thursday 2 December 2004

Mr Malcolm Wicks MP, Minister of State for Pensions and Alexis Cleveland, Chief Executive of the Pensions Service Ev 71

Written Evidence

1 DWP Ev 88 2 DWP further information Ev 106 3 DWP further information Ev 113 4 DWP further information Ev 114 5 DWP further information Ev 115 6 DWP further information Ev 115 7 DWP further information Ev 116 8 DWP further information Ev 125 9 DWP further information Ev 126 10 Local Government Association Ev 129 11 Standard Life Ev 132 12 National Pensioners Convention Ev 132 13 Civil Service Pensioners’ Allicance Ev 137 14 Leicestershire County Council Ev 139 15 Supplementary, Leicestershire County Council Ev 141 16 Age Concern Ev 142 17 Lancashire County Council Ev 156 18 Supplementary, Lancashire County Council Ev 161 19 Equal Opportunities Commission Ev 161 20 Supplementary, Equal Opportunities Commission Ev 165 21 Help the Aged Ev 166 22 Citizens Advice Scotland Ev 182 23 Citizens Advice Ev 190 24 Supplementary, Citizens Advice Ev 202 25 Fawcett Society Ev 203 26 Supplementary, Fawcett Society Ev 204 27 B& CE Ev 205 28 Public and Commercial Services Union Ev 207 29 Supplementary, Public and Commercial Services Union Ev 208 30 Pensions Commission Ev 209 31 Child Poverty Action Group Ev 224 32 Neil Bateman and Company Ev 226 33 Visit Notes Ev 230

Work and Pensions Committee: Evidence Ev 1 Oral evidence

Taken before the Work and Pensions Committee

on Wednesday 3 November 2004

Members present:

Sir Archy Kirkwood, in the Chair

Vera Baird Mrs Joan Humble Miss Anne Begg Rob Marris Mr Andrew Dismore Mr Nigel Waterson Mr Paul Goodman

Witnesses: Mr Alan Barton and Mr Steve Johnson, Citizens Advice, and Ms Lindsay Isaacs, Citizens Advice Scotland, examined.

Q1 Chairman: This is the first oral session on our Credit when they qualify for a Disability Benefit, new inquiry into Pension Credit. This morning we because that may well qualify them for a premium in welcome to the first part of the oral evidence session their Pension Credit. It is widely acknowledged that Citizens Advice and Citizens Advice Scotland. We take-up of Attendance Allowance is very low. The have Lindsay Isaacs from Citizens Advice Scotland last figures the Department for Work and Pensions and Steve Johnson and Alan Barton who are both published a little while ago were about half. from Citizens Advice in other parts of the United Certainly CAB visiting staV, who go and take claims Kingdom. You are very welcome, and thank you from people in their own homes, are still very busy very much for the sets of written evidence, which we and still getting lots of people on Attendance have read to our advantage. I do not think that there Allowance, and those who would then qualify for a is any real purpose in your explaining what you do, premium would then qualify for £40-odd extra of because I think we know. Indeed, we depend a lot in Pension Credit. We will therefore be very interested our constituency lives on what you do, so I think to hear what the analysis from the DWP is, because that we are all fairly familiar with what you are it is a bit of a surprise to us. doing. If you do not mind, we will go straight into the questioning. We have four or five areas which we Q2 Chairman: I should perhaps say that we still have would like to cover in an hour, and it is not a long not had the corrected transcript. It may be that he time. Let me set the ball rolling myself by asking a inadvertently left us with the impression and he did question. You may have picked up that we had an not mean to say that. He still has an opportunity to interesting exchange with the new Secretary of State, refine that piece of evidence which he gave us. Alan Johnson, a fortnight ago. He took a refreshing Lindsay—I will not do this all the time, I promise view of a number of things, but one of the things you—is it diVerent in Scotland? Please chip in if which caught my attention was that he seemed to there is anything specific you want to add. imply that, when he took a first look at the brief Ms Isaacs: I will, but I think that our experience when he took over the department, he came to the probably reflects what Alan said. We still get a lot of conclusion that 100% of the people who were in the case evidence from bureaux which indicate that lowest levels of household income were being clients are not in receipt of the Guarantee Credit. addressed by Pension Credit as it is currently They do not know that they are entitled to it, and the constructed, rather suggesting that it was the small bureaux help them go through the application amounts, the weekly amounts, that were left to be process. dealt with as a take-up issue. If my understanding of Mr Barton: There is one other point, Chairman. One what he said is accurate, do you have any sense of group where I should imagine the take-up is pretty whether that reflects your experience, or is it based near 100% is people who have a very low state on anything that you are aware of in terms of retirement pension, because they simply will not research or data? It would really help the Committee have enough to live on; so they will be getting the if we could have your opinion on that view which the Guarantee Credit. I would expect that group to be new Secretary of State seemed to take. 100%. Mr Barton: We had spotted that he had said this and Chairman: He may have had that in mind when he were quite surprised that this was the conclusion that said that. That is very helpful. DWP had come to, because the overall figures show that take-up, at the end of August, was still less than Q3 Vera Baird: Clearly you must be right in what 70%. It is very common for pensioners to feel that you have last said: that people with very low they have to live on their state retirement pension. So pensions are more likely to be claiming. However, at bureaux are still regularly seeing people who would the moment Alan Johnson’s analysis—and it is qualify for some Guarantee Credit for that reason. uncorrected yet—leads him to say that two key Also, many people come into eligibility for Pension things need to be done to improve take-up. One is to Ev 2 Work and Pensions Committee: Evidence

3 November 2004 Mr Alan Barton, Mr Steve Johnson and Ms Lindsay Isaacs look for ways of making claiming small amounts disabled people and carers. That is very worrying. more attractive, because he is suggesting that they Whilst it is the case that Housing Benefit and are the people who do not bother to claim for a little Council Tax Benefit have been proofed against gains bit. The other is to address the perception that he from Pension Credit generally, I think there is a wide sees out there: that it is not worth claiming, because misunderstanding about that. It is always the it aVects your Housing Benefit. First of all, your received wisdom in social security that it is “in one comments on those two as reasons why people are pocket and out another”. That is a very hard thing to deterred from claiming it. You seem to be suggesting break down, especially for people who have already that underlying it is still a prevailing ignorance that benefited from the higher applicable amounts at 65, people are entitled to it. Is that right? who are then not inclined to go for Savings Credit Mr Barton: I think that there are considerable because they perceive there will be an 85% taper here numbers of people who might be regarded as hard to on their award. Why bother? We get quite a lot of reach, who are not really aware of what their “Why bother?”—given the kind of bureaucracy entitlements are. As an example, Caradan CAB involved in claiming. down in Cornwall, at the beginning of last month, Mr Barton: On the point about Housing Benefit and had a “Don’t Miss the Bus” campaign for a week, Council Tax Benefit, it is the case that, for people where they had a bus that went round to car parks who have claimed Housing Benefit and Council Tax in diVerent parts of what is a very rural and quite Benefit and then subsequently claim Pension Credit, poor area. They were overwhelmed by the number of if they are getting a small amount—if they are in the people who came in. They had 270 people over the Savings Credit—they will have an 85% taper on that. course of the week who came into them. They found There certainly are people we have dealt with who that there were quite considerable numbers of them who did have entitlement to Pension Credit. We have taken the view that it is really not worth all the certainly acknowledge that the DWP has done a bother. Whether that is the right view to take, I am great deal to try to communicate with pensioners, not sure. They should get, if they claim Pension but they still found that there are quite substantial Credit, a five-year award period, which means that numbers of those people who have an entitlement. they do not have to keep going back in relation to So I think that there is quite a lot of ignorance. I do their Housing Benefit and Council Tax Benefit not know if it is ignorance or still a feeling that “This either. Of course they are also eligible to apply to the doesn’t apply to me”, amongst pensioners. One Social Fund if they have Pension Credit—which point they made in their report to us was that people they are not if they are only on Housing Benefit and are very independent in that part of the world, as are Council Tax Benefit. indeed a lot of the older range particularly of pensioners. Q7 Vera Baird: If you are confident that we have Q4 Vera Baird: Are you saying that those people now discussed the major reasons you are aware of were entitled to quite a large amount of Pension why people do not claim Pension Credit, can we Credit, so they would not fall into the category that have, if you have one, a recipe as to how the DWP Alan Johnson was talking about—of people who should increase its targeting, with some reasonable had not bothered because they were only entitled to expectation of getting the 90% which you think a little bit? ought to be their target? Mr Barton: We do not have an analysis of that, but Ms Isaacs: Alan mentioned it, but there needs to be I think that quite a lot of them were people who had more emphasis placed on not necessarily what you a Guarantee Credit eligibility. would lose or what people perceive they would lose, such as Housing Benefit, if claimed, but what gains Q5 Vera Baird: How do you comment on his they might also get by claiming: for instance, the proposal that making ways of claiming more other passport to benefits, things like access to the attractive to people who are only entitled to a little Social Fund. Also, in Scotland the Scottish bit is one step forward? Is there, in your view, this Executive is thinking about tying in access to fuel problem of people thinking that it will impact on poverty measures, such as central heating and their Housing Benefit if they do claim? insulation, to claimants, people who are in receipt of Mr Johnson: I certainly think that is the case. Pension Credit. Also, Citizens Advice Scotland is talking to Energywatch about possibly trying to V Q6 Vera Baird: The second one? introduce a social fuel tari for pensioners who are Mr Johnson: Yes. To address the earlier point—if in receipt of Pension Credit. So there are many Alan Johnson was right, then we would have been benefits that people would be able to claim if they establishing high claims at the beginning of the were in receipt of Pension Credit, and I think that scheme and low ones now. We are not finding that at those need to be emphasised. all. We are finding high claims now and I do not think that there has been much of a drop-oV in that. In my bureau in Walthamstow, north-east London, Q8 Vera Baird: I think that you have said in the past we are getting not an awful lot of people coming in that more needs to be done to encourage take-up specifically about Pension Credit but, when we through face-to-face contact. interview them and look into other matters, we are Mr Barton: Yes. establishing big under-claims, particularly round Ms Isaacs: Very much so. Work and Pensions Committee: Evidence Ev 3

3 November 2004 Mr Alan Barton, Mr Steve Johnson and Ms Lindsay Isaacs

Q9 Vera Baird: It seems that the DWP has been giving a lot of personal information over the doing quite a lot about that. What more do you phone to a disembodied voice. They feel very think it could do? uncomfortable about that. We do feel that the staV Mr Barton: We have published work in relation to on the telephones ought to be better trained at MIG, which showed that, for quite a lot of harder- spotting that a telephone is not a good idea in this to-reach groups, face-to-face work is exceptionally particular claim and oVering the person someone eVective—and possibly the only eVective way. I else. I believe they have conversion targets, as they think that DWP is recognising that now. We have call them, at the helpline—which may act as a been disappointed that they were quite slow to disincentive to saying, “Would you like us to send recognise the necessity of this, and there was very you a paper form?” or whatever. strong emphasis initially on direct mail and mass media. There are additional advantages, as well as Q11 Vera Baird: What is a conversion target? those that Lindsay mentioned, in that if a CAB is Mr Barton: That a certain proportion of the calls dealing with a pensioner they would look at all the they take should result in a Pension Credit claim. benefits that they might be entitled to. So often what they will be picking up initially is an eligibility for a Q12 Vera Baird: Converting a call into a claim? Disability Benefit; then that may also lead to Mr Barton: Yes. eligibility or a greater payment of Pension Credit. So the face-to-face approach also has the advantage Q13 Vera Baird: And if they send somebody oV to that it covers the whole lot, rather than just being the Local Service, then their numbers may be narrowly targeted on Pension Credit. endangered? Mr Johnson: The preferred model is the telephone Mr Barton: Yes, that is right. access system, which we see in tax credits as well. I can well understand why that might be the preferred mode, and I know that there is research to suggest Q14 Vera Baird: Is the Local Service adequate then? that people like using the phone. However, at Are we failing people who are not good on the ground level, anecdotally, quite a lot of older people telephone? What, again, is your recipe? have diYculties with the phone: not just people with Mr Johnson: I think that we are possibly failing language problems but as a matter of confidence. I people who do not use the phone, for the reasons am quite concerned that the kind of emphasis on explained; particularly people whose first language telephone access, particularly in view of the sort of is not English—we have to think about that—people poor advice people get over the helpline generally, is who are hard of hearing; but also the people who a matter for concern. I would suggest that we need never get to the phone. They are the ones I think we much more targeted home visiting, trying to should be more concerned with: where it does not encourage people. All of our experience in the CAB occur to them to make a phone call, and how to over the years has shown that people will open up reach them. I do not think we have come with a much more at home than they will in a DWP oYce perfect answer to that. My local Pension Service has been working with us to try to find ways of reaching or even a Jobcentre, as has been floated. V Ms Isaacs: Certainly our bureaux clients prefer face- people. We have thought about o ering light bulbs to-face contact rather than phone contact, and I to people who have a calculation done. That has imagine that will be reflected in terms of other worked in other areas. services. Also, I noticed that the DWP research, as far as I can understand it, into how well the Q15 Vera Baird: Delivering light bulbs to people? telephone service was being received was only Mr Johnson: Yes. The Government’s own research conducted—it got a fairly good response— shows that, once a calculation is done, people are specifically on people who were using the telephone much more likely to go for a claim, once they know service, which means people who might be more it is worth doing. Locally, with the Housing Benefit inclined to be a self-selecting group. I do not think it scheme take-up several years ago, people were given necessarily targeted people who either had not used a light bulb if they had a calculation done. They went it or had chosen not to use it. mad for it; they went up and down the street, getting their energy-eYcient light bulbs. So stuV like that— to try and encourage people in. Q10 Vera Baird: There is an Age Concern report Mr Barton: The Partnership Fund that the DWP has saying that 70% of applicants thought that the announced and taken applications for is a welcome application process was easier than MIG. But you development. This means that statutory and are saying that there are still diYculties with it, and voluntary agencies which need to co-operate with that face-to-face is better? each other—which is another area that we think is Mr Barton: We absolutely agree that, for lots of very important locally—can apply for funding for people, claiming by phone is excellent and they like take-up work. I believe that the applicants have been it. We have been concerned that the claim line staV told if they have been successful, and quite a lot of do not always seem to have been well trained to spot CABx have been involved. That sort of local claimants who are not coping very well with the call. partnership work is a really important plank in the There are a lot of older people who do use the phone way ahead. regularly in their day-to-day life, but who do not feel Ms Isaacs: Generally in Scotland, the Local Service comfortable carrying out long and complex calls. that has been on oVer has been good and fairly well We also find that there are people who do not like received across the country, both by claimants of Ev 4 Work and Pensions Committee: Evidence

3 November 2004 Mr Alan Barton, Mr Steve Johnson and Ms Lindsay Isaacs

Pension Credit, but also bureaux staV report other point about the quality of staYng from the favourable experiences. There was a DWP Scottish Local Service—generally in most places it is good. A annual forum, and we were assured that the number lot of quite experienced staV from the Benefits of Local Service staV was not going to be cut. We Agency felt that this was the sort of work they hope that is the case because, even though it is wanted to do and moved to it. That is not absolutely working well now, we do not think that it will work universal. We have seen a number of cases where eYciently if there were staV cuts. One final thing to people have been badly advised by Local Service say on that is that, although the service is good, in staV about their possible benefit eligibility outside of order for it to be an adequate and viable alternative the Pension Credit area, particularly in relation to it needs to be oVered up as such, so people need to Disability Benefits, where some of the staV seem to be more aware that there is an alternative service. I think that if you are disabled then you qualify for think that it needs to be more accessible and better Attendance Allowance, whereas of course you have publicised. to have care needs to qualify for Attendance Allowance. So we have seen situations where people Q16 Vera Baird: You think that with the proposed have been encouraged to apply for things they do staV cuts—the PCSU says 55%, apparently, of not actually qualify for. We would like the DWP to higher executive oYcers have already lost their jobs make sure that these staV do have the adequate because of re-clustering the Local Services—you training for the range of work that they are now sense an impact already, do you?1 doing, which is probably rather wider than Ms Isaacs: At the forum we were assured that the historically they have been expected to do. Local Service staV numbers were not going to be cut. We just hope that is the case, because they are Q20 Vera Baird: It sounds from what you have said operating well at the moment but we do not think that you are particularly concerned if these job cuts that they will be able to continue providing that level hit partner liaison managers, who are the key people, of service. I guess, between the Pension Service and the Local Service. Q17VeraBaird:So you are not speaking from any Mr Barton: Yes, we would be concerned if it hit there experience of the impact of these job losses? and we would also be concerned if it hit the more Ms Isaacs: No, we are just projecting, if there were junior staV, who are the people who are going out to be a cut. and seeing pensioners in their homes. Q18VeraBaird:Can I come back to what Steve said about language? There are apparently up to 150 Q21 Chairman: The Pension Service has sent a note languages available on the interpretation service. to the Committee dated 1 November which says, in The figures say that there were only 371 requests for relation to part of the modernisation programme and the staV cuts, “. . . as a contribution to this the Language Line between April 2003 and August Y 2004. Is that the scale of requests you would expect, commitment, the Local Service has reduced sta ng or do you think that is low or high? levels from 3,075 at 31 March 2004 to 2,675 on 1 Mr Johnson: We client-profile very regularly, and October 2004”. According to my arithmetic, that is 45% of our clients regularly assert that English is not a reduction of 400, which is something like a 13% their first language. That is our client group in north- reduction in the Local Service. That seems to east London. contradict something you said earlier, that you were not expecting many inroads into the Local Service V Q19 Vera Baird: That does not mean they cannot sta complement as part of the modernisation take a phone call. programme. What is your reaction to that, if these Mr Johnson: No, quite. I can say that, anecdotally, figures that I am reading are accurate? I do not know people are far less inclined to use the phone when whether they are for the UK or whether they are just they do not feel confident with it and I think that for England and Wales, by the way. language must come into that. Also, to ask about Ms Isaacs: What I said before was based on a Language Line you must be on the phone. It is not colleague of mine who attended a Scottish DWP surprising that people are not asking for Language forum at the end of October. She was assured then Line when they are not using the phone in the first that there were not going to be any further cuts to the place to access applications. I cannot oVer data on Local Service in Scotland. Whether or not that is the that; it is just anecdotal. way it will pan out, I am not sure. As I said, the Mr Barton: May I make a point about the Local service seems to be working well on the ground now, Service and the 55% reduction there is said to be in but it is probably working at capacity. If there were V cuts to that staYng level, I think that it would have the number of sta at the management level? I do V find that a bit worrying, in that these staV have a a significant e ect on the level and coverage of really important role to play in developing and service that they were able to provide. maintaining partnership working with other Mr Barton: I would agree with that. Those figures do agencies. One would be looking for some sort of sound quite worrying. I am a member of one of the reassurance about how that will be maintained. The consultative groups that the DWP has, the Partnerships against Poverty in England and Wales 1 Footnote: The memorandum from PCS says that “55 HEO’s group, which meets about four times a year. We were have already lost their jobs, which is 30% of the HEO quite surprised, at our last meeting, to be told of the strength”: (PC17, para 15). changes in what the local Pension Service would be Work and Pensions Committee: Evidence Ev 5

3 November 2004 Mr Alan Barton, Mr Steve Johnson and Ms Lindsay Isaacs doing. They had been reviewing this. One of their were absolutely terrific and got really good activities which in quite a lot of places they do not arrangements going. In other places, somebody find is a terribly good use of their time are the drop- would march in and say, “You’re our partners now, in surgeries. It appeared that they are looking fairly and this is what you have to do”—which is not very critically at that. Obviously we do not have a satisfactory. I think that has all got much better now problem about DWP wanting to use its staV and the Local Service staV have got more experience, eYciently, but we were rather disappointed that, but I am sure that there are variations—although I given that the Pension Service now says it is working could not quantify them for you. in partnership with other groups, all this reviewing of the Local Service had been going on and we were Q24 Miss Begg: The issue about the training of staV, then told, “This is where it has got to”, but we or the lack of training, the bad advice, and so on— certainly were not told in that group of the sort of again, it was a new service. It has been up and numbers that you have just told us, Chairman. So it running for just over a year now. Is that getting is both the numbers and the process which are a little better? Can you track an improvement in these disappointing from our point of view, in the things or are the initial problems still persisting in partnership context. some areas? Mr Barton: We have not recently been getting these Q22 Mrs Humble: I have a very brief supplementary sorts of reports of very high-handed behaviour. We on the issue of drop-in centres. The Pension Service have just recently signed a partnership accord with had run a drop-in service in my constituency oYce the Pension Service, and it has with it a code of one morning a week, which was very successful. practice on working together, which we agreed They unilaterally, at very short notice, withdrew it jointly with the Pension Service. We have provided and also withdrew drop-in services in other locations a copy of that to the Committee’s secretariat. There in my constituency. I am engaging in is a good framework there now to build on, correspondence about this. However, what I am therefore, providing there are some people in the finding very diYcult to identify is this. Is this part of local Pension Service to do their end of it. an administrative overhaul or is there a policy behind this? When some years ago the Committee Q25 Miss Begg: Can we move on to the accuracy of interviewed the then pensions Minister, Ian the calculations? As Citizens Advice, you have McCartney, on this, he was very clear about the probably been inundated by people with problems desirability of a Local Service, so that pensioners with tax credits and how that did not work as would have exactly the sort of face-to-face contact smoothly as it might have done. What has been that you have identified as being so vital. So who is the experience of Pension Credit? Has the leading on this? administrative quality been of a high standard, or Mr Barton: The DWP is making the decisions; the are there a lot of errors? Are people querying Pension Service is making the decisions. As I said, we something as an error and, where there is an error, do not have a quarrel if DWP are cutting back V can they get it fixed quickly? What is the general services where they are not being e ective; but we opinion about the Pension Service? would certainly argue that, in a local situation such Mr Barton: We have had quite a lot of evidence in as your constituency, changes in the Pension Service from CABs about this. It suggests that the service is surgery/drop-in arrangements ought to be made in not as good as it should be. There are too many consultation with the local partners: not something errors. There are errors that occur at the application that the local partners are told is going to happen. stage which can involve somebody not even applying, because they are told that their income is Q23 Miss Begg: I was quite interested in what you too high when actually it is not, because they have were saying, Lindsay. Also, as a Scottish MP, my premiums which mean that they would still get it. experience of the Pension Service in Aberdeen is that We had one case where somebody was told that their they have been doing quite a lot of outreach work, savings were too low, so they could not qualify have been taking up the ideas that both Steve and for Savings Credit. This was a complete Alan have mentioned, and are trying very hard. Is misunderstanding. Probably some people do not there any evidence of regional diVerences? Is it that, apply at all. Somebody else was told that he could if you are lucky enough to live in one of the areas not apply because he was on statutory sick pay. So where it is very proactive, where it is a local manager there are problems at that point. When it comes to and Pension Service, it means that the Pension the actual assessment of the claim, after the client Service is doing particularly well but, in other areas, has checked it, signed and sent in their it is falling short? documentation, there are quite a lot of errors that we Mr Barton: There certainly are variations. Initially, have seen. There is wrongly recorded information when the Local Service was set up and the about people’s income, with weekly and monthly partnership concept was promulgated, as far as we figures being got the wrong way round, which means know the staV who had to operate this were not they get too much or too little. Then what must be trained in operating with other organisations in a co- keying errors, where people get 10 times or a tenth of operative way. This meant that the quality of their capital recorded for Pension Credit purposes. interaction with agencies such as CABx was very There is information which is provided but just dependent on the personalities and skills of the omitted altogether from the calculation. It may be people in the local Pension Service. Some of them an occupational pension which a person has sent in Ev 6 Work and Pensions Committee: Evidence

3 November 2004 Mr Alan Barton, Mr Steve Johnson and Ms Lindsay Isaacs and received back their documentation on. Probably through to the person who is dealing with it and to the biggest area of all are problems with the wrong explain what the issue is. Twenty-minute telephone premiums being awarded. It is a very complicated calls to pension centres about a credit problem are set-up with premiums, with the carer’s premium and pretty common. A lot of that time is spent sitting the severe disability premium; but we have had cases waiting for the right person to be available, or being where the bureau has filled in the claim form and has passed on to another person. That is not good news written, “This couple qualifies for two carer’s for us as an organisation, because it is not a good use premiums and two severe disability premiums” in of our advisers’ time. the box at the bottom, and it comes back with one Mr Johnson: We have not spoken about the severe disability premium. In this particular case, it linking benefits—Disability Benefits and Carer’s was very bad news for the clients because it meant Allowance. I would suggest that the helpline staV that they only qualified for Savings Credit not should be equally competent in those benefits Guarantee Credit, and they had quite a lot of because, from our point of view, one of the main savings. With Guarantee Credit they get Housing reasons things go wrong is because these Benefit and Council Tax Benefit; with Savings entitlements are not picked up. Something like the Credit they would not. So there are a lot of carer additional amount, in many cases you are complications there. We also find problems with loss telling someone to claim a benefit they cannot get— of papers and their being put in as “dormant” when because they are receiving an overlapping benefit they are cases that are not. When you have a and that will then trigger a carer additional amount. problem to get put right, it does not seem to be a high That is very diYcult to explain to clients. Time and priority within pension centres to do this work. again, we find that the staV, although they are Obviously we welcome the take-up targets but, when obviously trying their best, do not know about they are busy, that is the work that gets done— Disability Benefits enough to spot the entitlements, getting the new claims processed. The people who and that is a great shame. have erroneous awards are further down the queue. Ms Isaacs: It is very much the same picture in Q28 Miss Begg: What is the solution? Scotland: problems the whole way through the Mr Johnson: I think the CAB should train DWP process, from the application procedure; people staV! You should get us in. doing a telephone application process receiving forms which are either completely blank or V information has been recorded incorrectly. They Q29 Miss Begg: Train the Pension Service sta ? then have to start the whole process again. For a lot Mr Johnson: That is my humble suggestion. of vulnerable pensioners who have little savings and income, the delay in terms of when they receive their Q30 Miss Begg: Is it a problem with the telephony Pension Credit can lead not only to financial system? Is the problems number that a pensioner hardship but also to a lot of anxiety and stress. Also, would phone if they have a problem with it diVerent incorrect payments, and just cases of poor from the claims number? communication: there has been some sort of hold-up Mr Barton: Yes. or problem with their application and they have not received details about what the hold-up is and how Q31 Miss Begg: So that they are already separated? they can address it. They just have not received any Mr Barton: Yes, there is a claims line which is a communication. Freephone number, and then there is a single number to phone to get through to the Pension Q26 Miss Begg: Do you have any sense of why these Service for any query on Pension Credit, which errors are happening? Is it human error? Is it simply should route you automatically through to the keying errors? Is there a problem with the IT, or is it pension centre which deals with you. That does not a range of all of those things? always work. Then, when you get through, you will Mr Barton: All those. not be speaking to the person who is dealing with the Ms Isaacs: Yes, a combination. I think that some of case. It does not appear that the IT is terribly good the staV on the telephone application line are well for them to be able to tell what is going on. This is trained and can deal with standard applications. As why one gets into these fairly lengthy calls in order soon as there is anything that is more complex—and to resolve each case. I have said that it is not good that is certainly the indication we get, not from use of our advisers’ time. For clients who are trying clients but from bureaux staV—they feel very much themselves, the length of call may well be diYcult that, when they speak to people on the end of a and, for people who do not have a telephone of their phone, they are not able to resolve the problems. own, standing in a callbox—we have had cases of 80 Often bureaux staV end up explaining the process year-olds standing in callboxes for 30 minutes to them. phoning to the pension centre—it is pretty unacceptable. Of course, it costs them quite a lot of Q27 Miss Begg: How long does it take to resolve one money as well, because it is a local call charge. of these problems then? Mr Barton: It can take several months to resolve Q32 Miss Begg: What if that same pensioner went problems where the award is wrong. Another thing into a drop-in centre? Could they resolve it for them? which is a concern to us is that very often it takes Mr Barton: Yes, I should think they would be able quite a long time in terms of telephone calls to get to deal with it completely. Work and Pensions Committee: Evidence Ev 7

3 November 2004 Mr Alan Barton, Mr Steve Johnson and Ms Lindsay Isaacs

Q33 Miss Begg: My next question is this. As the Q35 Mr Dismore: Is there a diVerence between new system gets up and running, there will possibly be a pensioner claims, as it were, and existing ones? What need for fewer and fewer processing staV. Would the DWP tell us is that 91% of new customers are you accept a cut in the numbers of processing staV if choosing to be paid by direct payment; in fact they that meant that those staV would be transferred on say that 90% already have an account suitable for to the front line? direct payment, for the existing pensioners. Is there Mr Barton: On the processing side, we are just rather adiVerence between new people and existing sceptical about how it is going to be done. It claimants? certainly does not look as if the processes are Mr Barton: I think that the problem probably gets terrifically eYcient at the moment. Keying in of a lot more severe as the pensioner gets older. People in of information that has already been given on the their eighties who have run their financial lives all claim line seems to be part of it. So I am sure there that time without a bank account probably find the is scope for that. The first thing we would like to see prospect of having to have one rather daunting. with process, I suppose, is an improved service. There is a priority rather below that—cutting the Q36 Mr Dismore: Citizens Advice have not actually V number of sta . said that you have had complaints about people Ms Isaacs: We learnt at this forum recently that the being harassed and bullied into converting. One or workload of two of the pension centres that are two other organisations have mentioned this. Is that closing is going to transfer to one in Motherwell and your experience, or did you not mention it because one in Dundee, in Scotland. Again, we have it is not your experience? concerns about the impact that will have, not only Mr Barton: We have had some cases where people on the workload but we already have examples of have felt that they have been very pressurised, claims not being processed because correspondence initially pressurised, into going for a bank account and forms have been lost. As the work transfers rather than the Post OYce card account, and then across the country, I think that we will see an impact. going for the Post OYce card account rather than to Mr Johnson: In our local CAB we have a the cheque system that will come in. So we certainly relationship with our Housing Benefit oYce where, have had some. It has not been such a heavy amount if things go on for too long or there is delay for more that we have felt we needed to make an issue of that. than a couple of weeks, we have a suite of trigger points. When the trigger point is reached, we Q37 Mr Dismore: So it has not been a widespread automatically get referred to a supervisor to try to problem? resolve it. Maybe that could be piloted with the Ms Isaacs: Also, even if people are not overtly helpline service. bullied or harassed, if they are not made aware that there is an alternative then they are almost forced, Q34 Mr Dismore: I would like to raise some just by default, to go down that road. questions about the direct payment system. The switch to cheques started last month, I think. What Q38 Mr Dismore: But you have not come across it as do you think is the extent of stress and worry that a major problem—being harassed? pensioners have suVered as a result of the change? I Ms Isaacs: No. have certainly had a lot of grief from people in my Mr Johnson: From my memory of the report, I think own constituency. it says that if you do not want to be converted you Mr Johnson: My mum is very worried about it, and have to talk to the conversion centre. It is quite she refuses to have a bank account despite all my daunting to have to talk to the people who want you injunctions. I think that there is a lot of concern to be converted, to ask them not to be. about that. People just do not want to do it. They get Chairman: It sounds painful! to 70; they have never had a bank account before; maybe their deceased partner had one. They are very Q39 Mr Dismore: Can I pick up the point Lindsay reluctant. Anecdotally, older people do like and was making regarding the problems of opening a trust order books. Post OYce account? What do you think could be Mr Barton: Certainly, of the reports that are sent in done to make it easier? Y to us in the o ce in London about people who have Ms Isaacs: Personally, I think that there are so come in with problems about their direct payments, many stages involved, it requires—particularly for a strikingly high proportion of those people are pensioners who might have mobility problems— pensioners. repeat trips either to the bureau, if they are helping Ms Isaacs: Of the evidence we have seen, all of the them, or to the Post OYce. Postwatch has identified case evidence seems to indicate not only that they eight discrete stages in the process, which is not want to do it, but they do not want to do it incredibly complicated—for someone to understand because it is causing a significant amount of anxiety at the beginning of the process all the steps they will and stress, and it is having quite significant eVects on need to go through. So a reduction in the number of them. Also, we have seen another group of clients stages and the complexity and paperwork that is who would be willing to open, for instance, Post associated. Because there are so many stages, it is OYce card accounts, but the system is so onerous very time-consuming. One bureau reported that it and complex that, even though they are willing to go was taking on average about six to eight weeks. That through that, they are finding it very diYcult to do it. can cause delays in payment, which we are seeing, Ev 8 Work and Pensions Committee: Evidence

3 November 2004 Mr Alan Barton, Mr Steve Johnson and Ms Lindsay Isaacs and pensioners having to claim Social Fund crisis Q42 Rob Marris: £450 million. loans. So a decrease in the paperwork and the Mr Johnson: We were talking earlier on about trying number of stages—which hopefully would have an to reach the hard-to-reach group, and the discussion impact on how long it takes to open an account. centred on people where there are smaller amounts to which they might be entitled. They are the “Why bother?” group, are they not? They are the ones who Q40 Mr Dismore: What particular stages do you may well decide not to bother. I think that we are think could be cut out? What do you see as worried, if it means that insistence on a bank unnecessary? account or a cheque, which may or may not arrive, Ms Isaacs: Initially they are not allowed to go unless pushes them over the “Why bother?” threshold. So they receive their personal invitation document. If it could be counterproductive mentioning it. they have not received one, they have to phone the conversion centre for an invitation. So we have seen Q43 Mr Dismore: Have the DWP said to you what quite a lot of people who have already gone to a Post should happen if the cheques do not arrive? OYce—and these are people who want to open an Mr Barton: They have told us there will be a system Y in place to ensure that these people get their money. account—they have gone to the Post O ce, but they 2 do not have their personal invitation document and I do not think they have told us what it is. If one so they are not able to. Perhaps if clients who have looks at what happens at the moment to people taken the initiative and shown an interest, and taken whose Giros do not arrive, they usually wait a very long time for the money. It is assumed that it has that first step of going to a Post OYce, were able then been stolen; they have to fill in a form; it is all to start the process at that stage, that would certainly checked up on and it is usually a six or eight-week cut out an element at the beginning. wait—which obviously will not be any good at all in Mr Barton: I am not the person in Citizens Advice these situations. I think that we still wait to see how who deals with direct payment, Chairman. If you the DWP is planning to deliver on the assurance that would like us to consider if we have more to say on there will be arrangements for these people to get the detail of this and then to put a note in to you, their money. It is very important that there should be would that be helpful? such arrangements, of course. Chairman: That would be very helpful. Q44 Mr Dismore: So the only experience you can go on is what happens with ordinary Giro cheques for Q41 Mr Dismore: Can I ask you a more general benefits? question? Do you object in principle to the DWP’s Mr Barton: Yes, which is not encouraging. decision to move to direct payment? Mr Barton: No, I do not think we do, in that we Q45 Mr Dismore: You have said that you wanted to agree that it is generally a more secure way of paying keep the order book system for people who need people. We have all along been concerned about third parties to collect their money. Why do you people for whom it is not a realistic option, or who think that is necessary? simply do not want to have to open a bank account Mr Barton: There are substantial numbers of older in their eighties. The slow track on which DWP put people who have very severe mobility problems and the development of its alternative scheme, and not cannot get to the Post OYce themselves; who live on mentioning the fact that there would have to be some their own; who have carers who are provided by the alternative scheme in all the early literature about social services department and who come in, and will the change—we were unhappy about all of that. We not be the same people every week; and they have still have quite a lot of worries about the cheque been in the habit of sending them to collect the payment alternative that will exist for those who do money from the Post OYce. These are a large and not have a bank account or simply do not send the important group whose needs should be catered for. information in. We did join in writing to DWP, with a lot of other organisations, suggesting that Q46 Mr Dismore: Can that not be dealt with simply something more like an order book, rather than by endorsing the back of the cheque? something that has to be posted out every week, Mr Barton: The carers come a particular day; the ought to be available for people who are not going cheque will not always come a particular day, will it, into bank accounts. We also feel it is important that the post being what it is? So there quite possibly these issues are properly talked through with the would be real logistic problems for them in this. individuals concerned, in a way that they do not find Q47 Mr Goodman: I have a couple of questions threatening. about the complexities caused by the interaction Mr Dismore: Picking up on some of the points that between the Pension Credit and the Savings Credit have arisen over the question of cheques, the DWP in particular, and other benefits. Obviously, Savings say it would be too expensive to keep the order book Credit exists to reward saving; but it seems to have system. They say each order counterfoil costs 68p to brought in new complexities. Passports for administer and direct transfers in the region of 1p. remission of health charges is diVerent from the V So it is a significantly large di erence in the amount Guarantee Credit and the Savings Credit, and there of money. We saw some figures on the amount of savings of about £200 million, when the whole 2 Footnote: Citizens Advice has now received information on system is worked through. this from DWP. Work and Pensions Committee: Evidence Ev 9

3 November 2004 Mr Alan Barton, Mr Steve Johnson and Ms Lindsay Isaacs are particular complexities around the withdrawal what they have got and what it passports through to. of Housing Benefit if your savings go over £16,000— Certainly the interaction with Housing Benefit is, I and who all this is reported to. What do you think would suggest, a bit of a mess: where, for Housing the main problems are? How are they aVecting both Benefit, people of 60-plus, they try to integrate with the people who administer Pension Credit and those Pension Credit in the way it is structured, but there who receive it? are still anomalies hanging round which are Mr Barton: The DWP is very keen to present unnecessary; and I think that the reporting thing is Pension Credit as a single benefit, whereas, as you a very big issue. have pointed out, it actually has two parts in it. Mr Barton: And across the 60–65 diVerence with When you get into things like health charges, eligibility for Guarantee Credit and Savings Credit however, they do not then follow that logic. DWP there is a complication as well, and another thing follow their own logic in the letter—and we have that we would like to see changed—that everyone problems about the letters that people get, their should be eligible at 60. It does positively award letters—but that just tells you on the face of disadvantage single women who are living on their the letter how much Pension Credit you get. It does own, who have reached retirement age at 60 and get not tell you whether it is Guarantee Credit, Savings their state pension. If they also have a private Credit, or both. It does tell you in the calculation pension of some sort, a small one, until they are 65 sheet, but of course you need to be fairly numerate to they do not get any recognition of that, because they follow the calculation sheet. So you do not actually are not yet eligible for Savings Credit. know, and yet it is of crucial importance in relation Ms Isaacs: And additionally people who have some to health charges and in relation to your entitlement other form of savings but who are below the to Housing Benefit if you have savings. Our view is threshold, and so are not rewarded. that both those anomalies should be ironed out by making any form of Pension Credit, a passport to Q49 Mr Goodman: That is your full list now, is it, of exemption from health charges. Of course, a lot of what you want the Government to do? the Savings Credit people will be able to get most of Mr Barton: The last one is a very important one. The their health charges back, but they have to go Committee commented on this when Pension Credit through a separate application system, through the was being conceived. It seems extraordinarily unfair DoH system. Similarly, we think that the capital that people who have below the full basic state limit for Housing Benefit should be abolished for all pension but who have some savings or a private Pension Credit recipients. pension get no benefit. It is like the old MIG Ms Isaacs: Another element of confusion is clients situation. I am sure that the calculations could be not knowing who they have to report changes to; so adjusted. It would make them even more not necessarily having to report their Pension Credit complicated, of course; but, as Steve said, they have but, in terms of their Housing Benefit, a change in already reached the point where advisers find it income perhaps. pretty diYcult to understand what they are, and explaining them to the clients is nigh on impossible. Q48 Mr Goodman: Could I ask you to clarify, in Mr Johnson: I think that “Savings Credit” is a your view, how much eVect you think all this is terrible phrase, because the connotation is that you having on pensioners who are claiming? have to have savings to qualify. We know that it is Mr Barton: We have certainly seen cases of people happening all over the place—people are who are very worried about what their situation is on disconnecting themselves from the system because the health charges, and how they can find out they do not have savings, but they would qualify. whether they are exempt from them—because by no Maybe another name? means everybody keeps their award letters. So certainly quite a few people who have been into their Q50 Miss Begg: That is one of the problems, talking bureaux are worried about that. Steve may want to about saving for retirement; but the savings are say something on the Housing Benefit side. actually in the form of an occupational, private, or Mr Johnson: You have people who are told they do whatever, pension. People do not regard that as not have to report certain things to the Pension savings, but that is the generic term that we are Service, but they do have to report them to the local using. I also have a problem that we use the word authority. That is very confusing. In the old days, “pensions” and we think of old people; but in fact we when you were just told everything all the time, it should be talking about pensions for everybody. made it a relatively simple model. I am not asking to Anyway, that is my gripe. We were talking about the go back there. However, in my view, the complexity diYculty of claiming. You have some complaints has reached the stage where certainly my staV think about the fact that older people have to send in twice about trying to explain how Pension Credit original documents to the Pension Service in order works for their clients. In the old MIG days, you for things to be verified, and that is causing some could more or less explain to someone what MIG problems. Would you like to expand on that? was. “There are your needs; there’s your income. It’s Mr Barton: They are asked to send in original a top-up.” We are entering a phase of, “Trust me, documents about all their savings. Also, they may I’m right”, where we do not have time, and possibly well have to send in birth or marriage information, not the resources, to go down the road to make or divorce information, and all savings information people understand. Our impression is that there are and information from their pension provider if they large numbers of people who simply do not know have a private occupational pension. They are Ev 10 Work and Pensions Committee: Evidence

3 November 2004 Mr Alan Barton, Mr Steve Johnson and Ms Lindsay Isaacs initially told that they have to send originals of all Mr Barton: Yes, and more sympathy as well. these things in. A lot of people are not at all happy about doing this, because they think that they will Q53 Chairman: Alan, earlier in the session, we were get lost. Also, people who depend on a bank book to talking about conversion targets—about which I do get their money out—and more and more of them not know a lot, and you may be the wrong people to will be with direct payment—cannot get any money address this question to—but do I understand that while the book is away. So people are not very happy there is a financial and contractual incentive? about this. It turns out—and I submitted evidence, Ventura operate these call centres. Is it your as an annex to the Committee of what the Pension understanding that conversion rates are a factor in Service said in May their policy, if you can call it the payment mechanism in the contract, or is it that, was—that, if you resist, there are alternatives. merely a target for PSA purposes? You can go along to a surgery. For some documents Mr Barton: I do not really know in detail, Chairman. but not all—and it seems to be a bit of a changing These targets have been referred to in conversation, list—you can send copies in. So we really do think but I have not then pursued it to find out exactly that the Pension Service needs to have much more what the implication is. realistic requirements of what documentation it Q54 Chairman: I think I know a man who should requires, that there should be are local places to know the answer to that. Do you have anything for which people can take valuable documents; and it us? That has been very useful. Is there anything that needs to be absolutely up-front about what the rules you think we have left out? are, rather than “If you resist, you get a diVerent Mr Barton: There is one point only, Chairman. I did deal”. mention it briefly, but the quality of the award letters is terrible. People get letters that really confuse them Q51 Miss Begg: What you have just said about and they feel that they have to go to their bureau to alternative arrangements—is that diVerent from have them explained. We are told constantly by what the DWP is piloting in the form of alternative DWP oYcials that this is because they come oV the oYces? old legacy IT system and they quite agree that they Mr Barton: That is an alternative arrangement. are not very good, but it is awfully diYcult to do Another alternative arrangement, which seems to anything about it. It seems to us that there is a lack operate in some places but not always, is that some of priority within DWP—and not just in this area, Jobcentres will verify documents and others will not. but in award letters which apply for other benefits as We have made a recommendation about that as well. well. It seems to us that clear communication with We think that there ought to be a formal agreement your customers is part of treating them with respect, between the Pension Service and Jobcentre Plus and yet this does not seem to be a priority. about how this will be handled, and then people can Mr Johnson: That is absolutely right. If you just be told this. Bureaux always need to know what the think of the font size of the letters and how they are rules really are, to be able to advise people what to laid out, that would be an obvious thing to start do. with. Chairman: Thank you for your appearance and for Q52 Miss Begg: So it is a consistency of approach? your written submission. That has been very helpful.

Witnesses: Dr Katherine Rake, Fawcett Society, and Ms Amanda Ariss, Equal Opportunities Commission, examined.

Q55 Chairman: We are lucky to have with us this your respective organisations, just by way of morning Katherine Rake, from the Fawcett Society, opening the discussions, and we then have three or and Amanda Ariss, who is the Equal Opportunities four areas of questioning we would like to put to Commission representative. You are both very you. welcome and thank you for your written Dr Rake: I am from the Fawcett Society and we are submissions, which have been helpful. Just by way of the UK’s campaign for equality between women and explanation, if you do not already know, I think that men, and probably of particular importance to the the Committee has always had a Pension Credit Committee is the campaign we have been running inquiry in its sights and we would have, if we had jointly with Age Concern called Let’s Make Pensions more time, added a full-blown inquiry into women Work for Women and we have produced a recent and pensions, but being realistic about the date of publication, which is a report that I would commend the next election and the programme we have to the Committee. I hope you have all seen copies of already got we are trying to do the next best thing, it but, if not, I will send copies of report 1in4which which is to take, in the course of our Pension Credit highlights the scandal which is pensioner poverty inquiry, a particularly deep and special look at how among women in the UK today. I have been Pension Credit, in the first instance, is aVecting personally working on the area of women and women and we will look at how it fits into the long- pensions for about eight years now (so it is a topic term policy. It is now an important part of the very dear to my own heart) but, also, for the Fawcett inquiry and your evidence is obviously crucial to all campaign it is an area of gender inequality which I of that. Why do not both of you say a little bit about think has been woefully neglected up to this point Work and Pensions Committee: Evidence Ev 11

3 November 2004 Dr Katherine Rake and Ms Amanda Ariss but, fortunately, is now recognised by government employment. So, currently, only a third of part- and by the Independent Pensions Commission. timers have any access to an additional occupational There is certainly very good analysis of the problems pension. They also tend to be in occupations where and what we are keen to see now is some move especially if they are working in the private sphere towards some of those solutions. there is no additional pension provision being made. What is interesting is that for those women where Q56 Chairman: Excellent, thank you. Amanda? there is a decent occupational pension they are more Ms Ariss: Firstly, I would just like to welcome this likely to be members of that. So there is some opportunity to give oral evidence to your balance—I do not want to overstate the case—and Committee. The EOC is the statutory body that has for those women working full-time and working been charged by Parliament with promoting within the public sector they are more likely to be a equality of women and men as well as enforcing the member of their employer’s occupational pension, sex discrimination legislation. We have a long- but when you look at women overall, because of the standing concern about pensions. I think there is a high numbers of women working part-time overall great deal that Katherine and I are going to agree they are less likely to be a member of an about this morning because we are coming at the occupational pension. That is the third reason. The issues from a very similar perspective of concern fourth, which I think is probably of particular about the persistently low income that many women interest to this Committee, is that the current State have in retirement, which means that the face of system is founded on principles that have not poverty in old age is much more likely to be female changed very much since Beveridge’s time. There are than male. I think we particularly welcome that you two underlying assumptions which are now totally have chosen to widen the scope of your inquiry into overturned by current demographic and social Pension Credits to look at how it sits in the broader trends. The first is that couples will divide between a system because we think there are some absolutely male breadwinner and a female carer, and the critical issues there that need to be addressed. pension system rewards that, and the second is that couples will be in a lifelong marriage. Clearly, both of those assumptions are untrue now but the State Q57 Mrs Humble: Katherine, to you first of all, we Pension system really has not caught up with that, have received lots of very interesting documentation and unfortunately, when the Second State Pension from you and other organisations and we think we system was introduced, and, indeed, the Pension know why women tend to be poor when they are Credit, it just compounded the problems of some pensioners, tend to have a reduced entitlement to very, very old, underlying rules within the State retirement pension and, also, have fewer savings, but Pension system. So the whole notion of a lifetime’s just in case we have got it wrong, for our record, contribution and needing to contribute for a very could you outline the basic issues, as you see them, extended period over the lifetime, the notion of and then, Amanda, I will move on to you because, periods out of the labour market being the exception again, we want reassurance that there is agreement rather than the norm are written, really, very much over what the basic issues are. If there is not, then you might want to highlight some of the issues as you within the State Pension rules and they serve to would see them. penalise women in later life. So those four factors— Dr Rake: I think there are four really very simple low pay, interruptions to labour market careers, and reasons why women are poorer in later life and will a sectoral concentration of women within certain continue to be poorer until we see some reform to the sectors of the labour market, compounded by a State State Pension system. Those are that women are system which is riddled with out-dated assumptions, paid less during their working lives, and that means mean that women are poor in later life now and they are excluded from the pensions system overall, indeed will continue to be poorer. If I can take the or they are simply unable to make the additional liberty to add to the fantastic analysis that there has contributions into occupational and personal been within the Independent Pension Commission pensions saving. The second reason is that they are report, one of the things we would add there is that more likely to take time out of the labour market to although there are trends which make women’s look after children and, increasingly, to look after pension entitlement look as though it is going to elderly people. Those interruptions mean two improve over the longer term—for instance, higher things: the first is that there are periods where they labour market engagement and a narrowing of simply do not have any pension coverage at all, certain parts of the pay gap—the other side of that especially occupational pension coverage, and the is that actually those trends do not aVect all women second is that those disruptions also have a very equally, and what we are going to see is an increasing severe impact on occupational pension entitlement inequality among women; so whilst well-educated in particular. So entry in and out of several diVerent women who tend to be engaged in the labour market occupational schemes tends to penalise women’s for a long period of time may well begin to look more entitlement to occupational pensions, in particular. and more like men, in terms of their pension The third reason is that women tend to be entitlement, there are other, very significant groups concentrated among certain sectors within of women who are simply going to be left behind. employment, so there is a very high concentration of For example, very large generations of lone parents women, obviously, within part-time employment will be coming into pensionable age within the and, equally, a very poor coverage of occupational foreseeable future and they are going to carry with and personal pensions within part-time them enormous labour market penalties. The other Ev 12 Work and Pensions Committee: Evidence

3 November 2004 Dr Katherine Rake and Ms Amanda Ariss thing we highlighted in our report is the extremely increasingly highly qualified and engaging in the poor entitlement that black and minority ethnic labour market, there are still structural diYculties women have to an occupational or personal pension. that are preventing them competing on an equal So whilst overall, if you look at the average picture footing, which means that, if you like, the sort of for women, it may well be set to improve, what we trickle-down eVect, in terms of improvement in are actually going to see is an increasing inequality pension provision, is likely to be slower than one among women; so some women looking like men in might expect. We would agree with Katherine’s terms of their pension entitlement but a very large analysis that there is likely to be a gap between sector of them looking increasingly left behind. So women whose labour market experience, broadly that is, I think, where we are now. speaking, resembles that of the average man and who therefore may well be able to provide reasonably well for themselves in old age and a large Q58 Mrs Humble: Katherine, you have answered my number of women for whom that is not the case. second question as well. I do not mind. However, Amanda, one, do you agree with that analysis? Secondly, are you aware of any organisations that Q59 Mrs Humble: What about Carer’s Credit in would disagree with that analysis, and do you also S2P? That was something very much hailed at the share Katherine’s concerns that what many people time it was introduced as helping women who took assume is going to be a much rosier picture for a career break especially to be carers, because, of today’s generation of working women might not be course, in the past they did not get any kind of as rosy? I just tack on the end of that, in S2P there is notional contribution entitlement. the Carer’s Credit that does address one of the Ms Ariss: Yes. We obviously welcome the steps that diYculties that today’s women pensioners face, have been taken to try and make sure that where which is the lack of continuity of a contribution women—or indeed men—are taking time out of the record. I just want to throw that in, because some of labour market to care for children they do not lose the groups that Katherine was talking about who out as a result, but we do not think those measures may be excluded from the job market may benefit are adequate as they stand; they are still quite from that provision in S2P, so it might not be quite complicated and sometimes the eligibility rules for as bleak. Over to you. You can answer both them mean that you can be out of the labour market questions, you can answer three or four. caring for a very large proportion of the tax year but Ms Ariss: I think I would like to start by saying yes, if you are not out for all of it you do not get any we do agree with the analysis Katherine has just credit. Of course, people’s lives do not align terribly presented about the causes of the problem and with neatly with tax years, and that does mean that it can the particular problems experienced by some groups be very diYcult for people to qualify for things that of women that she has highlighted—Katherine might help them otherwise. So we welcome what is referred to ethnic minority women being there but we do not think it goes far enough. particularly likely to have very poor pension provision and some particular ethnic minority Q60 Mrs Humble: The Government has announced groups of women have much lower employment it is going to have a review of women and pensions rates than the average for women as a whole. So I next year. So, presumably, this is something that you think that problem is likely to persist and become would want to highlight. What other things do you very acute. So we are in agreement about the basic think should be included? Katherine first. analysis of the causes of the problem. I think I would Dr Rake: Can I just add something on the Carer’s like to draw your attention to the way in which some Credit issue, which is to point out some of the of those factors Katherine has described interact anomalies within the existing system that make with one another. It is very common for women to Carer’s Credit not work as eVectively as it could? return to work after having children and opt to work The first overall point is that it is very hard still to part-time for a number of years. Working part-time gain full entitlement to the State Second Pension, would aVect your income anyway because you are because it is still based on Beveridge’s old rules that working fewer hours, but it is exceptionally diYcult a normal working life is 49 years long, which, clearly, to find part-time work in high-skill, high-paying not only has never been appropriate for women but jobs. So often what we find is that when a women is also increasingly inappropriate for men’s working wants to go back to work working part-time she has lives as well. So the credit works within a system that to drop two or three rungs down the ladder, so her is still based on these very old assumptions. It is very income drops dramatically, she is often working well disappointing, I think, that that replicated those old below her economic capacity, so there is a loss to the assumptions. The other thing I would point out is economy as well as to the woman’s earnings, and that Carer’s Credit only extends to the child’s fifth that loss can persist for a very long time. We have birthday, whereas credit within the Basic State some research under way at the moment which Pension extends up to the age of 16, so there are suggests that even a year of working part-time can some anomalies there. Another issue, as Amanda have a very significant, long-term eVect on the has alluded to, is that it operates on a tax year, so if woman’s income; it is very diYcult to regain the you start your maternity leave on 1 April and are position that she once had in the labour market. I terribly organised to deliver your baby on 1 April think those problems around the way in which part- then it is covered, but if it is delivered on 1 August time working is operating in our labour market then you will not get a full year’s entitlement. So suggests that although it is true that women are there are issues about why it is still based on an Work and Pensions Committee: Evidence Ev 13

3 November 2004 Dr Katherine Rake and Ms Amanda Ariss annual rather than a weekly entitlement. The final proposals to tackle the causes of the problems and to point I would make around the Carer’s Credit is that consult with the relevant stakeholders about what there is an anomaly also around tax credits. Any tax could be done. From our perspective, the absolutely credit that you get to top up your earnings counts critical issue that we think must be tackled is towards your basic State Pension but it does not entitlement to State Pension. We are particularly count towards your State Second Pension. So there keen to see moves to widen entitlement so that the will be women out there who think they are doing the vast majority or all women are entitled to the Basic right thing by going into the labour market and State Pension, if not more, and that is our priority, I getting some earnings and topping it up with Tax think, in terms of what we would like to see the Credit; they will be earning entitlement to the Basic Government focusing on in the report that it has State Pension but they will get no State Second undertaken to do next year. We would also like to Pension contribution for that. So, again, see some joining up of policy. I think it is already unfortunately, the Carer’s Credit, although it is to be apparent from the comments that we have made that welcomed, of course—any of these measures are to in order to tackle this problem it is not just about the be welcomed—brings with it some anomalies. pension system it is also about making it easier, for women who want to, to engage in the labour market in a way which enables them to build up a pension in Q61 Mrs Humble: So that is an issue to flag up to the their own right, and there is a need to join up what Government for its report. What other issues would is being done on pensions policy with action that is you wish to see covered? being taken to tackle the causes of women having Dr Rake: I think, clearly, we need on-going low pay and low income. That is as much about what monitoring of the situation in terms of current is going on in the labour market and what is going generations of women pensioners’ entitlement and, on in workplaces as it is about what is going on in the also, some serious projections looking at what the pension system itself. future entitlement is of younger generations of women and looking at some of these issues of diversity that we flagged up. Again, naturally, Q62 Rob Marris: Talking about Pension Credit and people tend to look at the average position rather current pensioners before we move on, as we shall, to than at inequalities among the population. On top of future pensioners, which in a sense we have already that what I would like to see is a report on action. We touched on, most people, including both your are very long on analysis and very short on action. submissions, are concerned about the level of take- The Government itself has produced some excellent up and the whole issue of take-up. Have you got any analysis within the context of the Green Paper that evidence as to whether there is diVerential take-up has just been further confirmed by the Independent between diVerent groups of women, such as black Commission. We have known, actually, for decades and minority ethnic women, or women who have what the problem with women and pensions is and recently been bereaved, or older women? If there is what we are really looking for now are some serious that diVerential take-up that you are coming across, measures to tackle this because, unfortunately, not (Katherine was talking about action) what action only does it sell down the river current generations would you recommend to address that diVerential of women pensioners but if the situation is not take-up? tackled now you are going to lose many, many Ms Ariss: We are concerned about take-up, as you future generations of women pensioners from full said. We were encouraged to hear that yesterday, the entitlement. I think one of the very real issues that Minister at a conference organised, I think, by the faces younger women is in terms of understanding Association of British Insurers was expressing the complexity of the current pension system and sympathy and expressing the Government’s concern knowing what kind of provision they can make in about take-up in this area. The EOC does not have order to top up their pension, and there is a huge direct evidence of diVerential take-up rates, for amount of confusion and uncertainty out there example, for ethnic minority women but we would which means that people are under-saving, as we be very surprised if there were not diVerential take- know. I think we would be very keen for some up rates, because it is relatively complicated to apply serious reporting on what the Government is doing and for a number of groups of older women who are to address those issues, as I say, in order to save, if particularly vulnerable that is going to present you like, future generations of pensioners from the diYculties and there is a wide range of reasons why scandal of pensioner poverty that aVects older people might have diYculties with either the women today. language or the numeracy issues that would enable Ms Ariss: Again, we find ourselves in agreement on them to be aware of what they were entitled to and many points. We are particularly keen that the take it up. So we are concerned about ethnic Government should use the opportunity of its minority women. We would also be concerned about commitment to publish this report to explore some the position of women who have recently been of the specific actions that could be taken. As bereaved simply because we do not think it is very Katherine has said, there has been a lot of very good likely to be at the top of people’s agenda at that time, analysis either already done or under way and it and we have concerns about older people who, if would be a missed opportunity if the Government’s they are, perhaps, experiencing diYculties with early report confines itself to summarising that analysis. signs of dementia, for example, are highly unlikely to We would like to see something that is more in the be in a position to claim what they are entitled to. We Green Paper mould of setting out a range of possible are very keen for the Department for Work and Ev 14 Work and Pensions Committee: Evidence

3 November 2004 Dr Katherine Rake and Ms Amanda Ariss

Pensions to explore methods which would generate we could move along those lines, which, as I payment of Pension Credit automatically to people understand it, would disproportionately benefit who were entitled to it. We think there is a possibility women? of thinking about, if you have got information about Dr Rake: It has to be said that fixing the State tax records and benefit records, whether it would be Pension system is going to cost money, and there are possible to identify automatically if people were no two ways about that. We spend, looking likely to be entitled to Pension Credit; so to have a internationally, an extremely low percentage of our system which is geared to identifying people who are GDP on our pension system, and I think that was entitled to it and giving it to them rather than waiting underlined by the Turner Commission. We do that for people to claim. We recognise some work would at the cost of pensioners currently; we keep them in need to be done to take that forward but we think it poverty because we choose not to spend more of our should be explored because if it is feasible it would GDP on the pensioner population. So I think there make a lot of sense. is, ultimately, a political choice that needs to be made about whether that is an acceptable way forward. My personal view is that it is not an Q63 Rob Marris: So information sharing within the acceptable way forward and we should go up to department. European averages and spend more on our State Ms Ariss: Yes. There are obviously issues to be Pension system in order to make it sustainable. addressed there about how one could do that, and of course any system would need to take into account data protection issues and so forth, but we think it Q66 Rob Marris: More prosaically, in terms of should be explored because if it could be made to reforming Pension Credit, as we have now got it, in work it would be a really good step forward. terms of the way in which savings are treated and so Dr Rake: I would absolutely agree. I would add to on, now that the Government has basically said it is the issue of vulnerability. Clearly, one would not going to spend £8 billion in that way, have you anticipate much lower take-up rates amongst, got any other “tinkering” suggestions along those particularly, vulnerable groups of women, although lines? unfortunately we do not have the data; I do not Dr Rake: I have to say I would caution against think the department collects the data in the kind of tinkering. We have had a very long history of detail you are suggesting. tinkering and this is where we have ended up, with this extraordinarily complex system that becomes increasingly impenetrable to anybody, any member Q64 Rob Marris: Do you think it should collect of the public, expert or not. that data? Dr Rake: Can I come back to that? I would add to Q67 Rob Marris: Give us some simplification then. the issue of vulnerability the issue of stigma. I think Dr Rake: There are a number of routes to there is still, particularly among older generations, simplification. Clearly, one of them is to— an issue about stigma about claiming means-tested benefits. I think what that highlights is the overall context in which Pension Credit is operating, which Q68 Rob Marris: I mean in terms of Pension Credit. is obviously within a means-testing context. Clearly, Dr Rake: That is diYcult. I think a Pension Credit whilst one could make eVorts to both get better layering on top of an already complex system information about non-take-up and to extend take- actually added an enormous amount of complexity up using all the methods that Amanda stressed, to the system. I do not know how, within the current which sound eminently sensible to me, there are system, to be absolutely honest with you, we would some serious cost implications of that. We have, on simplify. I think we need to take a step back and look the other hand, a Basic State Pension system which at simplification in broader terms. That is what I not only has almost complete take-up but is actually would suggest. I think, at this stage, more tinkering very cheap to administer. So there has to be some just fills me, personally, with a bit of despair. It is consideration of the cost-benefit of pushing and great for those of us that are pension anoraks and we pushing take-up of means-tested benefits in contrast can lead our lives knowing more and more about the to delivering in other ways to the older population. complexity, but for the average person, both in I do think that good data is always a good thing but retirement and, also, those planning to save, it just there are much bigger questions about how becomes an impossibility. sustainable this means-tested solution is going to be in the longer term—not mentioning, of course, all Q69 Rob Marris: You are nodding agreement there, the savings disincentives which, I am sure, we will are you, Amanda? come on to. Ms Ariss: Yes.

Q65 Rob Marris: Coming on to savings, as we Q70 Miss Begg: You have probably covered most of understand it, only savings above the level of Basic what I was going to ask but there is one thing. You— State Pension are rewarded through Savings Credit. particularly the Fawcett Society—are still arguing When we suggested to the Government that they for reform to the Basic State Pension, and more changed that, they rather sort of slapped us down accessible credits and so on, but you are still sticking and said that would cost £8 billion, which is an awful by the contributory system. Have you looked at lot of money. Is there any other way that you think something which could be more radical than that? Work and Pensions Committee: Evidence Ev 15

3 November 2004 Dr Katherine Rake and Ms Amanda Ariss

There will still, inevitably, if you have a contributory are working 16 hours a week at the Minimum Wage system, be some people that are going to lose out and you are not within the Lower Earnings Limit, at the they are likely to be women. moment. So it is craziness, really. Why not extend Dr Rake: Yes. I have a slightly diVerent that zero rating band down and include a lot of low- interpretation of our standpoint, which is that what paid workers, again, who think they are doing the we are saying is that we need a broader right thing by the Government, they think they are understanding of what counts as a contribution, so making a contribution but, actually, because of we are not sticking by the old-fashioned Beveridge these ridiculous rules, are being excluded from the notion of the contributory system being a system. That is the first principle. Then, absolutely, contribution within paid work. What we are saying there are a huge number of women who are holding is that you need to have a much broader one, two or three jobs at low pay or, indeed, working understanding of contribution and really recognise seasonally. That is the other issue with the National the contribution that is made by unpaid carers, both Insurance record: it is based on an annual in looking after children and then later in life, and, contribution, rather than weekly contributions. So, also, actually, allow people to make contributions. for example, dinner ladies who are working only One of the many anomalies within the system is the within school term-time actually do not, over the Lower Earnings Limit. In France there is no Lower year, earn enough to build up a full year’s worth of Earnings Limit—as long as you are in employment entitlement and nor do they have the money to make you are within the social security system—whereas the backdated contributions, or they are not we operate a Lower Earnings Limit which excludes aware of the benefits of making the backdated 1.4 million women from making any contribution, contributions. Disproportionately, people excluded and they may not be aware of the fact that they are for those reasons are women, and there seems to be excluded because of the Lower Earnings Limit. So no good reason for that to carry on. It is a lot of old, what we are saying is make the contributions work administrative record-keeping that goes back to better but, also, broaden out the notion of Beveridge’s time that, to me, seems entirely contribution. outdated now.

Q71 Miss Begg: In that broader definition, who do Q73 Mr Waterson: You talked about simplicity, you leave out? which I think we can all agree is a good idea in itself, Dr Rake: We made, I think, what was basically a but something that has superficial simplicity is the political judgment in publishing this report. At the citizens pension, which emerged rather late in the time of publishing our recommendations the whole discussion. Can I just be clear of your position? Are notion of a universal, citizen pension, people’s you saying you did not put any money on that horse pension—whatever you like to call it—was very because you did not know it was running in the race much oV the political agenda. Now it appears to be but if it is running in the race that is your favourite? shifting more towards the political agenda. What we Or do you think there is a downside to it? were proposing here were a number of measures that Ms Ariss: The EOC does rather like the look of that would actually open the door to a universal or a horse. Perhaps we came to a slightly diVerent citizen pension; they certainly would not stand in the judgment from our colleagues in the Fawcett Society way of introducing, in the longer term, a universal or about whether or not it was near the starting gate, I a citizenship-based pension. So we did consider guess. Our main concern in this area is that those options, but we made a political judgment that increasing the rate of the Basic State Pension does some of those options were out of play at that stage, not help women significantly unless entitlement is but that what we might want to do is actually widened. So it is the goal of widening entitlement increase women’s entitlement in order to solve some that we are after. We think that some form of of the issues now. universal State Pension or citizens pension looks like the best way of achieving that goal of wider Q72 Mrs Humble: Just on the issue of the Lower entitlement. There would clearly be a debate to be Earnings Limit, I recollect that the Government, had about how that would work, at what level it three or four years ago, changed the rules so that should be set, what sort of residence qualification— women could be credited with contributions even if any—there should be, and whether there should be though they were below the Lower Earnings Limit to any exclusions, and so forth. We think it is the right actually pay the contributions. One of the issues still direction of travel because it would give individuals arising for women is that they may have one, two or some certainty about entitlement, it would therefore three part-time jobs that are even below that new give people incentives to save because they would much lower limit. What is the answer to that have a platform, and we think it would give situation? incentives to employers to run good occupational Dr Rake: In terms of the first, what the Government schemes because they would know that they were did do was introduce a zero rate of National not just substituting for inadequacies in the State Insurance above the Lower Earnings Limit, which system. We think it could be easier and cheaper means that, eVectively the employee makes no to operate than the current, highly confusing contribution, physical contribution, but they get patchwork. So we can see a lot of advantages in it credit for that period. What we are saying is why not and will be doing some more work over the coming just extend that downwards? Just to give you an months about exactly how we think it could best example of the lack of joined-up government, if you operate. Ev 16 Work and Pensions Committee: Evidence

3 November 2004 Dr Katherine Rake and Ms Amanda Ariss

Q74 Mr Waterson: That is very helpful. Are you caring for children should be included within the conscious of the definitional diYculties, particularly system we saw unbelievable results—a huge amount relating to immigration and, also, other of consensus; for caring for older people something disadvantages of just junking the contributory like 93% supported that and for caring for children principle? it was 78%. You very rarely see polling results of that Ms Ariss: We would certainly see that there would nature, and there is a huge weight of public opinion need to be a debate about whether there should be a behind that broader notion of contribution. So I residence test. We can see there would be a very good think, as I say, ultimately the judgement is a political argument for that, because you could have a lot of one. I think you could keep the system as it is, add in unintended consequences if you did not do that. this broader notion of contribution and, eVectively, However, there is a debate to be had about how that end up with what looks like a citizenship pension— should best work. Although there would be a change we could name it as such, indeed—without having in the way in which the system is working, I think we these problems of residency or the problems of the do feel that one of the big disadvantages of undeserving individual who does nothing through the current system is that it does interpret their lives, and all the rest of it. However, as I say, I “contribution” incredibly narrowly; it does only think this is why we are a bit reserved about it for credit not just paid work but certain kinds of paid those concerns, specifically around the level and, work, because a lot of people are excluded from it. also, around the contribution. So we do not think that the argument is “Is the contributory principle a good thing or not”; I suppose we do not see ourselves as junking that Q77 Mr Goodman: Talking of horses that are principle, we think it is just the best way of dealing running or not running, one idea for reducing the with the fact that the current system excludes a lot of level of means-testing that is a kind of interim before people who are making a contribution. reforming contributions or looking at the citizenship pension is targeting money specifically at older pensioners, because that would greatly help older Q75 Mr Waterson: I just want to quickly get a take pensioners who are women, who are often among on the Fawcett Society. Of the 1.7 million, or so, the poorest pensioners. What do you think of that? people who are not claiming Pension Credit at the Do you think that has got anything as an interim moment, we cannot know how many of those are measure or are you simply interested in a bigger women, but presumably increasing the State Basic simplification of the contribution principle/citizens Pension and taking people oV Pension Credit will in pension? itself benefit a lot of women? Ms Ariss: I think we would like to see the medium Ms Ariss: If you just raise the level of Basic State to long-term direction being sorted out but there are Pension without broadening entitlement then it disadvantages to doing too much tinkering with would not because so many women do not have full something that we do not see as being the right entitlement. Entitlement is absolutely critical. solution in the long term, but would agree with you that older pensioners are disproportionately likely Q76 Mr Waterson: But the ones who are entitled, to be particularly poor, and therefore if you are in many of them will benefit. the targeting game that is a direction which one Ms Ariss: Yes. might target. Dr Rake: On the universal/citizen pension, I would Dr Rake: I would absolutely agree; it would be flag up three issues which are of concern to me. The another sticking plaster measure but, of course, you major one, which has not been mentioned, is if we do would never turn down money for older pensioners, introduce a citizenship pension at what level is it especially given that they are disproportionately paid? One of the issues, of course, is a simple cost women. However, it would only ever be a sticking one, which is that if you are going to broaden out plaster measure. those who are entitled then you are going to have to Vera Baird: Just looking at, as it were, the two simply pay more out, or are we going to set it at such alternatives to try and solve the structural problems a low level? I think the risk, in the British kind of with the pension system—one to move to a universal tradition, of spending very little on pensions may pension and the other one making the NI system well be replicated in that and the level of the much more inclusive rather than exclusive of citizenship pension would be set so low that it really women, as it is at present—I suppose one problem would not be meaningful. So if a Government with the Fawcett approach, if I can just characterise commitment were ever to be made I think I would it thus (although I have heard what you have said), await an announcement on the level before being is that it would take a long time for these changes to entirely convinced. The other two issues, I think, are get through so we will have another 30 or 40 years of about who is counted as eligible. Clearly, all the women in the same position that they are in now issues about residence are quite complex and, within when they go on to a pension. The other thing, and the current political climate, are very hot issues. The for obvious reasons we will need to ask you for brief third is that people clearly are attached to the comments on this, is how practical and how possible contributory principle, and indeed there is an it is to reconfigure the contributory system so that enormous amount of support for this broader caring and working are equally credited? For notion of what constitutes a contribution. So when instance, you are passported to the Carer’s Credit we polled and asked people whether they thought for caring for older people if the person you are that those who were caring for older relatives or caring for gets Disability Living Allowance because Work and Pensions Committee: Evidence Ev 17

3 November 2004 Dr Katherine Rake and Ms Amanda Ariss they require 35 hours’ work. In any other situation give that a little thought? One side of A4 from each you will not get a Carer’s Credit. If, for instance, two of you would really be very helpful. It is a very, very sisters are sharing the care of their mother, so that important question. I did promise you I would try each is doing 10 hours, how will you decide which of and save the last 30 seconds for you, because we have them gets a credit or what level of credit each of them covered a huge amount of ground—and very concise gets? If one individual is going out and doing some and powerful evidence it has been. Is there anything, part-time work but not enough to get them a credit in the last few seconds before the bell rings, that you and the other part of the time they are caring for think we should be thinking about that we have not their parent they are damaging their ability to asked you about at all? contribute to a pension by caring for their parent but Ms Ariss: We have covered all the things that I they may only be giving her Sunday lunch and a meal particularly wanted to raise. a day. Is that enough to amount to a Carer’s Credit? Dr Rake: I would flag up just two very small issues. That seems to me to be, almost, an acid test as to One—that we flagged up here, in terms of what we which way you go, whether you widen the could do in the short-term—is that getting rid of the contributory principle or you do shift to a universal 25% rule, again, would add a crazy kind of anomaly pension. Is it practical, in fact, to swap the NI system within the system. The other thing is about Pension around drastically to make it embracing? Credit and its rewards to savings. Of course, it is a household means test so it does not actually reward individual savings (it is very rarely said), so lots of Q78 Chairman: What I would really like—and this is women in couples are not getting any of their savings a bit hard because you have both been working very rewarded. hard this morning—is a note about that from you. I Chairman: We have caught both those points. think it is a key question and to ask you to do it in Thank you very much indeed. That has been helpful. two minutes is not very fair. You have been very Thank you for your appearance. The Committee good, coming at short notice, but would you both stands adjourned. Ev 18 Work and Pensions Committee: Evidence

Wednesday 10 November 2004

Members present:

Sir Archy Kirkwood, in the Chair

Vera Baird Mrs Joan Humble Miss Anne Begg Rob Marris Ms Karen Buck Andrew Selous Mr Andrew Dismore Mr Nigel Waterson Mr Paul Goodman

Witnesses: Mr Richard Wilson, Senior Policy OYcer, Help the Aged, and Ms Sally West, Income Policy OYcer, Age Concern, examined.

Q79 Chairman: Good morning, ladies and retirement, may act as a disincentive to some people gentlemen. The Committee is in the middle of an on low and modest incomes for making their own inquiry into the operation of pension credit. This is savings away for the future. the second session of oral evidence and we welcome Mr Wilson: How successful has the DWP been in this morning two senior representatives from Help launching the pension credit? I suppose the key the Aged and Age Concern: Richard Wilson, who is objective of the DWP has been not to repeat what the Senior Policy OYcer of Help the Aged, and Sally happened with the tax credits over the Inland West, who is the Income Policy oYcer of Age Revenue and to launch it in a way which ensured Concern. Both have helped the Committee a great that the systems did not collapse, that people had a deal in the past, and we thank you for that, we thank good service; and in that sense in meeting that key you for the written evidence and we thank you for objective, they have been quite successful. There is coming and making an appearance this morning. I also a feeling that they have learnt from the “MIG” wonder if I could ask you, to set the scene about how campaign where there were problems with the phone you think pension credit has been fulfilling the goals lines, where people were often disappointed because that were set out. It has been in operation a year they were not entitled, and so there has been a key now. You are at the front-line in terms of your eVort to increase take-up and to get people onto the organisations and you have been given feedback. pension credit. However, in the end, we do not seem How would you characterise whether it has been to have got past that barrier of about 66/70% of successful or not in terms of the Government’s people who are entitled to a means-tested benefit objects that were set out a year ago? claiming it—we still have not got beyond that Ms West: Age Concern is a national organisation. barrier—and there does not seem to be much hope We have local organisations across England and we that we will progress beyond that barrier, given the also have Age Concern in Scotland, Cymru and targets that the Government have set themselves and Northern Ireland; so I think we are in quite a good given their projected expenditure; and just from position to find out about older people’s looking at the charts of how many people are experiences, particularly through the information claiming month on month, which is now beginning services that we oVer. We have also carried out some to slow, we seem to have reached a plateau, and research with around about 2,500 older people, obviously Help the Aged is very disappointed by including getting on for 500 older people who are that. If the pension credit was to be seen to be a actually receiving pension credit; so we were able to success, a take-up of nearer 90% so that we could see ask them proactively what they felt about the that the usual suspects were not missing out on this benefit. In general, our view is that pension credit extra help. has meant that a lot of older people have received Chairman: I think the Committee are interested in additional income, and that is very welcome. The pursuing some of these delivery and take-up type older people in our survey were generally positive issues. Can we start the questioning with Mr about the amounts that they received, even though it Andrew Selous? was often quite small levels of income. The majority received under £10, but many said it had made a Q80 Andrew Selous: It is clear that the pension diVerence to their lives. On the other hand, people service delivers its service in quite a variety of still have a concern that it is a means-tested benefit diVerent ways locally; there is quite a diVering rather than an increased state pension, and again, in patchwork of provision, if you like, across the our survey 90% of older people interviewed said that country. Is your experience that this is confusing to they would prefer a state pension that meant that individual pensioners, and do you think that this they did not have to claim the means-tested top-ups. method of delivery provides a quality and quantity In terms of the other objective of the Government, of service that we need at a local level for pensioners? which was to encourage saving for the future, I think Sally, do you want to kick oV first? it is very diYcult to tell the impact that pension Ms West: The local service represents a very credit has had on that, but we do have concerns that, diVerent way of providing a service to older people, although a more generous income related benefit, and also the pension service in general has been very pension credit, because it will aVect incomes in proactive in trying to encourage take-up, and that is Work and Pensions Committee: Evidence Ev 19

10 November 2004 Mr Richard Wilson and Ms Sally West very positive. Our local Age Concerns have good Mr Wilson: Obviously having a pension service relationships with the local service and we welcome presence on the high street would be a welcome a lot of the work that they are doing. I think that thing, better than we have at present, but we would there is a problem in that the focus of the whole look back to the manifesto at the last election when pension service is about telephone contact, which is we were promised a third age service that was built great for a lot of older people, but not everybody is upon what we learned from Care Direct, the idea able or wants to use the telephone to claim benefits that we would start bringing together pensioner and to make inquiries. One of the diYculties is that services in one place; so it would seem that we are yet it is the telephone that is always publicised and there to have that. We have some proposals on LinkAge, are no longer local social security oYces for older but ideally I think what we would like to see is people, and, even though perhaps in the past people services for old people brought together by did not find that they were very attractive places to themselves but across diVerent agencies so that we go, they tended to know that the local oYce was on have council tax benefit, housing benefit, pension the high street so that if they needed to go, because credit, all diVerent kinds of benefits and help of a crisis or to pick up a leaflet, it was there. If you available in one place rather than individual do not know that perhaps there is a pension service agencies. in your local Age Concern on the first Tuesday in the month or that the pension service do local visits, it is Q84 Andrew Selous: We have seen a reduction in the very diYcult to know how you get into the system. I number of staV in the pension service, I think, from looked in my local telephone book last night, which 3,075 in March 2004 to 2,675 on 1 October 2004, and is south east London, and under “Social Security” we have also seen a reduction in what are called and “Work and Pensions” it referred you to “local service clusters” from 165 to 133. Do you have “Jobcentre Plus”, and there were three pages of concerns about that? Are you picking up from the addresses and telephone numbers. Under “Pension pensioners that you are in contact with that the Service” there was one small advert—that is quality of service is being aVected in any way by assuming you knew to look under “Pension Service” those reductions? in the first place—and it explained what the pension service did and it gave a telephone number, a text Ms West: We have had some feedback through our number and a website address, but—there was no local Age Concerns. One of the things that seems to address to write to and nothing to say if actually be happening is local pension surgeries are closing; people preferred a face-to-face service—“Ring this and we have some mixed messages on this, because there seemed to be a clear policy to close pension number and we will provide it.” services but then the pension service came back and said, “No, that is not what we are doing. We will Q81 Andrew Selous: Would you like to see the only close surgeries if they have a poor attendance pension service, for example, having space in and after consultation with local organisations.” Jobcentre Plus oYces so there was a presence on Some of our Age Concerns have been saying that many more high streets? Is that something that you surgeries have been closing. In some cases they say, would like to see? “Yes, that is right, because the attendance was low”, Ms West: Yes, I think we have always thought there but in other cases it does not seem to fully consult. ought to be some kind of local presence. Some One of the other things that some local Age Jobcentre Plus oYces will help older people, but Concerns have been saying is that the staV are not others will say it is not within their remit. sure what is happening either, and in some cases staV are saying, “We would like to attend this event but we are not able to at the moment”, and some have Q82 Andrew Selous: You do not see a problem in reported quite low morale, people having to apply having in one oYce working age benefits and for their own jobs within the pension service, and it pension services delivered? That does not create an is a great shame, because, as I said earlier, the local issue as far as pensions are concerned? pension service and local Age Concerns have been Ms West: Not if the oYce is the kind of place that working very closely together and have been people want to visit. I understand a lot of new building up very good relationships. I think we Jobcentre Plus oYces are like that. When the would be very concerned if that starts to be aVected Department did research in the past they found that just when we are seeing the pension service starting pensioners did not like going to benefit agency to oVer a much better service than older people used oYces; so the solution was not to have local oYces. to get. Another solution would be to make local oYces into places where people are happy to go. We do welcome the fact that there are outreach sessions in local Q85 Andrew Selous: Finally, on that same theme, surgeries and there is more home-visiting, but we feel just on the question of the accuracy of the advice that ought to be in addition to somewhere that being given, I understand the Citizens’ Advice people could go if they need to go on any day of Bureau have called for an independent audit of the V the week. di erent means by which advice is given to pensioners. I have certainly picked up some evidence from my constituency surgery that some pensioners Q83 Andrew Selous: Richard, do you want to add have received diVerent advice from diVerent places anything? that they have gone to, and that has obviously left Ev 20 Work and Pensions Committee: Evidence

10 November 2004 Mr Richard Wilson and Ms Sally West them quite confused. Is that a concern you have to, within the context of an income related benefit, picked up as well? What would you like to see done improve take-up dramatically, you perhaps have to about it if it is? look at an approach that does not rely on older Mr Wilson: That is certainly a concern picked up by people making contact with one of the agencies or our evidence and it is a continuous concern across even being identified and then encouraged to claim; the whole benefits arena that people can get diVerent you need systems that actually are integrated. For advice, incorrect advice depending on where they go, example, anybody who has claimed housing benefit particularly when they approach the wrong silo and council tax benefit has given all their within the Department. For instance, if you go to a information about income and savings to the local local authority to claim one of the benefits there and authority, but currently that information is not then try and find out about pension credit, it is quite automatically transferred to the pension service to likely that the advice you will get given might not be check entitlement to pension credit. 100% accurate because that is not their benefit, and vice versa: you can sometimes get inaccurate advice the other way round. So we would welcome any Q89 Rob Marris: Do you think pensioners would be attempt to try and standardise the way people concerned about data sharing like that in terms of receive information and improve the quality of invasion of privacy, or whatever: “I told the council, advice people get. but I did not want to tell the DWP about that”? Ms West: Actually it works the other way round. If you claim pension credit, the information is Q86 Rob Marris: I wanted to ask a few questions on transferred to the local authority. take-up. You mentioned earlier, Richard, that you thought the take-up target should be 90%. By when? Mr Wilson: We have a target for 2006, which is 3 Q90 Rob Marris: Have you had any concerns when million households, which is only a few years away, it is going down the street that way as opposed to the but the 2008 target, which is two years beyond 2006 other way, so to speak? obviously, only allows for an increase of 200,000. Ms West: I think what you ought to do is inform Given that more than 200,000 people will have people and people could tick a box on a claim form become entitled in the meantime, that is a slight to say they would like the information to be percentage fall in the number of eligible people who considered for other Department for Work and could be claiming. So it seems sensible for a much Pension benefits. tougher 2008 target unless the Department just intends to let the benefit drift for the next few years, which seems to be, from the targets, what could be Q91 Rob Marris: Do you think we have take-up allowed to happen. The Department has been let oV targets for attendance allowance or carers’ the hook essentially by the Treasury on pension allowance, because one of the reasons for under- credit take-up. claiming on pension credit is under-claiming on attendance allowance, carers’ allowance? Do we need targets for that as well, and, if so, would you Q87 Rob Marris: Have you ever fathomed out how talk about 90% there or what? the Department came to its targets? Ms West: I think it would be very good to have take- Mr Wilson: They are suspiciously round, the up targets for disability benefits, and we have had numbers, 3,000,000 and 3.2. It is not clear. They are discussions with DWP about this. The problem set with the Treasury and they do appear to be always seems to be it is very diYcult to estimate the numbers pulled out of the air, perhaps based on proportion of the population who would be entitled. projections of how many phone calls, how many It is hard enough to deal with pension credit when people they can help with forms over each month the national surveys collect information about until those dates, the capacity of the organisation income and savings. It is even harder to do that when essentially. you are assessing a disability benefit, but it would be very good if from some kind of research or surveys Q88 Rob Marris: Sally, 90% by 2006? we could get some idea of what the take-up is at Ms West: Yes, I would not disagree with anything present. Richard has said. I think if you are going to have a benefit, that is intended to relieve poverty, and, if it is going to achieve that goal, it has got to get to nearly Q92 Rob Marris: Richard—targets for attendance everybody. One point on the target figures, the allowance? 3,000,000 comes to round about three-quarters, 75/ Mr Wilson: The last survey which tried to look at 76%. I was looking back in our files and I found non take-up of attendance allowance was based on some Department statistics of estimates for take-up data from 1996, and so it is quite out of date now. It in the 1980s for supplementary benefit, and in 1981 was called “the first part” of the research into the estimate of take-up was round about 75%. So it attendance allowance take-up, but there was never seems to that the current targets the region of the any second part—they never continued it—but I take-up rates that income related benefits have think it was very useful. Also the carers’ allowance: always had. As I have said earlier, there are a lot of now the change has been made that allows for things the DWP are doing now to encourage take- premiums and additions for being a carer, there up. We are very positive, we are very supportive and needs to be much more eVort in that direction as we are working with them. I think if you are going well, because so many people who should be on the Work and Pensions Committee: Evidence Ev 21

10 November 2004 Mr Richard Wilson and Ms Sally West pension credit are not because they need to be on one script will have the member of staV ask them: are of these benefits first to get there and to be entitled they getting attendance allowance or carers’ to the addition. allowance; it will not go that step forward and say, “Your husband is disabled. Have you thought Q93 Rob Marris: Should the Department be doing about claiming carers’ allowance? Do you know anything diVerently in terms of trying to get take-up about claiming carers’ allowance? Here is some on carers’ allowance or attendance allowance both information.” Because a lot of people if they claim for those benefits and as a gateway into pension one benefit, they will assume the local authority or credit? the Government department, whoever, will check Mr Wilson: They only have a target at present on whether they are entitled to anything else; and the pension credit; so that means eVectively that that is ideal is a system where that happens automatically, the priority across the Department. Without any but at the moment if people go to the local authority other targets in other areas, it is very diYcult to or the pension service or to the health benefits unit, persuade civil servants to start looking in other areas where they may provide a lot of information to get because they know what they have got to do to help with their dental treatment, there ought to be a meet their— way of ensuring that they are in the system for all the benefits. Q94 Rob Marris: Leaving aside for a minute the target thing on attendance allowance and carers’ allowance, what kind of outreach would you like to Q97 Rob Marris: Have you had a chance to see the Department doing in relation to those two comment on the scripts used by the pension service benefits diVerent from the outreach it is already telephonist arm? You have mentioned about that bit trying to do as regards pension credit? Is there a not being in the script. Have you ever seen the diVerent way of reaching that group and then scripts? passporting them through? Ms West: We have seen some bits when we have Mr Wilson: All our outreach at present is generally asked, and carers’ allowance is one area where we based on claiming the pension credit and then we have expressed concern, and I understand that the might help you with housing benefit and council tax scripts have been improved to make sure, at least at the same time, and if we notice that you might be where people have got carers’ allowance, that they disabled, then we might help you with the are not missing out. I think we have seen some parts attendance allowance form. So it is always pension of the script when we have specifically asked for credit led, whereas it might be better, in fact—we them. want that holistic advice to happen, but it might be best also to advertise it as council tax benefit—get your council tax and then do the holistic advice on Q98 Ms Buck: I want to stick with your points on the the back of that, or try and take up attendance take-up and ask you from your experience, what you allowance as the hook to get people in, because, understand about the diVerence in take-up between attendance allowance not being means tested, some home owners and tenants: because we focus a lot in people want to claim that benefit and find that much the take-up debate on this relationship with other easier to do than, say, the means-tested benefits. benefits, and particularly housing benefit, and so forth, but actually my suspicion is that home Q95 Rob Marris: So does it imply greater integration owners, lower income home owners, are losing out between the local authority on the housing benefit more because there is even less of a read-across? side and the DWP on the other benefits, pension Mr Wilson: Certainly on the figures that they publish credit side? every year in (Income Related Benefits estimates of Mr Wilson: Yes. Take up), though obviously they do not look at pension credit yet, and council tax benefit is very Q96 Rob Marris: Or is that already happening? clear, it is home owners who are not claiming. I think Mr Wilson: It is beginning to happen, this 61%—I think this is correct—61% of homeowners integration with the joint teams between housing who do not claim. So I think there is some evidence benefit and council tax benefit and pension credit. that that is the case, but we do not know as yet However, it is not clear whether that is happening whether that is being borne out with pension credit with the attendance allowance, then disability living directly. allowance and carers’ allowance. That should be the point with a third age service and LinkAge and all these proposals. We have been talking for a long Q99 Ms Buck: It is not something either of you have time about bringing benefits together, about making had a look at? the service holistic and customer focused. But we do Ms West: No, I am not sure I have seen any figures in not have that yet we are still just talking. terms of pension credit take-up among home owners Ms West: I think in the context of the current and tenants. Certainly, as Richard says, we know system, before we have this fully linked up system, that for council tax benefit there is much lower take- wherever somebody gets into the system they should up by home owners. It may be that some people are be oVered the full array of benefits and services. For receiving those benefits but are not getting pension example, if somebody rings up the pension credit credit. I think it would be interesting to have more claim line to make a claim for pension credit the information about that. Ev 22 Work and Pensions Committee: Evidence

10 November 2004 Mr Richard Wilson and Ms Sally West

Q100 Ms Buck: What about the savings credit as gateway to all of those groups and that it is local opposed to the guarantee credit element, because we authorities, certainly Jobcentre Plus, that are most tend to wrap the whole of pension credit up as one, likely to be able to have an interaction with those and it is not really. I wondered if you have thought hard to reach groups that you are describing? about this take-up, because the argument that the Ms West: I think the integrated system is the ideal very poorest are the ones who are losing out, which and there should be a lot of work concentrated on may or may not be true and clearly would be very making it happen as soon as possible. Also it needs worrying, we need to deal with it, but if it is the greater links with the health service. The DWP refer savings credit, perhaps, that there is a lesser take-up to people not getting pension credit, as “hard to than might be expected, that would change our way reach” groups. It is not that these groups are isolated of having to respond to the situation? from everybody. They visit their GPs, they go to Mr Wilson: I think that the Department has been hospitals, they have contact, but not necessarily successful in bringing in people who have always contact with the pension service in terms of pension been entitled to benefit, people who were entitled to credit. I would like to see, as well as the sort of close claim but never claimed it, into pension credit, and integration between local authorities and the there has been an increase in those people claiming; pension service, the diVerent health service delivery and I think the Department has been surprised at agents taking benefit take-up as more of a priority, how successful it has been at persuading people with not necessarily becoming an expert in all the high entitlements to claim but how unsuccessful it diVerent benefits but being aware of possible has been persuading people with low entitlements to entitlements so that a district nurse or health visitor claim. There is a bit of a feeling: how do you would automatically be perhaps providing the persuade these people just for a pound entitlement a information or oVering a referral if that is what week, particularly if they are already on housing people wanted. benefit, council tax benefit and whether they are going to gain or not is unclear and whether they are going to gain significantly is unclear. So I think to a Q103 Ms Buck: In the 88 most deprived local certain extent that has been borne out, yes, that it is authorities with local strategic partnerships, some of the people with the smaller entitlements who are not them have a representation from Jobcentre Plus and making the claim, but there will still be considerable some do not, but I am not conscious that any numbers of people with big entitlements. of them would have, say, pension service representation. Is that something you have thought about, because the local strategic partnership is Q101 Ms Buck: Of course it would, but the supposed to be a means of bringing together all of assumption that low take-up of itself tends to mean the key agencies to serve and provide to the that the very poorest are the ones who are not community and make sure that there is this proper claiming would not be borne out by what you are integration and service delivery? saying. Would you agree with that? I am not saying Mr Wilson: We have over the last few years looked it is not a problem. I am not saying there are not at regeneration and what monies are going there, people with quite a large entitlement who are what has actually been spent on older people and missing out, but this kind of slogan that it is always how older people have been brought in to be the poorest who are losing out may not be borne out by your research? involved in these kinds of partnership; and actually Mr Wilson: Yes, I think often that data is used it is very little. Many of these partnerships are very because obviously the people who do not claim are much based on education and on worklessness and by definition the poorest, whereas those who do getting people into jobs, and older people have often claim have been topped up to a high level. I think been excluded from much of the work that has been that while there is evidence generally that savings going on in these deprived areas. It is quite credit take-up is lower and guarantee credit take-up interesting when you go and look. For instance, I has done well, considering specific groups, like BME went on a visit recently to see a Surestart programme groups and people with sight loss, or hearing loss in the deprived area of Camden and how services are V and other disabilities, we know that the take-up in becoming integrated for people of di erent age those groups can be really bad and those groups are groups, and there have been huge innovations in the amongst the poorest in our society. It may be that way the Government delivers services to those still there are specific groups who will have high groups, but for older people there is still this entitlements to benefit who are still not claiming fragmented service where people have to go round because they have not been reached by the pension all the houses saying the same things over and over service. again to get their entitlement. I think a lot of people have been left behind in those areas. Q102 Ms Buck: Would the corollary of that not be then just in terms of focus? Instead of perhaps, as we Q104 Ms Buck: This is something we could, for were discussing earlier, high street bases for example, raise, with respect to local strategic information like Jobcentre Plus, should it not really partnerships, and ask what planning they are doing be all focused on integration with local authorities? for pensions. One last question, which is about Should this not be the single area that we changes of circumstances and whether you feel that concentrate our eVort: because it does seem that pensioners are properly informed about, or can find council tax benefit would then be your biggest advice to deal with, questions about changes of Work and Pensions Committee: Evidence Ev 23

10 November 2004 Mr Richard Wilson and Ms Sally West circumstances, and, in particular, on the capital but if you just disregard savings credit it actually can rules, when there are more complex cases, which I introduce the perverse result that you describe, that think you raised, such as equity release schemes? people with a bit more savings can be worse oV than Ms West: One of the things with pension credit that people with a little bit of savings. So you have these was well publicised was that there are less changes of optimum levels at which somehow you are supposed circumstances that you have to report, which is a to realise that if you had saved just the right amount good thing. If your retirement income goes up or you could be in the best position when you need your savings go up, you do not need to report that. home care; but also in residential care, we also feel However, it does make the system more complicated that is unfair—both organisations—because your because, for example, you may not have to report savings credit it is kept so that you cannot receive the your increase in savings to the pension service, but if full amount. Is that really fair? The Government you are not getting the guarantee credit but you are says that it wants to reward savings, but they are not getting savings credit and housing benefit, you have for people who are in residential care; they only can to report savings going up to more than £16,000 to get a small amount of it, keep a small amount of their the local authority. I think it is quite early days to savings credit. know whether this is going to have an impact, because it is perhaps only when benefits are Q106 Mrs Humble: But the Secretary of State, has reassessed that if people perhaps have not reported argued that setting the savings credit disregard equal something to the local authority that they should to the savings credit a person receives would produce have done that will be picked up. So I think it is an anomaly in which someone with savings too high diYcult for people to know what they must report to to qualify for savings credit could be left with less whom, but, as yet, we have not had a great deal of money than somebody who had saved less, which feedback about whether this is going to cause the opposite to the other one. I think I need a flow problems in the future. chart. I think I need coloured diagrams to understand all this, because people in residential Q105 Mrs Humble: I want to ask you questions care do get a lot—their savings credit is capped a lot about the interaction of the pensions credit and care lower, it is four or five pounds as opposed to the— charging. Can I preface it by saying, “Help”? Does five or six pounds as opposed to the £15.51? anybody understand this? I have read and re-read Ms West: That is specifically because of using the and re-re-read all the many submissions that we have money that they had in a kind of cost neutral way in order to ensure, to try to make it so people with had, briefing notes that we have had, and I just want V to go into a dark corner with a damp towel over my higher savings were not worse o . The problem with forehead. If I cannot understand this, how on earth the system is because they bring your income down are elderly people supposed to understand it? Is to a certain amount. So if you are getting help from either of your two excellent organisations giving the local authority in a care home, the personal them advice on this? Can we clarify, first of all, what expenses allowance is £18.10. So having paid your it all means: because, as I understand it for the non- charges, you are left with £18.10. Had they just residential care charge, if you are getting the home ignored savings credit, then some people would get help in, the savings credit is fully disregarded, but £18.10 plus the full £15, but, as you pointed out, then, I think it is Age Concern who point out, if you there would be people with higher levels of savings do not qualify, if your savings are too much, then who would still be on the £18.10. So what they have you have to pay the full whack, which for some home done is enabled anyone with up to £4.65 in a care care charges now can be very considerable; and the home to keep that amount—£4.65 of savings credit neighbour next door who gets a savings credit and it to keep that amount—people whose incomes are too is disregarded, the person paying the full amount high to get savings credit can still get an extra £4.65 with savings that could actually just be a little bit on top of their £18.10. So it is capped for everybody. above what the neighbour has, could end up very We feel that the fairest thing would be to allow much worse oV. Is that true? people to keep their full savings credit, but also to Mr Wilson: Yes, we are very fortunate in the fact increase that disregard for people with higher levels that we both have health colleagues who mostly deal of savings because we do not see any other way to with this, but, yes, the Department of Health seem fulfil the Government’s aim of enabling people to to—there seems to be a break down in benefit from their savings. After all, £18.10 is a very communication between the DWP and the small amount to cover all your personal expenses Department of Health, so it was quite late by the when you are in a care home. So that at least if time the Department of Health decided what they people were able to keep their savings credit and were going to do about this. It was clear there was have their additional income capped at that sort of £15— no extra money, that no-one had bid for any extra money for them to pass over the more generous rules that were being introduced on income related Q107 Mrs Humble: How much would that cost? benefits over to home care charges, and there are two Ms West: I do not have that figure. It may be diVerent teams, one on residential care and one on available. home care, which seem to have taken two completely diVerent views on how they should try and work this Q108 Mrs Humble: Would it be simpler, instead of on a revenue neutral basis. On the domiciliary care talking about pension credit and entitlement to side, yes, it would at first sight seem to be sensible, pension credit and all of the complexities and the Ev 24 Work and Pensions Committee: Evidence

10 November 2004 Mr Richard Wilson and Ms Sally West winners and the losers, to simply say that for people Charging policies may have taken into account all in residential care, they do not have an entitlement the income support but not the complexity of to pension credit and instead just boost the amount pension credit? of the personal allowance, which has gone up by a Ms West: I think we definitely would like lamentably small amount over the years. Seven years departments working together at an earlier stage to ago it was about £16. As you say, it is £18 something ensure that there is integration between Department now. Would it be simpler just to say, “If you go into of Health charging policies and the pension service, residential care, no pension credit but you get a lot because, after all, from the point of view of the older more on your personal allowance”? person, it does not really matter who was assessing Ms West: I think it is important to increase the them and what the diVerent departments’ ways of personal allowance, because £18.10 is not enough to working policies are, it is the amount of money they cover clothing and toiletries and Christmas presents get and getting a fair assessment and receiving their for your grand-children and all those issues. So that full entitlements. would be one way of ensuring that people have a Mr Wilson: The fact that every diVerent means-test, more reasonable amount of income when they live in whether it is social services or pension credit or a care home. You would not then give people a housing benefit, seems to have diVerent capital higher income because they have got higher savings. limits, diVerent tariV incomes, diVerent ways of So I suppose that is a diVerent policy intent, but I assessing, makes the whole system very complicated. guess our biggest concern would be to ensure that So if those could be brought into line it would make people in care homes have enough income to be able the job of people working for the DWP and for local to enjoy and participate in the life that they have. authorities much easier and, of course, would make it much more easy for older people and their families trying to navigate the system, and actually one of the Q109 Mrs Humble: It is also important to recognise first priorities of working together is to have one that most of the residents who are in care homes now standard means-test so that everyone knows they are are not the residents who were in care homes 20 years going to be treated the same by diVerent agencies. ago, that people tend now to go into residential care Ms West: If you are in a care home your savings are when they are much frailer and have much more assessed for pension credit using the £1 for every profound social care needs. They have to be assessed £500 over a limit. If you are assessed by the local by social services as needing 24 hour a day seven day authority, it is £1 for every £250, and you can get a week care. So there are issues about what they some very anomalous situations to say nothing of need, and also the financial support that the state the complexities of people having to administer the could give them. Perhaps this debate should be systems. taking place against that backcloth. I do not know. Mr Wilson: I think both our organisations have Q111 Mrs Humble: There is also the complexity of campaigned in the past for a higher amount for the situation where one partner of a couple goes into personal expenses in care homes. The amount is too residential care, the other one is living in their home low; it does not leave people with enough to buy the as owner/occupier, where there are diVerent rules, as odd things that they want—newspapers, toiletries I understand it, for the Department of Health and things like that, all the many little things that charging policy and how DWP then allocates people would like to have—but obviously having a V entitlement to pension credit. di erent system for people in care homes to outside Ms West: We all struggle in working out these rules, in the community might break some principles so it is very diYcult for people to understand how about the equality and how we treat people. Should they are charged. we be treating people diVerently just because they live in a residential care home and do not hoard their savings? It is a diYcult question. Q112 Chairman: We are always as a Committee a bit loath to go into making recommendations as part of our reports if we do not know what even the Q110 Mrs Humble: It will also take into account the estimated general cost of some recommendations fact that some people go into residential care for are. If we were minded to look at a recommendation respite and then go back into their own homes. in the field of the inter-relationship between pension Finally on this issue: both of you mentioned credit and domiciliary residence—some of these discussions between the DWP and the Department important questions that Joan has just been putting of Health. There is a statutory basis going back to to you—if you have any way of estimating the cost the 1948 National Assistance Act on charging of that, I do not recall it being in the written evidence policies for residential care. For home care the that we have got. It may be a very diYcult question situation has been more discretionary on local to estimate, but if either of you have any way of authorities, although the Government a couple of capturing what it would cost to deal with that and years or so ago introduced a charging framework to some of the ways that you have been discussing, that try to get some more national equity. Do you think would be very helpful, a short note to the that the DWP should be engaging much more with Committee. the Department of Health in these sorts of Ms West: There may well be some information. As discussions and should the Department of Health be Richard says, these are issues that colleagues of ours re-examining its charging policy to take into account work on as well; so we can check whether there has changes in benefit? They clearly were not there. been any information publicised. Work and Pensions Committee: Evidence Ev 25

10 November 2004 Mr Richard Wilson and Ms Sally West

Q113 Mr Dismore: Can I raise some questions about Mr Wilson: Much of the theft or fraud is theft or the new direct payment system? Obviously the DWP fraud where cheques go missing or where the books have said that they are not going to keep the order went missing in the post. In the old system you books, which are now being phased out. In relation would perhaps give someone three or four to people who cannot convert to direct payment you opportunities a year for someone to steal someone’s have suggested that instead of issuing single cheques, pension book. With weekly cheques obviously that which is what is being intended, you would like to see is every week that person is going to sit there batches of cheques issued. Can you explain that idea thinking, “Will this cheque arrive?” You are giving in a little more detail? people a lot more opportunities for this post to go Ms West: I think both our organisations have had missing. It seems a very expensive way of delivering many people contacting us about the withdrawal of every week to send one cheque when actually I think the order book, because in a lot of ways there are a people would prefer to have more at the same time, lot of advantages in having an order book where you and it will mean less postage cost. So I think that is know exactly what you are going to get each week, something that will have a major diVerence and that you know it is going to be there because the book we are supportive of. Now what we are doing is says this Monday you can collect a certain amount inventing a service that specifically is targeted at the of money. We have had discussions with the most vulnerable people, those who have multiple Department on this for many years since Peter Lilley carers, those who cannot use bank accounts, those first wanted to replace the order book with a who cannot remember pin numbers, those who have payment card in 1996. We are now at a situation dexterity problems and cannot press the buttons. where we know that order books are going to go Instead of making it the most diYcult to use system, because the contract has finished with the Post the one that would perhaps cause the most worry, OYce, or will finish in the spring-time, so the why not make it a really helpful system that is best Government has announced that the cheque is going targeted at these people and gives them the service to be the only method for people who are not able or they want. refuse to have an account. So we have tried to look at if there is any way within the context of a system of weekly cheques to make an improvement on what Q116 Mr Dismore: Have the Department responded has been proposed, and I think the biggest concern to your suggestion? is, if you are waiting for a cheque to come each week, Ms West: They have told us that it is not possible. what happens if the post does not arrive, what happens if it arrives after your carer has been and Q117 Mr Dismore: One point that you did raise, gone? One option seemed to be, without trying to which I think is an important one—I would like to completely re-invent the order book, but to at least ask whether you have had any experience of this so ensure that people have a few cheques together, even far—is that the Royal Mail are changing their if it was perhaps just four cheques, so that you know delivery systems—certainly in my area you are that when your carer comes next Monday you have unlikely to get your post before lunchtime—and, I already got the cheque, you are not going to be think, obviously they are moving away from the worrying about the post and they can go straight and early morning post, and I think that is going to collect your money at the Post OYce. So it might be become a general trend. The point that you made a possible way of trying to address one of the major about carers often having gone before the post has concerns without relying on weekly posted cheques. arrived perhaps, but is this an issue that you have raised with the Department specifically? Q114 Mr Dismore: One of the arguments that the Ms West: Yes, we have and there are a few stock DWP put up is the cost of this order book system. I phrases that we are always told, which is there is no think they say it is 68p per order counterfoil question of people not getting their money and then, compared to 1p for a direct payment transaction. when we have asked what will happen if people do What would be the cost of doing it the way you not get their money, we are told there will be a suggest? number of options. What you have to do is contact Ms West: I am not sure that we have had any the pension service, telephone them and then they costings in terms of cheques. I cannot imagine that will decide the best option. In emergency situations sending several cheques together would be that this could involve somebody from the pension much more expensive than sending a cheque each service coming round with some money, although week. In fact, it is potentially cheaper than sending we suspect that will not happen very often. The other a cheque each week. options are what happens now when somebody does not get a giro, you could perhaps go to the oYce and Q115 Mr Dismore: One of the other arguments they they could give you a replacement or they may come up with is the cost of fraud and theft, provide another order and another cheque will be particularly theft, and I think the estimate they have sent in the post. The system is not ideal, I do not come up with is in the region of £50 million, the think, for younger people now because it can mean number of people who have their order books stolen, that you are quite a while without money, but I think and so forth, and the money stolen. Presumably if for the older vulnerable group of people who will be you are sending out a batch of cheques the benefit of tending to use the cheque service, it is going to be sending out single cheques is somewhat diminished even less suitable because a lot of people will not be by the risk of theft or fraud. in a position of being able to get to the oYce—I do Ev 26 Work and Pensions Committee: Evidence

10 November 2004 Mr Richard Wilson and Ms Sally West not know where the local oYce will be, job centre inappropriately. What hard evidence is there that oYce, I suppose, or a pension service surgery, if it people have actually been harassed? That is quite a happens to be there on that day. strong way of putting it. Ms West: I am not sure we used the word harassed. Q118 Mr Dismore: Have we formulated what the Mr Wilson: No. options will be for people in a standardised way that Ms West: Certainly people have said they feel they have communicated to you and to your pressured and one or two people have said to us, organisations if somebody does not get their cheque “We have been told there is no option but to have an on time? account.” We do not have recordings of these Ms West: We have been given some general telephone conversations and it may be that that is information to explain that these are the kinds of the impression that people got. However, it is options. We did say could we see the guidance that certainly what people say to us and that they feel that staV would have in order to help them decide which there is a lot of pressure being put on them to have an option would be suitable on what occasion, but we account. For example, people are getting telephone are told that is internal information. calls at weekends and visits at weekends with DWP staV coming round and trying to encourage them to open an account. In some cases it is clear that people Q119 Mr Dismore: Do you get the impression that have not been told all the options because we have guidance actually exists and you are not allowed to certainly had cases where people have transferred to, see it, or that the guidance has not been formulated? say, a Post OYce account and they have a regular Ms West: The guidance they are referring to I think V V carer or di erent carers who collect their money and is the guidance that sta would use now if the carers have said, “We cannot use your Post somebody’s job seekers allowance giro, for example, OYce account.” So in those situations the person did not arrive. has had to go back and have an order book or cheques resumed; so it was clear that they had not Q120 Mr Dismore: So you do not think there has understood that the Post OYce account is not been a specific separate arrangement for pension suitable if you have got a number of diVerent carers. service as opposed to the general giro problem? Ms West: No, we certainly have not been told that Q124 Mr Dismore: Is it that the conversion centre there is new guidance or new training for staV in staV are not properly trained or do you think it is a relation to the cheque service or the new customers bit more subtle than that and that there is a that they will be having. subliminal attempt to push people in this direction? Ms West: I think they have a role, which is to try to Q121 Mr Dismore: Going on to the exceptions to the get as many people to take out an account as service more generally, do you think that that has possible. I am not sure whether they work to specific been well advertised and, if not, what do you think targets. That would be interesting to know, but should be done to publicise it more eVectively? certainly it is the Government’s policy that people Ms West: I think it is not only that it has not been should have accounts if at all possible. advertised, it has not been mentioned on most occasions, as, once the DWP started writing to Y people encouraging them to move to an account, one Q125 Mr Dismore: Going on to the Post O ce card of the things that we have always said is that they account, we have heard a lot of evidence about the should at least be told, “If none of the options are problems there are in trying to get one of these and suitable we will have an alternative system”, but the the stages that need to be gone through. Are there Department was very keen not to say that; so that any stages that you think could be cut out of that the diVerent account options would have been process to make it more accessible? suggested and then there is a telephone number that Mr Wilson: Yes, it seems to me the principle should be that it as easy to open as a bank account, ie you you can ring if you want further information, but it Y has never been specifically stated that there is a can go into a Post O ce and open one by filling out service for people for whom accounts are not a form, and that would be the most simple way of suitable. doing it. Instead there are a number of stages. There is a stage at the end, which, it has already been admitted was an extra stage that did not need to Q122 Mr Dismore: How do you think they should happen, it was stopping people from getting their publicise it? What do you think they should do? final account where people had to go in to sort of Ms West: I think if people are going to make a unlock their account and make it work, and they proper informed choice about what option to have, have already knocked oV that stage, but there are then that should include saying that the fall-back also extra stages at the start. For instance, the fact position is to have a weekly cheque, and for many that you had to phone up the conversion centre to people they will say, “That is not what I want”, for get this invitation letter, and when asked why this the reasons that we have just been discussing, but at had to happen I think the feeling was that otherwise least people should be told about that. people would try and open accounts even if they did not have benefits and pensions; and I do not really Q123 Mr Dismore: In your evidence you suggest that think that is such a big worry actually, that people some older people have been harassed into just try and open these accounts for any old reason. converting to direct payment or people are moving So I think there are too many stages. People should Work and Pensions Committee: Evidence Ev 27

10 November 2004 Mr Richard Wilson and Ms Sally West just be able to go into the Post OYce and open a Post weeks and not telling people because they did not OYce card account if they have the right details realise they had to, and actually when the pension with them. credit has been branded as not a benefit, it is an entitlement, it is an addition on top of your state Q126 Miss Begg: There is a four-week limit on any pension, then why would people think they needed pensioner who is simply staying abroad, and at that to tell them if they went abroad? This is not supposed stage the pension credit stops and when they come to be an old-fashioned kind of benefit with these back they have to reapply. Do you have any evidence kinds of punitive rules that prevent you from going of the numbers of older people who are aVected by on holiday or doing all these other things. So I think that? that probably is the way the Department is looking Ms West: I am not sure that we have the actual at it. numbers. I know there was a parliamentary question some time ago where the Department said they did Q129 Miss Begg: If I can move on to a diVerent issue. not know how many people would be aVected, but I suppose I have got the last set of questions to you, they have been looking at this issue so there may be so I am probably jumping around a bit. This some information now, and certainly there is some Committee actually recommended in 2002, as, I information on the cost. I think it would cost think, Age Concern did, that the disregard for those £5 million a year to extend the period from four pensioners who were earning should be £40 in order weeks to 13 weeks; so they may now have some more to encourage pensioners to be active in the labour information. It is probably not masses of people but market. The Department did not take Age it is the unfairness of the situation that concerns us. Concern’s or our advice and they said that it was For example, if you live in London and your family basically because it would be too expensive and the live in Scotland you can go and spend as much time best way to promote activity was to award the with them as you want to without your pension earnings of those over 65 with the savings credit and credit stopping, but if your family live in India, if you through working tax credit. How do you respond to leave the country for more than four weeks, even if what the Government is saying? you do that once every five-years, that is when your Mr Wilson: Even since that inquiry the agenda has benefit will stop. changed so much. Now ministers and everyone are talking about the need to encourage older people to Q127 Miss Begg: Do you have any evidence that work beyond state pension age if they wish to, and black and ethnic minority groups are being what we have is a situation that the poorest 50% of disadvantaged to this extent, or is it just anecdotal at pensioners, those receiving benefits, could help this stage? themselves out of poverty perhaps by doing a few Ms West: We have not got numbers, but that is part days work here and they are penalised for doing so, of the reason that at Age Concern we have been and even the savings credit is withdrawn at 40p for campaigning on this issue, because we have been every pound; so that is a 40% tax rate for those very having some feedback from some of the black and poorest people who want to do some work and minority organisations that it is something that is supplement their income and perhaps also to get out causing problems for the people that come to them and see people and have a more interesting and seeking information and advice. varied life. I think the case is quite clear, that the limit needs to be raised, it would fit with the Q128 Miss Begg: Have you got any indication that Government’s agenda and I would hope that would the Government is looking seriously at extending the be a recommendation that the Committee would period of time people can spend abroad? make again. Ms West: The Minister has said that they are Ms West: As regards this £5, it has been the same for looking at this—there are civil servants working on years and years. this issue, and we find that a very positive sign and we think as a minimum it would be sensible to Q130 Miss Begg: 1988, I think, is it not! Age increase the period before pension credit stops to 13 Concern’s One in Four report argues for reforms to weeks, which would be in line with housing benefit the conditions of entitlement to the basic state and council tax benefit and goes back to earlier pension and improvements in the second state discussions about the importance of integrating pension. One of the criticisms we have heard of that benefits as far as possible. approach is that it will take a long time, particularly Mr Wilson: I think the Department are possibly for older women, for it to work through the system approaching this with the same view that they took until they actually are better oV as a result. Given with the hospital down rating issue, but actually that we have the pension credit, what would you when you look at the operation of this, is it worth all recommend as a short-term solution to the problem the bureaucracy, the time spent by civil servants in of low income for female pensioners? getting these order books back, stopping the money Ms West: The pension credit clearly goes to more and then making people reapply, for the actually women than men and it has been very important in quite small amounts of money you save and the increasing the income of older, poorer women. inconvenience you cause people. Also the fact that However, we know not everybody who is entitled most people do not have the slightest idea how these receives it and what we would like is a situation rules work, so there are also odd people out there where people do not need to claim top-up benefits who are probably going abroad for more than four because they have decent pensions, both private and Ev 28 Work and Pensions Committee: Evidence

10 November 2004 Mr Richard Wilson and Ms Sally West state. One of the options put forward that would responsibilities protection and particularly women increase the incomes of older women would be a of that generation who are much less likely to have universal pension, a citizens’ pension. It is a full state pension. interesting to consider whether the priority should be to extend the coverage of the current pension or Q132 Chairman: The inquiry is in the context of increase the level. Certainly Age Concern and Help Adair Turner and the Pensions Commission initial the Aged would like to see a system where you have a interim report. Where do your respective higher basic pension and a basic pension where most organisations stand, if you indeed have a position people receive the full amount. yet? The main question is identifying the fact that there is a trend, if you like, in trying to go for a bigger, basic state pension with less means testing Q131 Miss Begg: How much would that cost? but quite clearly that is averse to the fact that there Ms West: A citizens’ pension for all at the current are disadvantages to this in terms of additional level would cost about £5 billion. To increase the government spending or longer working lives. Do basic pension to £105 is about £7 billion net of means you have a view on that that you could share with us tested benefits. It is an interesting question: which at the moment, to help us consider that in relation to should be the priority and which would best help pension credit? women is the priority an increase in coverage or is Ms West: We believe that there should be higher and the priority increasing the level of the state pension? better state pensions and we accept that that will We need a lot more analysis on who would benefit mean increased contributions or tax in order to pay from the diVerent approaches. Extending the for that. We think that might also help in pension to older women would particularly help encouraging private savings. We do not feel that married women who tend to be the section of the compulsory, private contributions are the way population with the lowest individual income and forward because we think the people who would be are also much less likely to get a full, basic pension. compelled to pay into contributions who are not If the aim was to help, for example, older widows currently paying would be the low income people who are often considered one of the poorest groups, who currently lose benefits. We also accept that a citizens’ pension probably would not help because people need to work longer. There should be they tend to get a full basic pension based on their encouragement and support to enable people to do husband’s contribution. Before we move to that but we would oppose an increase in the state something like a citizens’ pension, we would also pension age because that would penalise people who have tended to have low lifetime earnings, such as have to consider whether people would be happy to manual workers who also have the lowest life abandon the contributory principle, which certainly expectation. has strong support among a lot of older people. Mr Wilson: There is a growing consensus now around Indeed, a lot of the women who contact us who do the issue that pension needs to be increased and not get a full pension tend not to be saying, “I think means testing needs to be reduced as we go into the I should get a pension because I have been living in future. We support the idea of a higher state pension this country for a long time.” They say, “I think the so that the vast majority of people do not need to rely system is not fair because it does not fully recognise on extra means tested support. As the Turner Report the time I have spent raising children” or, for a lot of highlights, this is a huge problem. It is not just going people, “the time I have spent working but paying to be state pensions that need to increase. We need the married woman’s contributions when I had not more private savings and we need people working realised that those contributions were not counting longer but that should be voluntary. The first huge towards a pension.” One option that might help tax step is to get people working up to state pension current older people is to look at perhaps some kind age; let alone getting people working beyond state of retrospective crediting for periods when people pension age. When they are working beyond state were caring for children but missed out on the pension age, it should be about people’s choice and current home responsibilities protection. One issue there should be the right incentives there to encourage that has not had much publicity—I do not think we people to do it when they can. have really pressed it—is that if you opted to pay the married woman’s contribution you do not get home Q133 Vera Baird: Considering the widening of responsibilities protection for that period either. entitlement to the basic state pension, are you One step forward within the context of the current confident that it is possible to design a national system would be trying to ensure that people did get insurance system which credits into pension full recognition for caring responsibilities, which is contributions everybody who should be getting something that younger women now will be more pension contributions for their caring as well as their likely to receive. working? Mr Wilson: Another way of targeting older widows Ms West: There are some ways that we can do it and to prioritise resources would be to increase the within the context of the current system, the sort of state pension at levels of diVerent ages and that is an proposals we have put forward, for example, option that has been discussed in the Committee reducing the lower earnings limit. There are some before, increasing the state pension for people aged diYculties in perhaps picking up some people who over 80 or 75 as a priority first, particularly to help are providing care to maybe an older relative but not those people who have missed out on the home enough to be qualifying for a carer’s allowance. We Work and Pensions Committee: Evidence Ev 29

10 November 2004 Mr Richard Wilson and Ms Sally West need to work on looking at those. The alternative, a Ms West: Yes. We also need to look at the position residence based pension, does not necessarily get rid of older women. of all the problems of complexity because you still have to decide who is resident in the UK and for how long. I do not think we have any system of knowing who is resident at one particular time so although it Q135 Chairman: I did promise at the beginning that, might solve some problems there is a whole range of if we had missed anything out that was glaringly other complexities in deciding how you establish obvious to you, you could mention it. Is there residence. What do you do if people want to retire anything that we have obviously missed out that you abroad? Over 800,000 UK pensioners currently live would like us to consider in the course of an inquiry? abroad so we would have to decide whether, if you had a resident’s pension, you could then export that Mr Wilson: No. We have covered quite a lot. pension later. I do not think there are any easy Ms West: There is one specific point that Citizens’ answers. We are interested in discussing the wider Advice asked me to raise because they had not issues of things like citizens’ pensions and we think managed to get it in to their oral evidence session. In it is really important to look at all the diVerent relation to interaction between benefits, one of the options. What we would not want that to do is to problems is, when you are getting income support stop any shorter term changes that could bring more and you get to 60, your income support stops and women into the system in the meantime that could you have to reapply for pension credit. There are lots be possible within the context of the current system of delays and gaps. Everybody was transferred from rather than waiting for some big bang approach. income support to pension credit in October 2003, an obvious thing that we should do to make the Q134 Vera Baird: They all take a long time to feed system better. through of course unless you are going to do them Chairman: Thank you both very much for your retrospectively. evidence this morning.

Witnesses: Mr Joe Harris, General Secretary, Mr Tony Lynes, Pensions Adviser, and Mr Neil Duncan- Jordan, Campaigns OYcer, National Pensioners’ Convention, examined.

Q136 Chairman: Welcome to our witnesses from the week? What it actually does is to oVer them income National Pensioners’ Convention. The NPC have support which is now called pension guarantee. helped us as a Committee a great deal in the past “Pension” ought to come into it but hardly “pension with various subjects and Tony Lynes has appeared guarantee”. It does nothing new for them. The before more committee sessions over many years on second thing is the savings credit which has failed in this important subject than most. We have this some respects because, in the first place, it is only morning Joe Harris, who is the general secretary of oVered to a single person who has a total income the National Pensioners’ Convention, Tony Lynes, with their savings of something less than £150 a who is pensions adviser and Neil Duncan-Jordan week. It means that anybody, as the threshold for who is the campaigns oYcer. Joe, perhaps you could claiming it lies on the basic state pension which is at set the scene for us a little. It would be helpful if you the moment £79.60, who has an income including could give a general overview about what the their savings of below £79.60 cannot claim anything Convention believes the operation of pension credit for their savings. There are many women who pick in the last 12 months has amounted to. up a state pension which is of course below £79.60. Mr Harris: We have about 1.5 million pensioners They probably pick up £45 or £46 a week and there through our aYliated organisations whom we are people who do not pick up the full pension represent. When we came across pension credit, anyway, men as well. If they have made up their there was great discussion throughout the nation on income through savings to, say, just under £79.60 what this meant to people. We looked at it in two they will get no benefit from their savings which is ways. First, what does this do to eliminate pensioner supposed to be one of the objects of the exercise. We poverty which, after all, should be the objective of us feel that it fails in that respect because the poorest all. Then, what about the measure itself? Overall, we pensioners who are always the target for government think it has failed in three respects. As far as the statements and approaches are not really getting poverty side, bearing in mind incidentally that 60% anything out of the savings side. The fact is that it is of median income is at poverty level which is £250- oVering something to pensioners. I am lucky. I get odd a week, what does the pension guarantee do? an extra 25 pence a week now and I do not have to The first thing it does is, to a certain extent, confuse be means tested for it. I am very grateful for it because it is called pension guarantee but it is taking because 25p a week is an extra I get which I do not the place of income support. The £105.45, as it is at have to fill out a form for. However, when it comes the moment is income support. The idea of calling it to the question of the pension credit system, for a pension guarantee I think denigrates the whole people to avail themselves of it, they have to go principle of a pension. Most people do not regard a through means testing. We think this is undignified means tested benefit as a pension. A pension is and, more than that, it is very, very confusing. Joan something quite separate. What does it do for single Humble made the point about how confusing it is. people who have an income of less than £105.45 a We thought it was confusing and, having read the Ev 30 Work and Pensions Committee: Evidence

10 November 2004 Mr Joe Harris, Mr Tony Lynes and Mr Neil Duncan-Jordan

Department’s literature on it, because of the general, Mr Lynes: I am pretty sceptical about that argument popular confusion, we brought out a pamphlet because I do not think that most people can begin to called Pension Credit for Beginners. We tried to work out how much they are going to be entitled to. simplify it. We had a wonderful sale—50p a copy, It may be that some people think they are not going incidentally—amongst people who least understood to get very much and so do not bother to claim, but whether they were entitled to make a claim or not. the idea that they do not claim because they are only That is not clear in the DWP’s Pick it up. It’s yours going to get £5 a week I think assumes a level of pamphlets. We think it is very confusing. It is understanding which simply does not exist. I would causing people who could benefit from it hesitation. like to say a bit more about that in terms of the whole I think you have already heard of the problems that way in which the pension credit is presented in the are related and we feel that it is a very confusing legislation and in the literature based on the statement in every way as to how people can increase legislation. Shall I do that now? their income a little. Chairman: Your written submission is along those lines and very welcome too so thank you for that. Q139 Mr Goodman: You are very welcome to. My next question was going to be: given the apparent complications of claiming, how could the literature Q137 Mr Goodman: Can I take you specifically to be made clearer. For example, should it explain how take-up and means testing? You argue that pension the savings credit element is calculated or would that credit has failed to get the money to the poorest provide even more confusion by providing more pensioners because of the reliance on means testing, detail? which is a point that is often made, but the Mr Lynes: I think the problem goes right back to the Government does respond by saying that nearly 60% legislation itself. The Government decided that in of the extra £2 billion going each year on pension introducing the pension credit it would not present credit goes to the poorest third of pensioners. About it simply as a modification of the existing income 80% goes to the poorest half. As the previous support rules, which in my view is what it is. They witnesses explained, older and poorer women have would present it as in eVect being two benefits, one benefited from the pension credit. In the light of all being the guarantee credit and the other being the that, can you explain your argument further? savings credit. What the pension credit did was to Mr Lynes: It is true that a large number of introduce what we used to call a “disregard” into the pensioners are now getting pension credit who were calculation of income support for older people. In not getting the minimum income guarantee principle, when you have a means test, any other previously. Many of them are pensioners who ought income that people have is deducted from their to have been getting the minimum income guarantee benefit entitlement. In future, if you have income previously so they are among the poorest from savings and so on, instead of the whole of that pensioners. We are not obviously saying that being deducted from your benefit entitlement, only pension credit has not done quite a lot of good in 40% of it will be deducted. That could have been terms of getting more money to the poorest introduced into the existing legislation very simply pensioners. What we are saying however, is that even indeed. We have had disregards in the income if you look forward and assume that the support system way back to the 1930s. That in itself Government is going to meet the targets that it set is not something new or diYcult. I do not say for itself as far ahead as 2008, there will still be very everybody would understand it but it is not a terribly large numbers of people not claiming the pension diYcult concept to explain to people. If the Pension credit and a large proportion of those will be among Credit Act had treated it in that way, the whole thing the poorest pensioners. Our calculation from would have been enormously easier for people to government figures is that in 2008 there will still be understand. You would not have had to understand between 0.4 and 0.5 million of the poorest what the savings credit was because there would not pensioners not claiming pension credit. They are have been a savings credit. I have mentioned it to this people who are below the guarantee credit level. In Committee before but if you look at section three of other words, they are among the people who were the Act and attempt to understand it I guarantee not claiming minimum income guarantee in the past that you will fail. What we have also discovered is and they will still apparently not be claiming it in that section three of the Act in some cases produces 2008. That is a very serious defect in the scheme, the wrong answer. The Department has admitted to however much one may welcome the good that it me that it produces the wrong answer, but it says has done. there are not very many people aVected so it is not prepared to do anything about it. I have submitted to your Clerk a considerable amount of Q138 Mr Goodman: The Secretary of State said correspondence on this subject which I hope you recently that one of the main barriers to take-up may have a chance of looking at. The system is much might be that some people who are entitled to claim more complicated than it needs to be and much more do not claim because there are small amounts diYcult to explain than it needs to be. involved. In other words, I think the implication was that those who can claim larger amounts and need the larger amounts are getting the larger amounts. Q140 Mr Goodman: You have a particular concern Do you think that the Secretary of State’s analysis is about the level of assumed interest on savings which right, first of all? Are there ways round this problem? is 10.4%. Would you just like to air that concern? Work and Pensions Committee: Evidence Ev 31

10 November 2004 Mr Joe Harris, Mr Tony Lynes and Mr Neil Duncan-Jordan

Mr Lynes: This is something which people have been Q144 Miss Begg: What about the pensioners who do complaining about for a very long time. The 10.4% not qualify for the state pension? is only half of the rate of interest that they used to Mr Harris: Pensioners who do not qualify for the assume. The justification for this is to say that we are state pension should now be brought into being not assuming that you are going to get 10.4% return qualified for a state pension. In our pensions on your savings, but we are assuming that as well as manifesto which we produced at our last Pensioners’ spending whatever income you do get from your Parliament, we asked for this. Everyone should be savings, if your savings are above a certain level, you credited in. are also going to spend part of your savings to meet your day to day living expenses. In the context of a Q145 Miss Begg: No National Insurance means tested benefit, that may not be an entirely contribution link at all? unreasonable proposition but again people simply Mr Harris: The national insurance contribution can do not understand it. If they are told that they are continue but as it does in other regards, like in assumed to be getting 10.4% on their savings and SERPS and so on, it is possible to credit people in. they are getting 3 or 4%, they think it is unfair and People who have been unable, either because they one wonders whether this unfairness is really have not had jobs with suYcient money—that justified by the amount of money that is saved. applies to women a lot—or who have been led into not contributing when they perhaps they could have Q141 Mr Goodman: Given that we do have pension done should be credited in. Indeed, if that was the credit, just leaving out of the equation for the case and everyone got a full state pension and it was moment long term reform, what improvements to it above that threshold, we would be okay. would you like to see to deal with these problems as far as they can be dealt with, within the framework Q146 Vera Baird: Am I understanding that your of the pension credit? recommendation is that there should be—let me Mr Lynes: What I have already said is relevant. I do read what I think it says in your manifesto—a BSP not think it is too late for the Government to have at the level of guarantee credit immediately for all another look at the legislation and make the whole men and women of pensionable age? thing easier to understand. I think that is the single Mr Duncan-Jordan: Yes. biggest thing that would help. Q147 Vera Baird: We are talking about a citizens’ Q142 Miss Begg: Can I clarify exactly what the pension? National Pensioners’ Convention’s attitude is Mr Duncan-Jordan: In eVect, you could call it that. towards means testing? Are you saying that It has been called a national pension in the past and pensioners should not be means tested at all? various diVerent things. The key point is we do not Mr Lynes: Yes. believe today’s pensioners can wait for reform in the way in which Adair Turner may be talking about or this Committee or anyone else may be talking about. Q143 Miss Begg: Where does that leave housing We have people now who ring up, write to us and benefit, council tax benefit and, if you do not have a come to our meetings who are in desperate need of pension credit, income support for those poorer a pension of £105 a week now. We believe it can be pensioners who do not qualify for the basic state aVorded straight away. What we cannot do is only pension? give it to those who have made full contributions Mr Harris: We are against means testing. We believe because that would still leave a large number of that the whole idea of the basic state pension women missed out and those who did not have a full originally was to take people out of poor relief. It contribution record for whatever reason. You have roughly calculated what it cost to have indoor relief to give it universally. The figures are there to show in a workhouse. The idea was that people were not how much that would cost and where the money called paupers any more. They got a pension instead. could come from. We think the idea of a pension should be to remove people from means testing. Most people, including I Q148 Vera Baird: Can I come to the costings later am sure our Members of Parliament, would regard and let me understand at its fullest what you are a pension as something which is certainly above saying? There should be a citizens’ pension now for anything to do with the threshold for means tested everybody who is retired? Am I understanding that benefit. Our attitude is quite simple. If it does not do would be on a non-dependency basis? that, why call it a pension? That is rather an over- Mr Duncan-Jordan: Yes. The manifesto is clear. simplification but what it brings in its trail is what we £105.45 a week for every pensioner, regardless of have been getting in this pension credit system, their contributions. If you want to call that a which is that once you have a pension which is below citizens’ pension, that is fair enough, but this is an income support—remember, £79.60 compared with immediate demand to meet an immediate need. £105—and people have to be means tested because Whether in future that has to be changed or in 10, 15 only if they are poor can they get the top-up, you or 20 years’ time we have to look at it, that have to prove you are poor and you introduce more is something separate but our campaigning means testing, more means testing and more means organisation is to achieve change now, not in testing. We are against it from that point of view. decades. Ev 32 Work and Pensions Committee: Evidence

10 November 2004 Mr Joe Harris, Mr Tony Lynes and Mr Neil Duncan-Jordan

Q149 Vera Baird: I understand but your manifesto everybody thinks ought to be in it because the credits also says that you recommend extending National in the past have been poor and there are two ways of Insurance contribution credits for those who have tackling it. I understand that. Mr Harris, if you leave not been able to build up full contribution records me a couple of minutes to ask about costings, then because of low pay or carrying responsibilities. How please carry on. do those two interact? Why do you need to be Mr Harris: On 4 February, in answer to Steve Webb, crediting more people into NI if you are going to give the Minister said that to give everybody over the age them a pension irrespective of their contribution of 65 the full state pension of £105 a week would cost rate? £9 billion. 1% on insurance contributions produced Mr Lynes: It is a diYcult issue for the NPC and for that figure but it went to the National Health everybody else. What we are saying is that there are Service. It can be aVorded. That is the first point. large numbers of people who are not getting a full The second point is, to stop the problem on this, state pension at the moment and who ought to be there is no real diYculty about this. The main thing because they paid their contributions when they is, do we have a citizens’ pension which is going to could reasonably be expected to. That needs to be be funded in a diVerent way or do we keep what has put right. been going along very well, which is the National Insurance fund, and somehow manipulate that in Q150 Vera Baird: Is there going to be some way of order to give everybody a pension? This was debated quantifying when somebody has paid a contribution at considerable length at our Pensioners’ Parliament when they could reasonably be expected to? How are and the idea was it is simple enough. We keep you going to make that quasi-moral judgment? the basis which is employers’ and employees’ Mr Lynes: There are two possible solutions. One is contribution to a National Insurance fund. We bring that we simply say, “This is a citizens’ pension. back Treasury grants to top it up so that we can Everybody gets it without any regard for the eVect this and then we only have a problem if contributions that they have paid or they ought to someone says, “So and so down the road did not have paid.” The other is to say, “We are going to contribute” and you have to go into it. Why should look at the gaps and see to what extent it is justifiable he or she get the same pension? That would be the to try and fill those gaps.” There are some gaps only element of problem about it. which I think it would be perfectly justifiable to fill if we could find a way of doing it. For instance, the Q153 Vera Baird: If you are going to do it on the fact that home responsibilities protection only came contribution basis, you are going to have to go in in 1978 so there are large numbers of existing retrospective. You are going to have to credit people pensioners who have not benefited fully from that. It into contributions retrospectively so far back that would be perfectly possible on some kind of more or you will bring everybody who is currently on a less notional basis to say, for instance, if you had pension somehow into the scheme. What is the point children before 1978, we will credit you with a of that? certain number of years’ contributions. Mr Duncan-Jordan: We believe that National Insurance has an important social, cohesive role to Q151 Vera Baird: I follow that there are two models. play, if you like. One generation pays for the next One is making the National Insurance scheme more and so on. We have argued that in the past. inclusive by giving people credits in working and caring. There are diYculties with that but it is there; Q154 Vera Baird: Can I ask you about the costings or just saying that it does not matter about the because I am very keen to know whether you have National Insurance contributions, which is what I costed the proposal for the basic state pension on a understood you were advocating, and to give universal basis being increased to a third of average everybody who is at retiring age a full basic state earnings over five years, which I think is your pension now. I see a conflict between those two preference? The Government says it would cost 41.9 which you seem to be advocating at the same time. I billion by 2009 to have a universal, basic state am asking you to help me understand whether there pension which is a third of average earnings. Is is a conflict between the two or not. that right? Mr Lynes: I am not sure I would use the word Mr Duncan-Jordan: We have not costed that. I am “conflict” but there is certainly a not completely not sure if that figure is the additional cost or the resolved issue there. When you look at the total cost. Certainly we know that the additional pensioners’ manifesto, which I think is a very cost immediately to give everybody £105 would be in important document, you have to bear in mind that the region of eight or nine billion. that was not written by a committee of academics sitting round a table. It comprises proposals which Q155 Vera Baird: At the moment? were made by pensioners’ organisations all over the Mr Duncan-Jordan: Yes, if we were to do it today. country and if there are things in it which do not entirely seem to hang together as neatly as we would Q156 Vera Baird: Increasing it to a third of average wish that is a consequence of— earnings over the next five years, according to the Government, would cost 41.9 billion. That is not just Q152 Vera Baird: I think it is very easy to get the possible, is it? It cannot be sustained. thrust of what you are saying, which is that currently Mr Duncan-Jordan: Is that an additional 41 billion a lot of people are excluded from a BSP who on top of current expenditure? Work and Pensions Committee: Evidence Ev 33

10 November 2004 Mr Joe Harris, Mr Tony Lynes and Mr Neil Duncan-Jordan

Q157 Vera Baird: Either way it probably cannot be pension credit in line with earnings more and more sustained, can it, but I think it is additional. It is people are drawn into means testing which makes impossible, is it not? reforming it ever more expensive; but if they do not Mr Duncan-Jordan: I am not sure. We have always then pension credit begins to fall behind again. On argued as an organisation politics are about choices the basis that for the immediate future pension credit and government of whatever shade has to decide (a) is here to stay, it appears, what sort of commitment how it raises money and (b) how it spends money. do you think the Government should be making on Our pensioners have determined the way in which uprating pension credit in future? they would like it spent. There are competing Mr Lynes: The £105 guarantee credit level must interests for the way in which public money is spent continue to rise in line with average earnings, not but that does not denigrate the suggestion that older just in line with prices because if it does not this does people have come up with themselves that that is mean that the poorest pensioners, or at least the how they want some of the public money raised poorest pensioners who get round to claiming and spent. pension credit, will fall further and further behind the incomes of the rest of the population. It seems to Q158 Vera Baird: Tony said that even if the me unthinkable that the Government should go Government meets its targets for take-up of pension back on the existing policy of raising the guarantee credit the largest numbers of those who do not claim credit level in line with average earnings. That is not will still be the poorest pensioners. I wonder if you the only determinant in the number of people have any evidence that that is right. We have just qualifying for pension credit and obviously if the heard from Help the Aged that in their view the Government acceded to our demands and raised the pension service has been successful “at getting basic pension to the guarantee credit level pension people with high entitlement onto pension credit but credit would virtually cease to exist anyway, but less so where the amount they are entitled to is even short of doing that it is not just the guarantee around a fiver a week.” Are Help the Aged wrong? credit level that gets uprated; it is also the savings What is your evidence? credit threshold which at the moment is the same as Mr Lynes: Our evidence comes from answers to the existing basic pension level. You get your savings parliamentary questions which certainly show that credit based on your income above that level. by 2008 there would be between 400,000 and 500,000 Logically, it seems to me that that level should also of the poorest pensioners still not getting the go up in line with earnings. If it did, then of course guaranteed credit. you would not have a steady increase in the number of people qualifying. That is not the policy that we Q159 Vera Baird: How do you say they are the are advocating because we want to get rid of it poorest pensioners? Is it not a very arguable view altogether. that it is the people who feel it is not worth claiming and who do not bother to claim? Q161 Mr Waterson: And your views on what the Mr Lynes: When I say “poorest” I mean that they Chancellor said yesterday? are people below the guarantee credit level. Mr Lynes: I have not read what the Chancellor said.

Q160 Mr Waterson: Gentlemen, I enjoyed Q162 Mr Waterson: He said he would not restore the addressing the Parliament in Blackpool. I want to earnings link. It was imprudent. ask a question about uprating. The Chancellor said Mr Lynes: He is in a rapidly diminishing minority very clearly in his speech to the CBI yesterday that because practically every reputable organisation he was set against restoring the earnings link for that has looked at pensions policy in recent months pensions. The new Secretary of State has recently has said that the basic pension should be raised to made it clear that he thinks the pension credit will the guarantee level and linked to earnings. not continue indefinitely but it seems we are stuck Chairman: Gentlemen, thank you for your written with it for the foreseeable future. There is a dilemma evidence and your appearance here this morning. It which will face any government, which is if it uprates has been very helpful. Ev 34 Work and Pensions Committee: Evidence

Wednesday 24 November 2004

Members present:

Sir Archy Kirkwood, in the Chair

Miss Anne Begg Rob Marris Ms Karen Buck Andrew Selous Mr Paul Goodman Mr Nigel Waterson David Hamilton

Witnesses: Mr Adair Turner, Chairman, Pensions Commission, Ms Jeannie Drake, Deputy General Secretary, Communications Workers Union, and Professor John Hills, Social Policy, London School of Economics, examined.

Q163 Chairman: Ladies and gentlemen, good sector is filling in the gaps left by the state. It morning and welcome. The Committee is engaged in describes, as you know, the basic demographics; it a Pension Credit inquiry and we thought it would be describes the trends in private pension provision as essential to talk to the Pensions Commission, who well as the state plans; and it ends by setting out a have recently produced their rather excellent logical set of ways forward which could be debated, compendium of background information and scene- which include but are not limited to the specific thing setting in terms of the wider work the Government which was put on our terms of reference: whether we has asked them to do. We are delighted that all three should ever move beyond the voluntary system (ie, commissioners were willing to come in front of us have some element of compulsion). But you cannot this morning. We have in front of us Adair Turner, answer that question without also considering who of course is the Chair of the Pensions whether the structure of the state system is well Commission; Jeannie Drake, who is the Deputy designed to encourage voluntary savings, without General Secretary of the Communication Workers considering whether the voluntary savings system Union; and John Hills, Professor of Social Policy at could be made more eVective in a number of ways. LSE. You are very welcome. Thank you very much That report has been published and we now have a for coming and for your written evidence. You are form of consultation process which asks for written dealing with a level of technical detail which we do consultations between now and the end of January. not need to get engaged with to the same extent in We are encouraging all the relevant expert groups this particular inquiry on Pensions Credit, but it and bodies to give us a reaction to the report, which would be foolish for us, if we were trying to make establishes whether everybody is agreed on the facts positive recommendations to try to get the policy that we have set out there. We have asked people to better configured for both the short term and the be clear whether there are any disagreements about longer term, to ignore the work you are doing. We the description of the situation that we set out but have the opportunity in the reasonably short- also to propose as between the diVerent options that distance future to make suggestions to government we set out which the diVerent bodies recommend. as to how to reconfigure Pension Credit. There has We will be taking the input of those written been a little bit of discussion: the new Secretary of submissions—and, indeed, some oral sessions State is saying some interesting things about the subsequently—and further research and thinking longer term and Malcolm Wicks has been saying that we will do, and we intend by sometime about that Pension Credit is not forever, which, in one October next year to come out with our sense is a statement which is blindingly obvious and recommendations on what the way forward should everyone understands that; but, on the other hand, be for our overall pension system. Within that it is quite interesting that they are thinking how the overall context, the issue of the Pension Credit is policy might be refined in the immediate future. It mentioned and discussed in one of the chapters of would be very helpful if you could just set the scene our report, chapter 6 in particular, from which the a little and say a little bit about your working written evidence that we have given you is largely timetable, what you expect to try to achieve, and taken. It is in a section where we talk about barriers then we will go into some questions with a slightly to the success of a voluntarist solution. We did not narrower focus to help us with our work on position it there as the only barrier, nor, indeed, the Pension Credit. knock-out barrier, but as one among a set of things Mr Turner: Chairman, we are very glad to have this that can make it diYcult to have eVective increase in opportunity to talk to you. Perhaps I could begin by voluntary savings. These include fundamental telling you where we are in the work of the Pensions behavioural barriers, complexity, lack of trust, the Commission. As you know, we produced our first high cost of distribution, but also within that we did report four or five weeks ago now. In that report we flag that means testing, if it grew over time—as it aimed to provide a very detailed and, we hope, would grow if we continued indefinitely the present comprehensive description of the situation as indexation arrangements—could be a problem of a regards pension provision in the UK. We covered disincentive to save for some people. We also flagged both the plans which the state has to outline to up, however, as is in our written evidence, just how provide pensions and the extent to which the private very complicated the set of incentives to save are, Work and Pensions Committee: Evidence Ev 35

24 November 2004 Mr Adair Turner, Ms Jeannie Drake and Professor John Hills given the fact that there is a very complicated Mr Turner: In our report we do quite a lot on the interface between the taxation system, the Working rational incentives to save; ie, what happens to Tax Credit system and the means-testing system. We someone’s post-tax, post-means-testing return positioned our point of view of the Pension Credit as relative to the return they would get in an understanding the reasons why the Government had environment where there was no tax or no means- introduced it, as a response to pensioner poverty— testing. We illustrate that there are some categories and, in a sense, the only way to do a short-term of people for whom the incentives to save are response to pensioner poverty within constrained reduced by the impact of means-testing. We also public expenditure—but we flagged up that it could illustrate that there are some groups of people who be, if it grew over time with indexation, a problem of actually have rather good incentives to save, even at bringing a larger number of people into the low income levels, because of the interface of the withdrawal impact on incentives. That is where we Working Tax Credit system and the means-tested positioned the discussion of the Pension Credit credit system. For example, if someone is on within the overall view of the pension system. Working Tax Credit during their working life and means-tested Pension Credit during retirement, they Q164 Chairman: That is very helpful. Could I ask can actually have a quite good rational incentive to one question before we go into some of the technical, save, but there are certainly some people whose detailed matters? If in the course of your work you rational incentives to save are reduced by the impact found that the evidence and the results of the of means-tested withdrawal. I think one has to consultation in which you have engaged indicated it, accept that is almost inevitable in any pension or do you think you would have the ability to stretch welfare system. We have the fundamental problem the slightly narrow focus of your original terms of that means-testing is the bad side of targeting which reference? Obviously I do not think anybody is tends to be a good thing; that is, if you have expecting you to go round the horizons into constrained public expenditure and you want to deal prospective territory looking for things to do—I am with low income levels, you target, and everybody sure you are not doing that, you have enough on agrees targeting is good, and the flip side of targeting your plate as it is—but, given what some of us felt is means-testing and it inevitably has problems for was an important but slightly narrow remit, would disincentives, either for working or for saving. That the three of you, as commissioners, if you felt the problem is inherent in any welfare system and has evidence drove you to think about other things, have been inherent within our welfare system for many the confidence to be able to make recommendations years. The fact that there are some groups of people on a slightly wider plane? who have rational disincentives to save cannot, I Mr Turner: We feel we were asked to recommend in think, be seen as an overall criticism of the principle particular on the adequacy of private pension of Pension Credit and I think it is diYcult to imagine saving, but you cannot answer the question of the adequacy of private pension saving without clearly a system which does not have some element of that setting out what it is that the state is providing as the occurring. But the concern that we flag up is that, if base load to people. That is why we have discussion we were to continue indefinitely the current in our report of the state intentions. In discussing combination of the Basic State Pension indexed to whether or not a voluntary system will work or prices while the pivot points of the Pension Credit whether a compulsory system is required or would were indexed to average earnings, then it follows as work, you cannot ignore the implications of the way a simple mathematical fact that, rather than a small that the state system is designed for the incentives for number of relatively low income people being in this private savings, either direct rational savings or the means-tested environment, a wider and wider share indirect impact of complexity. That was clearly set of the population is going to be in it. The second out in the work programme for the first stage of our question to raise is: Are those rational disincentives report, which was set out in May or June 2003, which to save (ie, our charts which show what happens to made it plain that we would consider the the rate of return) stopping people saving? There is implications of the design of the state system for an argument that says, “Given that it is so diYcult to incentives to save as well as for how much people understand, how could it be a disincentive to save”. I could rely on from the state in any case, and think we are wary of that as a principle of public therefore the implication in our report is that, in our policy, that we should rely on lack of understanding recommendations, if those features of the state in order to have good incentives to save. The other system are relevant to the likely success of private thing to be said is that in this disincentives to save, savings, we must and we will comment on them. the point of view of the distribution channels and of Chairman: That is very helpful. Thank you. the independent financial advisors and of the sales forces of the insurance companies and banks is Q165 Mr Waterson: I would like to focus a bit more actually as important as the point of view of the on disincentives and complexity. First of all individual, because the vast majority of pension disincentives. You have made the point—and you products, certainly, or group personal pensions are make it, I think, very clearly—in your interim report sold not bought. People do not go out and say, “I’m that means-testing does create disincentives, going to buy a pension product.” Somebody goes particularly for low-income savers. Could you and persuades them. If those people who are to expand a bit more on what you have found so far on persuade them believe there is a danger that there is this issue of disincentives. a group of people to whom it would not be good Ev 36 Work and Pensions Committee: Evidence

24 November 2004 Mr Adair Turner, Ms Jeannie Drake and Professor John Hills value to sell a pension product because of means- do not have a good base load of what they are going testing, they will not sell it, and in some cases they to get from the state on which rationally to think will not sell it because they are worried that in 10 or about how much they should save for themselves 15 years time, if they do, they will be accused of mis- (exhibit 6.5 in the report). We also know that people selling a product. Whereas it is diYcult to put one’s have a pretty poor understanding of what tax relief hand on one’s heart and say, “Look, we have clear they receive on pension saving. When you ask a survey evidence that proves that there are lots of higher rate tax payer how much tax relief they are individuals who know the impacts of means-testing getting, only 28 correctly say 40%. When you ask a and are disincentivised from selling through that, it basic tax rate payer how much tax relief they think is clear from discussion with the independent they are getting, only 17% of those correctly give the financial advisor industry—and if you simply read answer of 22%. When you ask people whether they their press and look at what they say in that think they have good knowledge of pensions and industry—that they believe the future spread of the whether they think this is an area they are well coverage of Pension Credit should be a disincentive equipped to navigate, a significantly large number, to save, and that of itself is or could be a major 53%, say their knowledge is either very patchy or influence on the market. We have not, let me stress, they know little or nothing about it. That figure of conducted survey evidence which gets to how aware 53% now was 46% in 2,000, and, if anything, the people are of the impact of means testing withdrawal trend of people who have poor knowledge seems to on Pension Credit, how important is it to their be increasing. When you ask people who do they pension saving decision—we will be conducting trust, we end up with significant levels of distrust of some of that sort of survey evidence and focus the Government and of the financial services groups during the course of the next year—but the industry, which, again, seems partly to reflect the thing which is, as I say, much clearer than the sheer complexity of it. When you add that with the knowledge of individuals, is the knowledge of the findings of behavioural economics which very independent financial advisers. clearly illustrate that people shy away from Professor Hills: I think one has to make this complexity and diYcult decisions, although we do distinction between the rational incentives, that if not have clear survey evidence that says “X% of you sit with a wet towel around your head for several people say they find this complex and therefore do months you can end up mapping, people’s beliefs not save,” I think there is a very strong basis of about the system. If the climate of opinion out there evidence to infer that it is highly likely that is that there is this thing on the horizon which is complexity in itself is tending to make people shy going to aVect two-thirds of the population in 30 away from savings decisions. Complexity itself also years time and therefore people are saying, “It’s not increases the cost of delivery of product in particular worth saving in a pension,” we have a problem, to low income/low premium people. We have gone particularly if the rational incentives are for most through a process with the Sandler Product Review people very positive, as, indeed, they are through the of trying to see whether we can design pension and system of tax relief and National Insurance other products and selling processes—the so-called contribution relief. So we almost end up with the light touch sales approach—which are suYciently worst of both worlds: we are putting money into the straightforward that one can have a tight price cap system to incentivise pension savings but people do and still have the industry find it profitable to sell to not realise that those strong incentives are there. It is people. The resolution of that has been that the the climate of belief which can be as important as Treasury ended up agreeing that 1% was too tight what is underlying it. and 1.5% was required. That in itself reflects the sheer complexity of the products, which therefore increases the size of the interview process which is Q166 Mr Waterson: Would it be fair to summarise required to sell these products, which is the direct your evidence by saying that, at the moment, your and primary driver of the cost of selling these gut instinct is that the complexity, as well as the products. V V e ect on take-up—which is a quite di erent issue— Ms Drake: May I add, going back to the Pension is actually leading people to under-provide for their Credit point, just taking the issue of the Savings retirement, so you would not be surprised if the Credit threshold, the way that it is set in relation to evidence you obtained would come to that same the Basic State Pension impacts greatest on those conclusion. with less than the full entitlement to the Basic State Mr Turner: We would not be surprised if complexity Pension. Those with a less than full entitlement to in itself was a problem. It might be worth just the Basic State Pension will suVer the 100% picking up on this complexity point. We asserted in withdrawal rate on their savings, which, as we know, Chapter 6 that we have one of the most complex for women can be a particular problem. pension systems in the world and that that in itself is a barrier to rational savings. We did not base that at that time—although we will now be conducting the Q167 Mr Waterson: To be clear, you are going to research—on survey evidence of people’s responses, return to this issue in your final report. but we did cite a number of things which tend to Mr Turner: We will certainly try to be a bit more support that assertion. We know, for instance, that specific about it. It is very diYcult to be highly people have a relatively poor understanding of what specific about it, but certainly when you talk to the they personally can expect to receive from the state IFA industry you will now get a significant number when they retire in, say, 20 or 30 years time, so they of people who will tell you anecdotally, “We’re Work and Pensions Committee: Evidence Ev 37

24 November 2004 Mr Adair Turner, Ms Jeannie Drake and Professor John Hills going to keep away from that market because we are consequence of individual aspects of policy which just not convinced that it is good advice to advise appear to make sense looked at in themselves but people on low incomes to take out personal the cumulative eVect of which did not make sense. pensions, given the means-tested eVect.” We are in I think it is for politicians to decide exactly what the process of designing our work programme for level of commentary before the election is the next year and we will have to decide whether we appropriate. We have been asked to do a job, which will do a survey of IFAs as part of that in order to we are doing at what we think is the fastest possible see how important that eVect is. But certainly if you pace to do a really professional and good job. talk to the IFA industry it is something which is Ms Drake: We have said quite clearly that we are significantly put forward, and that in itself can have very keen to build the broadest possible consensus an important eVect. on the analysis of the problem and, hopefully, the way forward. That takes time. Obviously we have Q168 Mr Waterson: Do you think there are any produced our initial findings, but we have also short-term design changes which can be made to invited people to comment on whether they agree tweak the structure of Pension Credit to help or disagree with those findings as well. As part of simplify this problem in the short-term? consensus building you have to allow people time Mr Turner: We have not got into the detail of that. to make their comment. As I have stressed, our biggest concern is not so Chairman: There are two supplementary questions much what is going on at the moment and the picking up on the current impact short term. immediate impact of it, as the impact which would grow over time if the current indexation Q171 Ms Buck: I want to go back to the research arrangements continued over a long period of time. that you carried out on people’s understanding of As we head toward recommendations, we will the value, for example, of tax relief. Forgive me, I obviously think about both end points and do not remember whether you did this or not, but proposals on transitions, but we really have not got did you establish whether there was any public into the detail of whether there are short-term awareness or understanding of the impact and the tweaks that can alleviate these problems and our eVect on incentives of the public expenditure focus has very much been on the long-term impact implications of raising the Basic State Pension to of the diVerent indexations. the point where a means-tested Tax Credit would not be required. Q169 Mr Waterson: Your report recommends Mr Turner: The answer to that is no. Are you policies that would make it easier for those who saying that if we were to raise the Basic State wish to work beyond the State Pension Age. Do Pension to the level where means-testing would not you think that should include an increase in the be required, that in itself would require a higher earnings disregard for Pension Credit? level of taxation and that level of taxation would in Mr Turner: Again, that is not a specific issue we itself be a disincentive eVect? Is that the argument? have looked at. There is obviously a classic trade- oV there. I think it might have to be a significant increase to make a diVerence to the incentives to Q172 Ms Buck: Yes. save and there may be other more powerful things, Mr Turner: The answer is that neither we nor, as but, again, it is not something we have looked at far as I know, anybody else, has conducted survey in detail, so I think we probably like to avoid information that gets to that level of complexity. I getting into those detailed levels at this time. have to say I think it would be an extraordinarily diYcult question to ask in a public opinion survey. Q170 Mr Waterson: Finally, if I may, there is a We are in the process now of discussing with feeling in some quarters that the next election professional surveyors the questions that we want campaign would be better informed if we had your to ask on knowledge, expectations, attitudes, final conclusions before rather than afterwards. Do preferences, and I know that what is going to you have any comment to make on that? happen is we are going to have to come down from Mr Turner: All I can say is that we as a commission our wish list of all the questions we would like to can only work at a pace which is do-able. We could ask to what the professionals advise us is actually not have produced this report, which tries to do-able. But, you are quite right, there is no free provide a detailed and comprehensive description lunch here. In order to get round the problem of of the situation, earlier than we did. It took a great means testing, in order to have a higher, less means- deal of work. It included discovering some tested Basic State Pension, there are really only two fundamental facts; for instance, about total levels ways to proceed. You either have to accept a higher of pension contributions which were wrong in the level of taxation or you have to accept a higher OYce of National Statistics which we had to get State Pension Age. Those are the only two ways right. It is not that we are sitting here with, as it where you can cut through and get to something were, the recommendations in our back pocket but which, if it were costless, would be very attractive, not saying them: it has taken us until this time to which is a higher, less means-tested Basic State get to here and we do believe it is more important Pension. So there are trade-oVs but I do not think to get our recommendations right than to get them anybody has managed to tease out all the diVerent early. One of the things that has gone wrong in attitudes that people would have to the incentive British pension policy in the past is the unintended eVects from all of that. Ev 38 Work and Pensions Committee: Evidence

24 November 2004 Mr Adair Turner, Ms Jeannie Drake and Professor John Hills

Q173 Ms Buck: A very fair answer. But you accept savings rates in those which have simpler systems, it as a piece of information—it is germane to the and that is not a specific piece of analysis that we argument. have done. Mr Turner: Yes, it is germane to the argument. We Ms Drake: On the issue not simply of saving, or are very clear—indeed, one of the purposes of our not saving, but of actually saving enough. Even if report was to face this—that there are no free lunch you are consciously wanting to save the complexity passes to this problem. If you want to solve one set of the system makes it very diYcult to know what of problems that has a set of consequences. your savings will actually produce for you as a pension at the end of the day. That can also be a Q174 Rob Marris: Tax relief on pension problem as well. There is that issue as well as contributions is pretty simple, yet your figures that whether to save or not to save. you have quoted, the 28% and 17% and so on, suggest that that knowledge is out there. You say Q176 David Hamilton: In many cases, low income the complexity is a barrier to rational savings. I persons do not even look at the complexity because would suggest to you that in fact you are assuming they do not have the income coming in to be able what you are trying to prove there, because the to look at it, and many young people do not look figures you just quoted suggest to me, given that at it because that is Never, Never Land and a long tax relief is a simple concept, that there are too way down the road, so it does not get to that many people who are just saying, “It’s all too complexity stage. I would suggest that it is only complex, I can’t be bothered dealing with it. when you get to a certain income bracket, where Man˜ana.” Rather than the actual complexity per se you may have a bit of spare money, that you begin putting them oV, they have yet to engage with to look at these issues. the issue. Mr Turner: When we look at the area where private Mr Turner: I am trying to think whether I agree savings is most required looking forward, it is not with that. I think the answer is that there is a form at the lowest income levels. Under the present plans of complexity which can be a barrier, not because of the Government rolled forward, replacement people sit down and, as John says, put the towel rates, income in retirement relative to income in round their head and do the mathematics and do work, will stay stable as a ratio over time on the frankly what we have done. There is a lot of hard basis of the current state intentions. That is true of, work that has taken me a long time to understand as it were, the bottom 20% or 25% of the income what is going on here—and we have been doing it distribution. It is in the middle of the income as a sort of professional job of work—and there are distribution, say between the income percentiles still bits that surprise us in our understanding. I do 25% and 75%, where the state is presently planning not think it is that a whole load of people go to provide through state provision a lower through that process and then say, “Ah, this is so replacement rate, and I think it is in that group, complicated, I am not going to make the decision,” where you are getting to the level where there is but the fact that it is so complicated means they enough income to make a savings decision, where do not even start the process. When they first think it is important to work out whether the about it, they have a discussion and there are so disincentives to save and complexity are reasons many moving parts of the discussion that they say, why they might not save, or whether it is simply “I don’t want this discussion.” There is an awful the case that people always make inadequate lot of behavioural economics which illustrates that provision and that savings for pensions is always people simply do shy away from complex decisions ultimately done either by states or by employers or but also decisions which are very long term and by compulsion, etcetera. That is the open issue decisions which involve an element of stress which is a key issue that we have to consider in the because they are, to a degree, irreversible. I think next year, whether these barriers to rational savings it is a reasonable inference that if you have a very decisions are inherent or ones which we have high degree of complexity, that makes people less created. We certainly believe, however, that if there likely to be willing to engage even in the discussion. was a chance of a voluntary system to work, we have made it less likely by the complexity we Q175 Rob Marris: Is there a greater level of saving have created. in countries where there is less complexity? Mr Turner: That is certainly something we should Q177 Mr Goodman: I would like to ask some look at in greater detail than we have. Let us be questions about the future of Pension Credit, clear, one of the things we set out in the report— although we have already been delving into it. One and we leave it as an open issue—is how many of of the themes to date, if I may pick up on John’s the barriers to saving are absolutely inherent within point about people’s confidence in the system, is the the myopia and the unwillingness of people to sort of calculation you make about future saving make long-term savings decisions and make them which you do not do with a towel round your head, for them, and how many of them are the product as he put it, but you have a general impression of of things we have done to the system by what the system is like. Since you published your complexity. We put that as an open issue between report we have a new Secretary of State who has the inherent and the fixable ones. I think I would come in. He has said—and I think it was new—that accept that it probably would be a useful analysis there are no plans to continue with Pension Credit to see whether it is the case that there are higher indefinitely. He said it should be there until the Work and Pensions Committee: Evidence Ev 39

24 November 2004 Mr Adair Turner, Ms Jeannie Drake and Professor John Hills problem of abject pensioner poverty is solved— Mr Turner: It is very expensive. which, again, I think was a new take on the situation. Looking at all that, what impact do you Q179 Mr Goodman: It is very expensive and you think that will have on, to quote John, “people’s are paying more tax and that is destroying your belief in the system” and what impact do you think incentive to save. it will have on the retirement saving decisions? Mr Turner: The answer is that there is no free lunch Mr Turner: I think it is unlikely that general here, because sitting behind it are some discussions of ways forward in themselves have an demographics driven by the fact that we are living immediate feed through to savers’ decisions. I do longer and having fewer children. That is why we notice that one retail firm, attempting to explain its face a set of problems to which there is no easy somewhat poor pre-Christmas results, is claiming solution and there are some choices we have to that the Pensions Commission may have so terrified make. We set out clearly that the range of choices people into savings, but I think the Financial Times overall had to involve either accepting that there described this as reaching the limit of the ability of would be somewhat higher taxes, or higher average managers to think of reasons why their sales are retirement ages, or higher levels of savings. We also slowing down. I think it would be unlikely if either suggested that the optimal solution was unlikely to our information in itself or general responses from be pulling one of these levers alone but had to politicians and ministers were having an immediate require some mix. All I can say is that we would impact through to savings decisions. I think the be thinking over the next year about what we think more important thing will be to develop over the the mix required is and we will come up with course of the next few years a way forward with recommendations about this time next year of what pensions which does make it easier for people to we propose. But, by definition, given the problem understand, and, in so far as we are relying on a you have described, it will have to involve some voluntary system of saving, has clear and choices to which some people will object. Given the understandable incentives to save. The implication fundamental demographics, there is no easy route of what we are saying is that one element within through here. that will be that we do not relentlessly increase the number of people covered by means-testing. My Q180 Mr Goodman: Given that you clearly do not understanding of what Alan Johnson has said is want now to say which of these, in some ways, that that mathematical logic is, indeed, pretty unpalatable options the Government can take, relentless: if we go forward with that indexation could I just ask you a couple of questions about over the long term—which the Government has figures. The Government’s predictions of its said it would not do, but if it were to do that—as expenditure on Pension Credit assume that income a simple mathematical exercise, an increasing from savings will increase in line with earnings. Do problem develops. Therefore we are suggesting— you think that is a reasonable assumption? and I think Alan Johnson has also suggested—that Mr Turner: All I can say is that this is an issue we some way needs to be found which does not have will be looking at in much more detail now, but up that continual increase in the number of people until now, in the first report, we used the covered by means-testing. Whether that will ever Government’s oYcial forecasts. We now need to go mean that nobody is ever covered by means-testing, back and check whether those assumptions are I suspect, is a bit unlikely, because I think it compatible with the trends that we have seen in probably gets almost impossible to design any pension saving. That is heavily dependent on what welfare system which does not have some element happens on this defined benefit, defined of means-testing somewhere in it, but the challenge, contribution shift, and in the report we set out a as we see it, is to develop enough consensus on the scenario in which the total level of private savings way forward that we can get agreement from might not grow in line with GDP, it might actually Government but also across parties, across fall as a percentage of GDP, in which case it would opposition, about a way forward on pensions be falling below average earnings. So that is not a which is suYciently clear, suYciently sustained and piece of work that we have done to test the public which does have clear incentives for people to save expenditure forecasts against our scenarios for the which they can understand and which are then development of pension savings, but that is an maintained over several decades. exercise that is on the work plan now to do, and I think it is an important issue to deal with. Q178 Mr Goodman: How would you advise the Government to go about getting this consensus? Q181 Mr Goodman: Would you be able to share The consequences of these decisions about up- any of these findings about costs with the rating with prices and earnings are pretty clear. If Committee as and when you found them? you up-rate Pension Credit with earnings, you are Mr Turner: I think our intention would be to do it drawing more people into means-testing and you and to set it out in the next report, but we would are not solving the Secretary of State’s problem. If have to think about whether there is some you up-rate it in line with prices, you stand the risk intermediate thing that we can reveal. At the of increasing abject pensioner poverty, which he moment we have a work plan which takes us up to does not want to do; if you increase both the the middle of the summer, and then writing up the Pension Credit and the Basic State Pension with report thereafter, rather than producing a set of earnings, well . . . . intermediate products along the route. Ev 40 Work and Pensions Committee: Evidence

24 November 2004 Mr Adair Turner, Ms Jeannie Drake and Professor John Hills

Q182 Mr Goodman: Finally, is it your gut feeling Given that we have had the contributory principle that the Chancellor is right when he says that future for a long time and many people seem to be quite levels of public spending on pensions will remain thrilled with it, is there any way that you can see closer to some 5% of GDP? that the inequalities can be addressed of the present Mr Turner: The forecasts have increased over the structure of the Basic State Pension? last few years simply as a result of the new Mr Turner: One could take steps even within a Government Actuaries Department life-expectancy contributory system to reduce some of the forecasts. If you include all the expenditure on inequalities; for instance, the rule by which one gets pensioners rather than on pensions (ie, you no accrual until one has 10 years of working included disability, etcetera) the forecasts are contribution (which means that somebody who already suggesting that it will increase from 6.1% works five years basically gets no state pension) is of GDP to 6.9% of GDP. The fundamental reason one of those details that you could change without why that trend is upwards rather than the flat of a tearing up the whole principle of the contributory couple of years ago, is the new life-expectancy system. You can obviously also change the rules, forecasts. I think it is not impossible that in the the precise rules, of home responsibility payments, future we might get other life-expectancy forecasts etcetera. It is not that you can do nothing as long which might increase it further. Where the as it is the contributory system. There is a Chancellor is absolutely right is that, compared complexity in trying to adjust the contributory with Continental European countries we do not system by a set of carer responsibilities as well, and have a set of state pension promises which, rolled that is why many people are attracted to cutting forward at their present generosity, would through a Gordian knot by saying, “Let’s move to automatically produce increases in percentage of some sort of citizen’s pension.” The issue simply is GDP of 3%, 4%, 5% and 6%. The range of debate that that is expensive and you have to put the cost in the UK is 1% or 2%. The flip side of that, of that against other claims on public money. But, however, is that we have not made very generous again, it is easy to identify a set of things which, if state pension promises and therefore we need to they were costless, would be extremely attractive. I have a high level of confidence that something else do not think it is the case that you can do nothing is happening which is a high level of pension saving. as long as we have the contributory system. You I think the answer is that in overall directional could set out a number of things where, even with terms the British fiscal position on savings is clearly keeping the contributory system, you could make in a much better position than the Continental it more favourable to women. But clearly there is European system’s position on state position a significant body of opinion which believes we expenditure, but it is not staying completely flat, should take a radical point of view on that. even with the existing oYcial forecasts. Q185 Miss Begg: It obviously is a problem if you Q183 Mr Goodman: In short, it is not going to stay take any changes to the National Insurance at 5%. Contributions and who can be credited and what Mr Turner: Depending on how you cut the figures, counts, where there is not just work but obviously it is not 5% already. It is 4.8% on state pension caring, and changing that. If it is not going to be expenditure at the moment, but there is then 0.6% made retrospective, then that takes a long time for of housing and council tax benefit paid to it to work through the system. Is there anything pensioners and 0.6% of GDP disability benefits that can be done in the short term that will mean paid to pensioners, so the total state expenditure that women who are retiring in the next decade on pensioners, is 6.1%. There is, of course, about actually have the contributory record that will another 1.5% state expenditure on public sector bring them closer to the pension that most men employee pensioners, so the total public who have worked all their lives can expect? expenditure on pensioners (including public Professor Hills: Your inquiry is specifically on the employees) is actually about 7.6% of GDP. It is Pension Credit rather than on the overall structure important always to work out which of these of the state pension system. The aspect that really definitions you are working on. plays in here is the structure within the Pension Credit of the Savings Credit. The whole rationale Q184 Miss Begg: Some of us were delighted that of the Pension Credit reform was to reduce the you had a whole chapter on women and pensions. number of people who face a 100% marginal tax For a long time in the debate about pensions and rate on any additional pension income. The trade- pensioners, the position of women and the fact that oV which the Government made was to decide that they do not have the same kind of working life as it was better to have a somewhat larger number of men has very often been forgotten. Part of the people facing a much milder disincentive rather complexity of the Basic State Pension is obviously than to have a particular group of people caught its reliance on the contributory nature of National by a 100% disincentive, where they were literally in Insurance, and the diYculty women in particular a position where any additional income would have of getting suYcient contributions so that they leave them no better oV. The way that the Savings qualify for a pension in their own right. You Credit itself operates depends on whether you have actually do say in your report that the nature of the yourself got clear of the Basic State Pension. That current system is a “major driver of the inequality is the cut-oV. Until you get your income to that between men and women in pension provision.” point, you are still aVected by the 100% eVective Work and Pensions Committee: Evidence Ev 41

24 November 2004 Mr Adair Turner, Ms Jeannie Drake and Professor John Hills marginal tax rate. That obviously aVects quite a lot women face in retirement but it cannot deal with of women who do not have complete rights to the all of the issues. There are matters that have to be Basic State Pension. Without wanting to put addressed such as the rates of pay that are given to forward the solution to that problem, it seems to part-time people, the occupational segregation that me that for your current inquiry that might be one exists in society and initiatives to address these are of the issues on which you would like to focus. being taken elsewhere. Pension design can make a Ms Drake: I would like to reinforce the point John real contribution but it cannot be a total solution has made, because that is the point to which I was to the issue of the income of low paid women in referring earlier in response to Mr Waterson. That retirement. is something that I think could be looked at. Obviously we have not determined policy positions, but we did identify what we call the cliV-edges in Q187 Miss Begg: But it could improve things, could the state system. The issue that has to be looked it not? at is how far you can reconfigure the existing state Ms Drake: Yes, and it can also challenge the contributory system to cover all caring situations. assumptions that apply, which may not be valid There is also the wider political and philosophical any longer in terms of the position that women face issue of what do we believe should be the treatment when they get to retirement age. Fewer women will of people who take on caring responsibilities. We be the recipients of spouse benefits for example, as have also been asked to look at the position of an increasing proportion of women who enter women and pensions. You are right in terms of the retirement will not be in an ongoing marriage or other issue that you pose which is the time-span for will be in a single position. Also the shift from DB improvements to take eVect. If you go for a to DC carries implications for women and spouse reconfiguration of the existing contributory benefits as well. arrangements there is a time lag for some of these eVects to fall through. That would not be a good reason for not doing some of them, because they Q188 Miss Begg: Your report says that progress is can obviously have immediate benefits certainly for being made in improving pension income for some women, for example look at what you can do women partly because there are favourable market with the LEL, what you can do with the ability to trends, more women are working and making combine the income from diVerent jobs, how you provision on their own. Something that the Fawcett credit HRP, whether that credit goes on the Society said in their evidence to us suggested that numerator or denominator on accrual. Yes, some improvement in some women’s pensionable income of these potential changes for some women will could actually mask the fact that there will be other have a long time-span before the full benefit. There women who are no better oV in retirement and so is a debate to be had about whether to reconfigure there is going to be a wider gap between the better or whether reconfiguration at the end of the day oV women and those who have got less income in cannot capture the full pension challenge that the retirement. When all of that is put together it would caring responsibility poses for those who are carers appear that on average women’s income is going and at the moment that is predominantly women. up but in fact the gap is getting wider. I think what I would also want to say is that some Mr Turner: I think a general point that we stress in of the problems that women face in particular the report which is that for men and women there is under the pensions system partly arise from the an increasing inequality of pension provision. design of the pensions system and partly arise There is an increasing inequality between those because of other systemic problems in society, such people who are fortunate in the private sector to as the rate of pay for part-time workers for be grandfathered into open DB schemes versus example. We will not necessarily be looking at those new members of firms who cannot join an policy solutions that can deal with some of those open DB scheme. There is an increasing inequality more systemic problems. between people in the private sector and people in the public sector in pension provision and there is Q186 Miss Begg: The situation we have at the an increasing inequality between what are called moment is one where women are the poorest group “top hat” schemes in DC and general staV schemes of workers and there is already a pay gap between and when you roll that forward what you have is men and women workers. Do you not think it is an increasing divergence of pension provision. I inevitable that that equivalent pay gap will think the position of women in that increasing automatically move into retirement and that inequality probably has some good things and women will always be worse oV in retirement unless some bad things. In one way, because women are they are supported through their husband’s more concentrated in the public sector which still contributions, or a single woman will always be has open DB schemes that puts them in a worse oV compared to a single man? favourable position on average, but there are other Ms Drake: I think under the current arrangements women who are in DC schemes where they could one is tempted to say that there is certain be further hurt by interrupted careers. I think on inevitability in that, but there is a limit to which a average the position of women relative to the pensions system can deal with the problems of the position of men is probably going to improve rates of pay for part-time women. It can deal with somewhat because of trends in the labour market some of the issues in respect of the income that and because of the concentration in the public Ev 42 Work and Pensions Committee: Evidence

24 November 2004 Mr Adair Turner, Ms Jeannie Drake and Professor John Hills sector, but we are probably seeing an increasing though we did flag up that there were some specific divergence between the position of diVerent groups people who retired in the 1990s with probably of men and women. unsustainable and unrepeatable levels of pension generosity. Q189 Andrew Selous: In your report you state that future pensioners retiring on ever lower incomes Q190 Andrew Selous: You talk about the relative to the working age population is not revitalisation of the voluntary sector in your paper. acceptable. The Government in its Green Paper Would you agree that it would be helpful to get to a noted that the incomes of pensioners relative to the situation where £1 of accumulated pension savings working age population are now around two-thirds actually makes you £1 better oV in retirement? of average earnings of people just before Mr Turner: I think we have flagged up that the retirement. Is that the sort of figure that you want impact of the tax and means-testing system is one to see maintained? Did you have a figure in mind of the things which will almost certainly have to be when you made that comment? looked at in having a coherent system of voluntary Mr Turner: I think it is an interesting issue. We savings and I think I would agree that an overall should not accept unchallenged the public policy principle so that you can be certain that there is a assumption that whatever is the present level of clear benefit from saving is a good principle to try average pensioner income necessarily has to be and have. At the moment, as one of our tables in maintained with average earnings. I think there are the report and indeed the written evidence shows, some people who retired in the 1990s with a there is a very complicated matrix whereby exactly combination of replacement level and expected where you are on the tax and the means-testing longevity in retirement which was unintentionally environment and whether you have got an generous, in some sense unsustainable and unlikely employer contribution or not means some people to be repeated. Frankly, retiring on a generous, get more than pound for pound and some people fully paid up final salary pension scheme based on get less than pound for pound. In an ideal world middle or higher incomes in the late 1990s was a it would be a more common and less varied result rather favourable thing to do. So you cannot take where as many people as possible were getting at those gold standards and say we are going to least pound for pound. preserve that. What we did end up believing when Chairman: Is it your ambition as a Commission to we looked at a whole series of indicators of our end up with a package where political groups or position relative to other countries of what people individuals could say “That is what we need as a expected in retirement was that although for some package” and so there will not just be a continuum people there might be an opportunity to say, of options which we can all spend a long time frankly, that less income in retirement was part of fighting about? Are you prepared to make some of what was inevitably going to happen, in general we the judgments, which are very hard, yourself and did not see a major opportunity for poorer come up with a 10 point plan which you can be pensioners to take the strain. I have to say that this either for or against? choice between diVerent decisions is partly for society to debate and at the margins it is also for Q191 Rob Marris: How much bottle have you got individuals to debate whether they want to work is what he is asking. longer, save more or have a lower retirement age. Mr Turner: I think the answer is yes. What we will I think any solution should have a mix of society not do is just turn up and say there is one thing, debating that and making a decision on that and take it or leave it, we are oV fishing and see how individuals debating that and making a decision on society gets on with it. I think what we could that. We did set out a set of benchmark imagine is a thing that says here are the principles replacement rates and what we suggested is that which we definitely believe are required, here are a they probably should vary by income. If you are range of possible options and here is one particular on a low income you probably need a replacement one which strikes us as a frontrunner, so there is rate of 75 or 80% to have a reasonable income in an intermediate between providing a whole load of retirement. We suggested about 67% as a options and simply saying that is the answer, take reasonable benchmark at about median earnings, it or leave it. The other thing is that we are very but lower levels are reasonable at high earnings keen to try and build cross-party consensus on that simply because high earners save more during life and we will be meeting with Steve Webb of the and the need for saving falls away in retirement. Liberal Democrats and David Willetts of the We did suggest, as many people have suggested, Conservatives within the next few weeks to talk to that if you want to benchmark a replacement rate them about our next steps on the process. We are then a sort of sliding scale with income makes very keen on the process of trying to develop as sense, but we suggested the overall thing was that wide a consensus as possible on the way forward. we could not see a major contribution to the Chairman: It is a very viable market and your macro-economic problem coming from a big appearance this morning has been very helpful. reduction in relative pensioner incomes, even Thank you very much. Work and Pensions Committee: Evidence Ev 43

Witnesses: Ms Alison O’Connell, Director, and Mr Chris Curry, Research Director, Pensions Policy Institute, examined.

Q192 Chairman: Ladies and gentlemen, can I pension. I do not know from those figures yet what reconvene the hearing this morning and welcome that breakdown is between the Savings Credit and Alison O’Connell and Chris Curry from the the Guarantee Credit. Is it not possible to investigate Pensions Policy Institute. Thank you very much for those figures further and tell us a little bit more about your help and written evidence and your continuing the kind of people that we should be targeting our work in the area which I think helps to deal with information at and promoting take-up with? some of these issues of complexity which we are all Mr Curry: I think it will be at some point. One of the struggling with. Alison, to make the best use of the things that we tried to address in our written time, could you just say a little bit about the Institute evidence was to provide some estimates of take-up. itself just to set the scene for the record. As of yet I have not seen any oYcial estimates of Ms O’Connell: Of course, Chairman, thank you. take-up which tend to be estimated from a diVerent The Pensions Policy Institute is an independent source and take much longer to feed through and to organisation set up to make factual contributions to be calculated by the Government. What we have got the pension policy debate. In other words, we in our written evidence is something we have put provide facts, analysis and commentary with no together from our best estimate of the sources that particular axe to grind. There is no particular are available. The detail that I think you are right solution that we are pushing for. I suppose we are needs to be looked at as to who it is is not claiming best known for our work on state pension reform the Savings Credit or Guarantee Credit or the because that is where we have spent most of our time combination of both can be done with a more working and because we concentrate on the policy detailed data set and I think should be done when the angle we have less to say about the practical delivery Government does its first analysis of this bit of the aspects, but I guess your questions will reflect that. take-up issue of Pension Credit. I think it is important that there is still some early indication of Q193 Ms Buck: The figures that you have analysed whether things are working or not. I think the read confirm what we already knew, which is the across from previous means-tested benefits work diVerential in take-up between the poverty suggests that it is likely to be people who are only alleviation element of Pension Credit and the entitled to one particular benefit and a small amount Savings Credit. I wonder if you could tell us a little are not likely to have been reached. This goes back bit more about that and, in particular, what you to some of the points Alison was making about only understand about this relatively low Savings Credit having a small entitlement, not being aware that you take-up, what that tells you about the people who are even in the right income range to be thinking are applying and who are not applying and why. about means-tested benefit. Whereas means-tested Ms O’Connell: It is diYcult to know, but I think it is benefits have always been perceived as being for the clear that Guarantee Credit is working much better poorest pensioners or for someone who has a and in a way that is inevitable because there is a very particular need with the help of Housing Benefit or simple message with Guarantee Credit, ie if you are Council Tax benefit, now it has been extended to on a low income your income will be topped up, and people who have done some saving who previously so it would seem likely that that would have a higher thought they could not claim anything. It is trying to take-up than the Savings Credit which is very target those people who are completely unaware of complicated to understand, it is diYcult to know their entitlement that will be the interesting part. whether you are in the right ballpark to claim or not and it seems to be expanding up the income scale to Q195 Ms Buck: Do you know anything about people who have never thought that they would need people who make a speculative call? Do we know to be means-tested for a benefit before. It is a anything about the number of people who might combination of the diYculty in accessing the people ring the Pension Credit hot-line or make another that might be eligible and the fact that we might be inquiry and are told they do not qualify? I would talking only about a very small extra amount have thought you could say to people that there is a anyway, £10 is the average Savings Credit cut-oV point and the simple message is that if your entitlement, which is very diVerent from the total income is below that you may get something. Guarantee Credit where there is a simple message That does not seem to me to be a terribly and probably more to claim. complicated message to get over. Mr Curry: I do not think it is as simple as Q194 Ms Buck: What do we know about the people that because it depends on each individual’s who are not applying? You have explained the circumstance, what type of income they have, where motivations behind it, but I think we could know that income comes from, what are their needs, more if we were burrowing down into the figures and whether they do any caring for anybody, whether finding out whether these people are owner they are disabled, singles or couples. It is not occupiers as opposed to tenants, whether they live in necessarily that straightforward. particular parts of the country and what some of their characteristics are. I have one of the highest Q196 Ms Buck: Of course it is not straightforward, overall Pension Credit award levels in the country but it is more straightforward to say that above a and that tells me a great deal about the nature of my certain level you are not going to qualify and less population, which is that I have an awful lot of straightforward to say that you may qualify for people who do not qualify for the basic state more than you think. Ev 44 Work and Pensions Committee: Evidence

24 November 2004 Ms Alison O’Connell and Mr Chris Curry

Ms O’Connell: You could certainly say that people in lower income groups who tend to have a everybody below a certain income—and maybe shorter life expectancy. The raising of the Guarantee leave a margin of error—should be applying, but Credit age from 60 to 65 directly impacts on that applying requires getting together all the evidence, group and therefore is even more discriminatory in the original proof of all your savings and everything that sense than in the way it is being used in the State to The Pension Service, it requires quite a lot of Pension Age argument. work. It would be very expensive to do that and you would not just do it once, you would have to keep Q200 Ms Buck: It would be interesting to pursue doing it at diVerent points through someone’s that but we do not have the time. We discussed a retirement because of the indexation issue that little in the first session the potential impact in the generally income rises in line with prices at best, earnings disregard. I wonder if you could outline whereas the thresholds at the moment are going up your view on the benefits of that. with earnings or faster. So it is not just a one time Mr Curry: This is an area which we have not looked question, it is something that would have to be at in detail, but just from the economic theory and repeated throughout retirement. principle of it, the idea that if people worked they could keep more of their earnings and so their Q197 Ms Buck: That is an entirely reasonable income was slightly higher seems to suggest it would theory, but is it not just a theory? Has nobody sat encourage people to work. The last time this Select down with groups of pensioners and done Committee looked at Pension Credit the qualitative research in diVerent parts of the country recommendation made to Government was that that says, “Do you know about this?” and “Why are there was an earnings disregard of £40 and the you not claiming it?” Is that what people are saying Government’s first response was an obvious one, in response to the question? Should we be saying to which was that it would cost money, they suggested the Government, when we talk to the Government it would cost £180 million. I think the second Minister on this, why are you not doing the kind of response was not quite so obvious and highlights research that should be necessary to find out why six some of the uncertainties about what Pension Credit and a bit out of 10 pensioners who should be entitled is for in that one of their arguments was that it would to something from the Pension Credit are not even only aVect 70,000 people who are currently working. bothering to make an application? You may argue that you are not looking to help the Ms O’Connell: I said in my introductory comments people who are currently working, you are looking that we are not really involved at the delivery end to encourage other people into work and so that is and I know you have taken evidence from people the real number they should be looking at and there who are. We would say the data is not just suYcient was no discussion of that. It is something that if the to understand even what the oYcial take-up rate is Government is going to reject they need to look at a let alone who should be claiming and who is not. bit more closely, but it does seem to fit in much more with the ideas that have been put forward in the last Q198 Ms Buck: Should the Government be setting couple of years about more flexible retirement and (a) a higher target and (b) a diVerential target for allowing people to work and take pensions and state Savings Credit and Guarantee Credit? benefits all at the same time. Ms O’Connell: I think it would be very helpful if the Government set diVerential targets for the three Q201 Rob Marris: Disincentives to save includes types, Guarantee Credit, Savings Credit only and various factors such as aVordability, means-testing, both together, and published those take-up figures marginal deduction rates and so on. Have you got monthly. any evidence as to the diVerent weights that one should attach to those various factors? Y Q199 Ms Buck: Specifically on the phasing out of the Ms O’Connell: Evidence is di cult. I think we have credit entitlement over time for the 60 to 65 year old heard very strongly from advisers and employers group which I think you are concerned about, can about this reticence to sell pensions to or enrol you tell me why you are concerned? If we are talking members in pensions when it is not known what the about raising the retirement age for women to 65, individual’s future circumstance is going to be vis-a`- does it not send out an extraordinarily odd and vis means-testing in future. I think the complexity is complex message that you may otherwise still be a big issue but perhaps what is more important is the entitled to Pension Credit at that stage? uncertainty. Ms O’Connell: Absolutely. I think it is entirely rational that the Guarantee Credit level should rise Q202 Rob Marris: Would you agree with Adair from 60 to 65 in line with the State Pension Age for Turner that IFAs sell pensions rather than people women. We wanted to mention it to make sure it was buying them? brought to people’s attention that the Guarantee Ms O’Connell: Yes. Credit scope was being limited and also to make the point that it does really cast doubt over the logic of Q203 Rob Marris: So IFAs are having uncertainty what is being argued against, on raising the State and therefore are not so keen on selling them? Pension Age. This is an entirely separate issue about Ms O’Connell: Not just IFAs but advisers that work making pensions better by raising the State Pension for life insurance companies, too, and employers are Age. The one argument that is brought against that also saying that they are finding it hard to see why it is that it would be wrong because it disadvantages would be in low paid workers’ best interests to be in Work and Pensions Committee: Evidence Ev 45

24 November 2004 Ms Alison O’Connell and Mr Chris Curry an employer’s scheme if the current means-testing reform were to increase the basic state pension there regime still exists in the future. That is the big “if” would still be some means-testing requirement left that nobody knows and that is the thing that is through Pension Credit, Housing Benefit and stopping people from being able to make decisions Council Tax benefit because the basic state pension with confidence. will always lead to inequalities because lower income people, women, do not get the full contribution of Q204 Rob Marris: Is that evidence anecdotal or the system. With a higher basic state pension means- survey evidence? testing it could be less but still not go away Ms O’Connell: It is anecdotal, but I have to say I altogether. The other example is that with a Citizen’s hear it everywhere, it is pretty strong. Pension that would be universal, perhaps not 100% but something like 95% and that would mean that a Q205 Rob Marris: Is anybody doing any survey stuV much smaller residual would need to be means- on that to see if the number of disincentives to save tested. Guarantee Credit would still exist, so would has increased since Savings Credit was introduced? Housing Benefit and Council Tax benefit but to a Ms O’Connell: I think the Pensions Credit analysis much lesser extent. on the economic side is very important. In terms of surveying people as to what prevents them from Q208 Mr Goodman: Is that what you think the buying a pension, there is less done on that, but what Government should do? that tells you is that they do not have the income to Ms O’Connell: We think what the Government save, they would much rather not get on to the should do is have a good long think about these subject of pensions altogether, it is too scary, it is too issues and use the work that we and others have far away, it is too much about being old and horrible already done to have a long-term policy so that what things like that. I think there is quite a lot on appears to be the short-term policy of Pension behaviour let alone economic behaviour which is not Credit does have a coherent future. I think the understood but we are all familiar with the isues in Government and all parties are engaged in this and our every day discussions. I think it is right that that should happen.

Q206 Rob Marris: Would it be fair to say that in Q209 Mr Goodman: You say there is a risk that terms of prospective consumers, that is people who spending on Pension Credit may increase faster in might be saving for a pension, it is those factors you the future than the Government suggests. Is that mentioned which are important, ie it is too far away mainly to do with projected savings levels? and it is all too complex and no, I do not want to Mr Curry: I think there are two main reasons why think about it, but that for the financial advisers and we think the Government might be potentially so on that you referred to there is pretty strong under-estimating how much Pension Credit might evidence now that Savings Credit has led to a cost in the future. One is take-up in that the disincentive to sell these products? projections going forward assume that take-up stays Ms O’Connell: I think that is right because the at 75% right the way through over the next 50 years. advisers have to go through the numbers to the best As we have already talked about, that does not seem of their ability and they are still left with an a particularly ambitious target and you might hope uncertainty even when they have done the rational that if the system was around for that long it could thing and gone through the numbers. be improved in such a way that take-up could be higher. The other was the amount of income that Q207 Mr Goodman: I am about to ask you some of people have from other sources which determines the same questions that you heard me ask the Turner how much Pension Credit they are entitled to. Commission about the future of Pension Credit, Savings income is one component of this but there is though you may be less circumscribed than they are. also income from other sources, for example other The new Secretary of State said that Pension Credit savings or earnings rather than just pensions. As will not continue indefinitely, it should remain until I think John Hills said earlier, The Pension the problem of abject pension poverty is solved. Commission use the existing current projections for Where do you think the policy is now going? What Pension Credit expenditure, but some of the other do you think is going to happen to Pension Credit analysis in the report undermined quite severely the and how soon? assumptions that the Government had used to do Ms O’Connell: I think there is a thought process that that. You mentioned earlier that the Government goes like this. Pensioner poverty is not going to go had assumed the amount of income that comes from away by itself and it is not going to go away with the savings goes up in line with earnings, but it assumes current setup of Pension Credit unless take-up something more than that, it assumes that the increases to 100%. I think there is a consensus that average per pensioner goes up in line with earnings. reform of the state pension system broadly defined is If you take into account a large increase in the needed. The big question is what that reform is going number of pensioners between now and 2050, then to be. When we know what that reform is we can the proportion of GDP that is being paid to calculate some good numbers on how much pensioners through savings is much higher, it is pensioner poverty would be left and therefore about 50% higher and I am not aware of any understand how much means-testing for basic projections which were in the Pensions Commission income along the lines of Guarantee Credit would report which supported that. It seems as if there is still be needed. Let me take two examples. If the likely to be less income per pensioner coming from Ev 46 Work and Pensions Committee: Evidence

24 November 2004 Ms Alison O’Connell and Mr Chris Curry savings in the future. We know that the amount that outside of pensions or we raise taxes or National the State is providing outside of Pension Credit is Insurance contributions or we raise the State reducing quite significantly per pensioner. The other Pension Age, we probably will have to do that under uncertainty in all of this is how much income the current system or any other pension reform pensioners are going to get from earnings, but no option as well as with the Citizen’s Pension and that one has done any work to show how much more is just something we will have to face because of the pensioners need to earn in order for the overall demographics. amount to be in line with Government projections. We think there is a large funnel of doubt Q212 Miss Begg: One of the criticisms from the surrounding the projections of Pension Credit and at point of view of women of the way that the Basic the very least there needs to be work done on how State Pension is formulated is that it is on a wide that funnel of doubt could be. The projections dependency model, that women’s pensions still at the moment show one extreme of the funnel of depend on the fact that they are married and they doubt. We have done some other work which might have a husband or a partner. You have taken the show the upside of the funnel of doubt which means New Zealand model which perpetuates that whole that expenditure could be somewhere between 2 and dependency and, as I understand it, it is not an 3% of GDP higher, although the likely answer could individualised pension. Are you talking about an be somewhere in between, but I think this needs to individualised pension? be investigated much more. Ms O’Connell: No. The New Zealand model and the model that we have worked to gives an individual Q210 Mr Goodman: Let me just take you back to right to every individual, whether you are single or take-up at the moment. Do you think there is any married. reason to think that take-up could get up significantly above the level that the Government is Q213 Miss Begg: That is still a household gets less planning for? than— Mr Curry: It could do. One scenario is that if the Ms O’Connell: The New Zealand model gives less to amount of income that people get from other people living in a household than if they were single sources goes down and Pension Credit becomes even people. In the model that we have costed for the UK more important to people entitled to higher amounts we have looked at either option, and obviously there of Pension Credit, then I think it is in people’s is a cost implication, but what I have just been interest to claim it and if they are dependent on it talking about has been with both individuals getting more, because it is a large proportion of their the full amount either singly or living together. income, then I think that would increase take-up. Q214 Miss Begg: In the short-term, is there a way Q211 Miss Begg: I have read your proposals with around the problems that are in the present system regard to the Citizen’s Pension and obviously you with regard to National Insurance contributions? see that as a means of addressing some of the The contributory principle has been around for a anomalies with regard to women and pensions. One long time and there is a lot of attachment to that of the problems where it has been proposed is that whole principle. Is there a way of keeping the many people are proposing it comes in at the level of National Insurance contributions as the basis but the guaranteed element of the Pension Credit. I making sure that more women are included, actually suspect what would make the Government baulk at crediting a lot more things that they do on the caring that is the fact that it is very expensive. Is there a way side than is presently the case? round that? Ms O’Connell: Firstly, you can certainly keep Ms O’Connell: If the Citizen’s Pension replaces both National Insurance contributions as the way of the basic state pension and the state second pension, paying for pensions, you do not have to go to paying which in terms of amount is not drastic, that would out through general taxation, just to make that clear. be more or less at the same level for most people, Your question is about using National Insurance then contracting out would cease and therefore the contributions or credits into the National Insurance amount spent on contracting out rebates is logically system for eligibility. In theory, it is possible to added to the amount of Government spend that is extend the list of situations in which you get credits available. The Citizen’s Pension could be aVorded but, in practice, inevitably that will be very next year or this year immediately within that spend complicated because you are making yet more provided the transition is managed in certain ways to judgments about how many hours of caring you preserve accrued rights in the current system which credit in or not: do you get a credit for looking after you would obviously want to do and in other ways a child of six or eight or 16 or 17, those kinds of which we talked about in our reports—and we have judgments. The complexity increases, the amount of one coming out very shortly. As we go into the future record keeping increases, and inevitably it would with the Citizen’s Pension obviously the cost only reduce the potential for women to be increases because there are more pensioners living disadvantaged, not eradicate it. It is hard to see how longer. The cost of that we think would still be that could be retrospective because somebody would within this funnel of doubt that we talked about for have to prove suddenly that they were doing 25 the cost of the current system. What that means is hours of caring in 1972 or something. It is very hard that while inevitably we will have to face the fact that to see how it could be retrospective. In terms of what either we find that money from somewhere else we can do immediately within a National Insurance Work and Pensions Committee: Evidence Ev 47

24 November 2004 Ms Alison O’Connell and Mr Chris Curry system, we are very limited. Any change would be moment and that the existing Social Security only partial and would take a generation or two to agreements, which operate with other countries for work through. As I know you discussed in your people who either live outside the UK after State previous session, I think the preference would be to Pension age or have been in the UK earlier on in do something around the Pension Credit rules but their working life and then retire outside, would then, again, that is the means-testing part of the work with a Citizen’s Pension with residency as its system, not the contributory part. entitlement rather than National Insurance.

Q215 Miss Begg: Is there anything in the short-term Q218 Miss Begg: At the level you are suggesting for that you could suggest? the Citizen’s Pension, that is not going to get people Ms O’Connell: No. out of means-tested benefit, we will still have Housing Benefit, Council Tax Benefit and a range of Q216 Miss Begg: In those terms, the Pension Credit, various premiums. The problems that we have or whose avowed aim was to address some of the that exist with regard to the take-up and the pensioners who were living in abject poverty who disincentives of means-tested benefit will still exist were predominantly women and in the short-term under your system, so what makes you so sure that would lift that group of pensioners up to a minimum a Citizen’s Pension is going to be any more level of income, is actually working and it is acceptable to the pensioner groups we have talked to delivering on that particular promise. who say they want no means-testing at all and do not Ms O’Connell: As a short-term measure you can see think pensioners should be subject to any kinds of why it was the thing to do. Is it working or not means-test? depends on whether or not you think 75% is the right Ms O’Connell: A Citizen’s Pension of £105 a week take-up. Apart from moving to a Citizen’s Pension would eradicate means-testing in a way that or trying to replicate the residency eligibility of a guaranteed credit means-test—Sorry, that is not Citizen’s Pension within the National Insurance quite right. Not eradicate, there would still be a contribution system, which you could do and you residual 2 or 3%, much, much less than the might stand a better chance of doing retrospectively projections of half to two-thirds of pensioners who than the credits on all the diVerent caring and so on, will be on it. There will still be some residual means- that might work, but by the time you have done all tested benefits through Council Tax and Housing that you are back to saying that having a Citizen’s Benefit. The higher you take the Citizen’s Pension, Pension on the basis of something like 10 years’ the less of that there will be. Those types of benefit residency is a more pragmatic solution to be generally have higher take-up rates and they are for inclusive. specific amounts, so are diVerent from being means- tested for basic income, have less of a disincentive Q217 Miss Begg: One of the questions we were going eVect because they tend to be for people in the lower to ask was how easy do you think it would be to income groups who are not saving anyway. The issue define exactly who should qualify for a Citizen’s with Pension Credit is that it is extended up the Pension? I think we have got the figures and I was income scale, so it is into Middle Britain, it is into the surprised in our papers today that there are more income groups who are being urged to save if they than a million rich pensioners who are receiving the can, and most of them can in that sense. Basic State Pension but living abroad. How do you cover all of those diVerent aspects of a moving Q219 Chairman: Is there anything that you think we population without pinning them down and saying, have missed this morning? Your written evidence is “I am sorry but you have got to live here for x very comprehensive. We look forward to your future amount of time” and who qualifies? work being published and it would be useful to have Ms O’Connell: We were commissioned by the NAPF that too. to do a very detailed report on all the aspects of Ms O’Connell: We have not talked about the creep transitioning to a Citizen’s Pension which will be aspect which is in our written evidence. I think that published in the first week of December, which is worthy of attention, the fact that people may not obviously we would be delighted to send to the be eligible on day one of their retirement but are Committee. Very briefly, we think it is absolutely more than likely to be later on. possible to have a residency entitlement similar to a Chairman: The point is well made. Thank you very Category D pension that exists in the UK at the much for your attendance this morning. Ev 48 Work and Pensions Committee: Evidence

Thursday 2 December 2004

Members present:

Sir Archy Kirkwood, in the Chair

Vera Baird Mrs Joan Humble David Hamilton

Witnesses: Ms Carol Habberfield, Senior Projects OYcer, and Mr Terry Patterson, Social Security Adviser, Local Government Association, Mr Jim Dickson, Head of County Welfare Rights Service, Lancashire County Council, and Ms Janet Gurney, Senior Welfare Rights OYcer, Leicestershire County Council, examined.

Q220 Chairman: Good morning, ladies and if they have no savings and no occupational benefit gentlemen. Can I call the committee to order and then the overall rate of benefit has not increased at first of all thank our hosts for looking after us so all. The LGA would welcome though, with the well. The committee makes a habit—indeed it is an introduction of this new benefit, the higher focus on important part of its work—of taking evidence the take-up of benefits overall by pensioners. That outside London, and we always get very good whole arena with the additional marketing treatment. Mrs Humble, who is a distinguished campaigns and the work that the LGA has been former member of this local authority, has done us doing with the Department of Work and Pensions proud and made sure that everything has been in has been very useful. In particular I would make order and we are really grateful to our hosts. Joan mention of the work with the black and minority was very keen that we came and took some evidence ethnic groups; the additional focus there has been locally. We had a very good session yesterday in very useful. When we are looking at pension credit Blackpool and Fleetwood. We are in the middle of a overall and the creation of the Pension Service as a pensions credit inquiry and we are joined this separate entity, which has helped to give pensioners morning by a set of expert witnesses representing the a higher focus regarding benefit overall, that has Local Government Association and local county been a useful progression and the creation of a Local councils’ Welfare Services. We have with us Carol Service within Pension Service has been a useful Habberfield, Senior Projects OYcer at the Local attribution. When you are looking at the creation of Government Association, and she is assisted by partnership working of the Joint Teams with these Terry Patterson, who is a Social Security Adviser. Local Service staV from the Pension Service, at the We are also joined from Lancashire County Council present time there are 29 teams which are by Jim Dickson, who is the Head of County Welfare operational with 70% of local authorities signed up Rights Service, and from Leicestershire County for the creation of further Joint Teams. What the Council by Janet Gurney, who is a Senior Welfare LGA want to make clear is that these Joint Teams Rights OYcer. You are all very welcome. This is an should be built on existing partnership work because important inquiry for us. We are coming to our there is a lot of extra knowledge within those local conclusion. We will be putting some questions to the authorities where benefit take-up has been done Chief Executive of the new Pension Service and the extremely well and local authorities have local Minister on Wednesday next week, and that will be contacts with their local communities. Building on our final oral session of evidence. We have a series of existing partnerships is one of the key priorities; that areas that we would like to cover with you but I should be stressed. would like to start by inviting you all to say a little bit about how you see your work and how you see Q221 Chairman: That is very useful and we will come that work having changed on the introduction of back to some of these important issues that you have pension credit which has been in place now since put your finger on a little bit later on. Let us turn to October 2003. From an operational point of view, our county council colleagues. Jim, what is your for the avoidance of doubt, David Hamilton has perspective? parliamentary duties which will take him away quite Mr Dickson: I am Head of the Lancashire County soon, so if he leaves it is not because he has lost Council Welfare Rights Service. The Welfare Rights interest or has taken oVence at anything which has Service in Lancashire has almost two decades of been said! Without any more ado, Carol, can I start carrying out take-up work. Without wishing to with you? appear arrogant, I think we do have some Ms Habberfield: The LGA would like to start by background in doing take-up work. We currently welcoming the fact that the pension credit has come deliver over 40,000 advice transactions a year in about. The LGA is certainly focused on trying to Lancashire and generate in the region of £26 million eradicate pensioner poverty and sees central in cash benefits for people in Lancashire, so we have government’s eVorts in the introduction of this new some background in delivering welfare benefits benefit as one of the ways of helping the situation. advice. We welcomed pension credit as a worthwhile Having said that, there are some things I would like benefit and the feedback that we have had from to say about the benefit. First of all, for the poorest pensioners has been extremely positive. The fairer pensioners there is nothing additional in the fact that treatment of capital, for example, and the ability to Work and Pensions Committee: Evidence Ev 49

2 December 2004 Ms Carol Habberfield, Mr Terry Patterson, Mr Jim Dickson and Ms Janet Gurney reach out to people who are capital rich but income by the Pension Service with local authorities within poor, which has always been a problem with various that arena, but unfortunately that has not always benefits, are extremely welcome to us. I do not agree been replicated across the country. entirely with Carol that it has not reached the poorest pensioners because there has been an Q224 Chairman: Janet, what is your experience from increase in the basic scale rates which has benefited your own county council? the poorest pensioners. I would say: great benefit; Ms Gurney: It is quite similar to Jim’s. Just to shame about the administration. The problems that introduce myself, I am a Senior Welfare Rights we have had with pension credit have been almost OYcer with Leicestershire County Council. Again, entirely around the administration of the benefit we have been an authority with welfare rights rather than the benefit itself, although we do have established for over 20 years and I have worked there one or two points as regards the benefit. The only for over 20 years. We have two teams and my team way I can describe the perception of the Pension works with home care and residential care service Service is that they came to Lancashire almost as a users only, who are largely old people. I have also colonial power in that they arrived in the county been the lead person from the city and the county with a very firm set of views as to what pension credit responsible for advice and liaison meetings with was and how it would be administered and they Pension Service and other oYces of the DWP. Yes, have been extremely inflexible in how they have like Jim, we welcomed the introduction of Pension administered the benefit. Despite the fact, as I say, Service but have found negotiating and liaison quite that we have been carrying out highly successful diYcult. We have had the experience at our liaison take-up work for two decades in the county there has meetings, which have been going for 20 years, of been an almost complete failure to co-operate with Pension Service refusing at one point to continue to a lot of the existing work that has been going on in turn up and that being quite diYcult to negotiate. Lancashire. In fact, we have found that some of our We have had diYculties with issues such as accessing take-up work has been derailed by the way pension claim forms and with communication with them credit has been administered, particularly around generally. The administration is poor. There are lots the failure of the Pension Service to co-operate with of mistakes. We are having to work hard to get our service in some of the highly successful take-up improvements. It is improving but I would feel very work that we do. I can contrast that with local uncertain, if we were to lose our local Pension oYces, the predecessors of the Pension Service. We Y Y Service o ce, that we would manage to maintain enjoyed great co-operation from local o ces of the any sort of eVective local liaison. It is certainly hard Department of Work and Pensions. Now that it is going. It has been almost impossible for us to being administered centrally we have had a dreadful negotiate partnership working. We started out two years in trying to get any proper co-operation having meetings and then had the experience of and liaison. As an example, we have had liaison Pension Service not attending a meeting that had meetings going back many years with the been set up to progress things and not responding to Department of Work and Pensions. In the last two communications since. For two meetings which they years of trying to liaise with Pension Service we have did attend they sent a completely diVerent group of had six meetings at which over 30 staV have V V sta to negotiate with us, which was disconcerting. appeared from Pension Service at di erent times, There has been a view that it is one-size-fits-all. As but there has been no continuity. Only four of those V Jim has said, things that we had in place before were members of sta have attended for more than two whipped away from us in terms of local agreements meetings, so it is very hard to have a dialogue with and we had to start from scratch. There is a feeling the service. They are constantly chopping and that you have to do things their way and they do not changing personnel. recognise local expertise. For me there are particular problems around not recognising the need to do Q222 Chairman: Is it getting better? That is a pretty take-up work with other benefits alongside pension powerful set of criticisms. credit which is, I suppose, going to be a real Mr Dickson: Unfortunately, the withdrawal of the stumbling block for us in terms of progressing Local Service, which is the latest development, is partnership working since Leicestershire Welfare causing yet more problems because we were just Rights has always taken a holistic approach to the getting used to Local Service. take-up of benefit.

Q223 Chairman: We are going to come on to that a Q225 Chairman: That is very helpful—actually, it is little bit later. This is a yes or no answer. Is it getting not; it is very worrying. We will come back to a lot better or not, that liaison, that relationship, that of these things in detail, but on a much tighter basis imperial approach to life? Is that improving or are I want to check three very brief questions with you you still struggling with it? because we need to know a little bit more about these Mr Dickson: On balance I would say no. for our own purposes. Has the move to telephonic Ms Habberfield: Perhaps I might come in there. We systems made a diVerence and are there problems? cover the whole country with the LGA, and certainly Could two of you from your own local situations on some of the issues that Jim has mentioned the deal with it briefly? contact has been quite patchy. Where it has worked Mr Dickson: I am sure telephone advice works for well it has worked very well and primarily in the many pensioners, perhaps the majority. However, south west there has been a lot of active engagement the problem with the abrupt change (and it was Ev 50 Work and Pensions Committee: Evidence

2 December 2004 Ms Carol Habberfield, Mr Terry Patterson, Mr Jim Dickson and Ms Janet Gurney almost overnight), from being able to access a claim Q229 Chairman: That is very clear also. The file by a variety of means to a solely telephone based question of award letters has floated up at us a lot service, aVected those people who cannot use the during the course of this inquiry. Do you have phone (and there are a lot out there) either because anything to say about the quality of communication they have diYculties with hearing or because of a of the service? lack of confidence. It is very misleading to look at Mr Dickson: It is hard to separate out Pension telephone ownership because many pensioners have Service from other elements of the DWP. A a phone in their house but it is there for emergencies. particular problem is the so-called award letter. It is They do not use it as a preferred means of a non-award letter for carer’s allowance. I defy communication and it has been very diYcult for anyone to understand that letter, including the bullet those pensioners. points. It tells people, “You have to let us know if Ms Gurney: I think you need to have the maximum you get sent to prison”, and they have actually sent possible number of ways of accessing the benefit if that letter out to pensioners. you want to improve take-up. What you should not have done is introduce a telephone service but take Q230 Chairman: It is not the first time that has been away some of the other methods, which is what raised with us. happened. Claim forms were really diYcult to get Mr Dickson: It is a strange point to make hold of and I think there are still some advice conceptually. Award letters have always been a agencies that have not managed to get a supply of problem in the 20 or so years I have been involved claim forms. I think they should be made broadly in welfare rights and they continue to be a problem. available so that people can pick them up and have There is an issue around, for example, housing costs. time to think about them. I find that pensioners For some reason that I do not fully understand a often want to weigh it all up, they want to think letter is generated telling someone that they are not about it, they need time to consider if this is really for entitled to pension credit when they are entitled to them. It often takes two or three interventions and pension credit and that is because they have not had contacts from an adviser or somebody else before time to do their housing costs. they have the confidence to go forward and claim.

Q231 Chairman: Do you concur with that Q226 Chairman: I will come back to the LGA. We generally, Janet? have been looking at some of the accuracy targets Ms Gurney: For me the major issue is that people and figures for the agency and their accuracy targets forget which parts of pension credit they have got are quite high. On the other hand, there is some because they no longer have order books which prima facie evidence, and in an anecdotal sense, that would give us more information. The award notice the accuracy on the ground is not all it is cracked up does not tell them that that is the only time that they to be in the figures. Again, very briefly, have you got are going to be told how it has been calculated and a perspective on that? which components they have, which is quite Mr Dickson: Around premiums we find the accuracy important for passporting them onto other benefits. levels dreadful. They really need to be told to keep that somewhere safe. The other issue that I have about award notices and communication is that when we have discussed Q227 Chairman: Dreadful? this at liaison meetings, because all the Mr Dickson: Dreadful. If I can give you two correspondence is handled centrally, even if we can examples, my colleague carried out 10 checks last agree that we need an improvement in something the week. Five of those were wrong in terms of missing local oYce do not have the flexibility to re-design premiums. There is an issue around carer’s premium their letter and make an improvement. They have to where, because the Pension Service are not send it up and it can take us years to get an encouraging people to take up underlying improvement and, of course, by then the situation entitlement, on a straightforward superficial has changed completely. accuracy check that person’s benefit will be seen as being correct. However, had they gone and got someone to apply for an underlying entitlement Q232 Chairman: That is very helpful and clear. there would have been an additional premium Carol, you obviously have a perspective on some available. We find that all over the place, basically. of that. Mr Patterson: Perhaps I can deal with that. On the telephony point, the call centre model gives a lack of Q228 Chairman: That is very clear. Janet, do you ownership of cases and there is a lack of expertise. It concur with that? takes a long time to resolve these areas of diYculty. Ms Gurney: I largely agree with that. They are pretty On the computer system itself, backdating is a huge good at getting the basic rates right and there are problem and staV have to fool the computer to get only two options. The premiums are problematic the correct outcome when they are inputting to get and we have examples of arguing cases repeatedly, to backdating and that takes extra time. On the award be honest, to get the premiums. Also, all the other letters, that is something that is extremely unclear. possible additions, such as housing costs, we are There is national standards group looking at the finding recently are becoming a problematic area. letter but progress is quite slow. Work and Pensions Committee: Evidence Ev 51

2 December 2004 Ms Carol Habberfield, Mr Terry Patterson, Mr Jim Dickson and Ms Janet Gurney

Ms Habberfield: Picking up on Terry’s point with the pensioners in poverty who would not be receiving telephony scripts, the LGA have been at pains to their true pension credit entitlement. We would say point out that they do not encompass advice on that the targets overall are not ambitious enough. other benefits. There is an overarching approach which limits the accuracy of the advice that is given Q234 David Hamilton: Have you any comment Mr out at the telephone pick-up points and also at the Dickson? pension centres themselves. The SDP (severe Mr Dickson: I am not sure I agree with that. This is disability premium) rate for couples is a prime the first government that has ever introduced a example. The other issue which has started to come target for take-up of benefits and for me that was to light is incorrect assessment where there is pension quite a development and something to be welcomed. credit for work around people with children. Those From our point of view it is hats oV to them for that. are usually incorrectly assessed and that is because The target, looking at it now, appears to me to be the wrong rate of retirement pension has been taken quite ambitious because I do not think they are into account. going to meet it. What I think is happening is that the Chairman: I want to move on now to some of these initial wave of publicity has clocked up all those areas in a little bit more detail. people who are quite willing and comfortable with the telephone based claims process and they have all Q233 David Hamilton: Can I carry on the theme that gone through the system now and are getting you have just been discussing, Carol, and that is pension credit. What we are left with are what have take-up of pension credit linked with other benefits? always been termed the hard to reach groups and Are the targets for pension credit suYciently they will be much more diYcult to get onto the ambitious at present? The number of new claims benefit for a whole range of reasons. each month seems to have dropped considerably since March of this year. Could you give us a reason Q235 David Hamilton: Could I just follow that why that has happened? The National Audit OYce through? Do you have the information you need in have apparently highlighted the importance of take- order to get to that target at local level? You are up work at local level. What progress is being made identifying that that is where you are now. Are you to develop local take-up strategies? Can I make one able to achieve that goal of getting the information observation here, that where there is a patchy you require in order to achieve that goal? response right throughout England and specifically Mr Dickson: We have enough information. We have in this area there has not been a very good been doing this work for a long time. We know how relationship to assist that take-up between the to reach those types of pensioners and we would be workers in the two organisations. Could you give me quite happy to share our approach to take-up work some good examples of how you are working with the Pension Service. The problem for the together, and indeed how you are wanting to move Pension Service is that they are not interested in a on from the take-up of pension credit, which in turn dialogue with us about how we would get to those has allowed claimants to enter into other benefits? hard to reach groups. Where we have contacted hard Ms Habberfield: If you look to the south west of the to reach groups the Pension Service are not co- country where Joint Teams have been in operation operating with us and helping us to get those people for about two years, they are adopting a holistic onto benefits. approach to the whole issue of older people’s Mr Patterson: We have 20 years of local authority- services, and if you look at that you will see large led take-up work which is mainstream take-up work increases, for instance, in attendance allowance for all sorts of groups. With sheltered housing and take-up which then can trigger entitlement to new council tenants you will often find that they are pension credit through the award of extra premiums. automatically signed up to the whole range of There is some anecdotal evidence at the present time benefits provided by services. What seems to have of additional take-up through those Joint Teams happened more recently is that the department has which are working in a holistic way. That holistic been playing catch-up and learning about take-up approach is spelt out in the Link Age document strategies in the last two or three years. In applying which was recently published and which was those take-up strategies they have a long way yet to produced with the Local Government Association go. The scans and data-matching were done in and central government. Regarding take-up 2002–03. They did local outreach in 2003 into 2004. generally, there are concerns in the LGA at present Now we are at the hard stage where the scans are still about the withdrawal of things such as the pension being worked upon but they are not generating good credit Sub-Committee which has been looking at the returns. The current scan in the Pension Service maximising of take-up via pension credit and the Local Service may have 200 cases of which only a additional marketing of that. That was withdrawn handful are entitled to pension credit, so they are not without any consultation and we would like to working on the best data. The best data tends to express our concern at the abolition of that. It does come from housing benefit records and local seem to send messages through about how authority-held records, which give a straight concerned the Government truly are regarding indication of a high level of likely eligibility, and enhancing take-up. With regard to the pension whenever we look at those we achieve very high credit targets, if we look at some of the work that our success rates. The feeling in local government is that major partners are doing, even if 100% of those more attention needs to be given to local authority- targets were met it would still leave a million led partnership work. Ev 52 Work and Pensions Committee: Evidence

2 December 2004 Ms Carol Habberfield, Mr Terry Patterson, Mr Jim Dickson and Ms Janet Gurney

Q236 Vera Baird: Do you know who is not claiming? were. Of those 220 there were only 14 people who I think the department is now coming round to the needed solely a pension credit claim. However, the point of view that, exactly as you have said, most vast majority were entitled to either additional people with a sizeable claim have been caught and pension credit or a new pension credit claim but they the ones who have not been caught by take-up needed to claim attendance allowance or carer’s campaigns and so on are, contrary to what you said, allowance in order to get it. This is the diYculty. The not necessarily being left in poverty but are being Local Service are concentrating on doing only perhaps left with a pound or two less than they are pension credit. In Leicestershire they have reduced entitled to which they simply do not think is worth the amount of work they are doing on other benefits. claiming. They do not fill in the forms. They will hand them Mr Patterson: The answer to that is yes, we have a out and that is the limit, and they have reduced that lot of information about who is not claiming. in order to do cold-calling. I have checked this week with the Local Service about the cold-calling and Q237 Vera Baird: On the issue of whether people are what they have said to me is that the cold-calling is being left—as you put it in a rather dramatic way, a producing around a 25% success rate in returns, million people are left in poverty and the targets are whereas previously they were achieving a 50–70% achieved—are we in fact failing to get to people who success rate, so it is going down remarkably. They have only a little bit to claim who perhaps know that are saying that is due to the lack of accuracy about they might be entitled to that but simply do not the data from the data scans. bother because it is too complicated? Mr Dickson: Amongst the hard to reach groups Q240 David Hamilton: By your answer you are there are people for whom the benefit is marginal, indicating that the onus seems to be getting pushed but we are still coming across lots of people who onto pension credit and then hoping that other have been very reluctant to claim for a number of things get picked up. Would it be of benefit if we reasons and who are missing out on huge sums. Last challenged what it says, that there should be an year we did a mailshot using Social Services data and attendance allowance target, and that we should I did not believe some of the figures on paper. There target each individual? were people who on paper were living on £75 a week, Ms Gurney: Definitely. and I was quite sceptical about that, but when we went out and visited them they were living on £75 a week. For various reasons they had been very Q241 David Hamilton: If I may turn to the LGA reluctant to do something about that. representatives, in your evidence you say that increased networking with local community groups Q238 Vera Baird: You said people who you say are is vital to increase take-up among black and ethnic still deeply poor are reluctant to claim have been minorities. Do you foresee the community groups reluctant for a number of reasons. becoming part of the Joint Teams and, if not, why Mr Dickson: They are frightened that the money is not? going to be taken back oV them. There are some very Ms Habberfield: With the creation of Joint Teams deep-rooted fears about committing fraud and we have already heard this morning about the ways suddenly finding that they are going to be asked for in which Pension Service have interacted with local the money back. There is a lot of diYculty over the facilities. Where there has been a consistent claims process, even with the claim forms, not just approach and some ongoing dialogue those teams because of the telephone service. There is a whole have been looking at some sensible partnership range of reasons like that. It could be mis- working. I think the concerns of local authorities are information, having been turned down in the past. currently being exacerbated by the DWP cuts. What They maybe claimed five or six years ago when the has happened is that in some cases where there have rules were diVerent and got refused, and they do not been Joint Teams operational with a manager in realise that the rules change and things move on and place, that line manager is now having to run two you may become entitled. teams and there have been a lot of concerns over what else is going to change. Regarding the numbers Q239 David Hamilton: The real question is, do the of Pension Service staV on the ground, we are Pension Service have the resources they need to constantly seeking reassurances that those will not apply these issues and what could be done diVerently be cut and obviously no-one at the present time can to achieve that link that you were just talking about? give any definite assurances on those grounds. When Ms Gurney: I think it is a question of linking the we are looking at partnership working and how we diVerent benefits together. For me, in order for them work together, we are a little bit perturbed about to achieve their target they have got to do the that and we need some reassurances before signing attendance allowance and the carer’s allowance as on the dotted line to progress partnership working. well because they trigger the additional amounts. The other concern is the issue of benefit take-up and The way that we work in Leicestershire is that we get the national control over the teams because what we referrals from other parts of social services, so we are would say regarding benefit take-up is that it is best not specifically doing take-up work. We are acting discussed at local level where it is factored into the on the basis of referrals. Currently I have over 220 local knowledge. Unless that occurs local authorities referrals waiting to be allocated and I did some will not be pursuing the partnership working in any analysis on those recently to see what the problems sensible way. Work and Pensions Committee: Evidence Ev 53

2 December 2004 Ms Carol Habberfield, Mr Terry Patterson, Mr Jim Dickson and Ms Janet Gurney

Mr Patterson: The Joint Teams are at a very early DWP are allowing local authorities to access DWP stage. They are very small staV groups for quite a information. It is certainly nice to have direct access small population. There is a bigger vision, is there through their computer terminals. not, in the longer term with the Link Age services now, which is a single access point to a wide range of Q244 David Hamilton: As an ex-councillor who services? There are many concerns over the role dealt with people on a day-to-day basis on welfare of independent advocacy and advice. It is very and so on, it seems eminently sensible for the important to have that. Many of the community individual who is looking for claims not to be groups that you are thinking of, perhaps duplicating form-filling when they claim benefit. If incorporating them with a Joint Team, would not be there are other benefits which in their eyes they are happy to come on board and sign up to partnership entitled to they just want to fill in one form and work working under Pension Service terms and it through to the others. There are arguments taking conditions, for example, and it would put oV a lot of place with that, and quite rightly so, but do you see their potential customers. There are the same sorts us getting to that point relatively soon where we can of concerns within the whole of the advice sector. do one form for a person and that person can then Our independence is very much valued and we need sit back and receive all the benefits that they are to see early evidence, independent evidence, of how entitled to: housing benefit, council tax benefit, Joint Teams can be made to work. attendance allowance and so on? Ms Habberfield: The technology certainly exists Q242 David Hamilton: If it is not working in the already in the private sector which would enable that present format how would you forge that sort of interaction of information. I think it is a very relationship? The answer surely is not, “We are not sad state of aVairs that the current plans for both the signing”, and nothing gets done? What will you do Inland Revenue and DWP IT enhancements do not in the meantime if it is the case that small groups will include any exchange of data with local authorities. not join the department brief? Mr Patterson: We are looking at local flexibility in Q245 David Hamilton: Is that a no or a yes, or a this whole concept and we are looking at closer maybe? working and partnership working. We want to pull Ms Habberfield: As it stands at present we cannot do out the best values of those. There is extremely it because central government are placing restraints eVective partnership working in many parts, such as upon us. in Blackpool, where we do visiting. Ms Habberfield: To take things forward we need to Q246 David Hamilton: Jim? have some assurances, as I have just said, on the Mr Dickson: I would find it hard to envisage in my staYng levels. I think the customer experience of lifetime one form that would trigger entitlement to being able to access services easily is absolutely vital such a benefit system which is so wide-ranging and and if you work with central government and have diverse and changes so often. To me it would be access to data—and that access to data does need to impossible to devise a single form that identified include Inland Revenue data with the details of entitlement across the whole range. A lot of capital—that way round you can do some very information has to be teased out of people and some good, well-focused benefit take-up work. For many of it is subjective information; it is not just facts. The years local authorities have identified people who issues around attendance allowance are very should be getting means-tested benefits through the subjective and they are not always picked up fact that they have already claimed housing benefit through a form. It is an ideal, probably, but I think and council tax benefit. How they have been able to it is a long way oV, unfortunately. progress that is quite variable within local authorities because there is no specific funding for Q247 David Hamilton: To what extent will initiatives benefit take-up work within local authorities. What such as the OYce of the Deputy Prime Minister’s is around at the present time is things such as the National Benefits Project and DWP’s Pensions Pension Partnership Fund which allows some short- Transformation Project overcome data-sharing term funding for benefit take-up initiatives, but, to problems? You have answered part of that, but how be frank, that does not allow any long term strategy eVective are current arrangements, such as remote planning and is very limited. access terminals? Janet, you submitted some evidence on that. They are unfortunately called Q243 David Hamilton: Can I move on to joined-up RATs. services and IT? Once older people have provided Ms Gurney: That is right. County councils, and the information required to access one benefit, what certainly Leicestershire, have been denied access to a prevents this information from being used to assess RAT and we have been asking for one for some time. entitlement to all possible support? I have to say that I know virtually nothing about the Ms Habberfield: Certainly with the Joint Team Pensions Transformation Project and nor did the structure the LGA have been working with central Pension Service when I asked them about it. The government to look at that whole piece of RATs in Leicestershire are only available in the legislation. Once there is a formal partnership district councils where we have housing benefit and agreement then some data-sharing can occur which we do find problems with the district councils not will enhance benefit take-up. The only thing that is being able to use them eVectively, or saying that they currently a stumbling block is the way in which the do not trust the data as accurate and requiring Ev 54 Work and Pensions Committee: Evidence

2 December 2004 Ms Carol Habberfield, Mr Terry Patterson, Mr Jim Dickson and Ms Janet Gurney secondary proof of things that would be available to Mr Patterson: On the other hand, the housing them on the RAT As far as Leicestershire County benefit matching service uses the MIDAS system, Council are concerned we would like to have one. which is matching intelligence data and analysis Mr Patterson: The National Benefits Project is services data to target people in claim checks for providing a platform which can share information housing benefit purposes and that includes several across a range of services. There is no reason why lots of Inland Revenue material, such as interest on that particular information should not be accessed savings, construction industry scheme data, P45 by local government, by the Government, by the information and so on. Data matching is going on voluntary sector and permissions and safeguards already so the potential is there to take that data and could be built in. In the longer term the processing use it positively for maximising take-up. could be done to ensure there is a check list to maximise take-up. Q251 David Hamilton: I find that really interesting, Ms Habberfield: Somerset and Tameside are that you can get information from the Inland involved in two projects for pensioners. Somerset are Revenue. focusing on the data exchange in their financial Ms Habberfield: It is a very well made point that that issues and Tameside have developed products which information is being used for fraud purposes but not will help with training issues for benefits with for benefit take-up. electronic information. The concern that the LGA have is that the funding for both those projects will Q252 Chairman: Janet said something a moment ago run out at the end of March 2005, and certainly we about the Pensions Transformation Project. Let me would like to see some continuance of exploring ask the same question of Jim and the LGA. What, those issues which we feel would be useful. if anything, do you know about the Pensions Transformation Project? Q248 Chairman: You were talking about Tameside Mr Dickson: Can I phone a friend? A lady who rang and Somerset being involved. Is it the National the other day told me about it and it did not make Benefits Project or the Pensions Transformation any sense and I have been trying to find some Project? information on it. Ms Habberfield: The National Benefits Project. Q253 Chairman: Maybe the LGA would be in a better position to know. I do not think it is due to Q249 Chairman: Tameside have a vast expenditure start until next year or 2006. Carol, what do you in IT hardware infrastructure. They have been at this know? for ages and ages and are miles in advance of lots of Ms Habberfield: Basically, with the Pensions other local authorities, I guess. I am not an expert on Transformation Project they have been using the English local authorities. Maybe they are in a LGA by phoning us with ideas and questions and we position to take advantage of these things better have been trying our best to respond to those. than some other less well endowed authorities. Basically, the end result as it stands, if there is such Mr Patterson: There are demonstration projects and a thing as an end result, has been focused almost on others and all that expertise has to come forward and the rationalisation of pension centres and the be evaluated and put to best use. processing, which is something of a disappointment from the benefit take-up point of view. It has been Q250 David Hamilton: Part of my final question has looking at eYciencies within DWP as opposed to been answered. Carol, you say the increased use of putting a very high focus on benefit take-up. Inland Revenue data on capital and income would Chairman: We would now like to move on to Joint allow better targeting of prospective benefit Teams and Alternative OYces. recipients. Could you explain how this would work? Do the Inland Revenue have all the data that they Q254 Mrs Humble: First of all I should declare that require to be able to make someone aware of their as an ex-Lancashire county councillor I helped set entitlement to PC? Are there any barriers to the up the Lancashire Welfare Rights Service, which is Inland Revenue sharing information with DWP? It an excellent Welfare Rights Service. Fine oYcers it was said earlier on that the barriers are there. Could has had throughout its many years. We kept you expand on how you would want to extend that touching on the issue of Joint Teams throughout the position? answers to other questions, so I just want to explore Ms Habberfield: Basically the Inland Revenue have in a little more detail what are the advantages and data regarding occupational pensions and they have disadvantages and what we mean by Joint Teams. details of people’s capital. If those two factors were From the limited experience we have of Joint Teams put into data sharing that would clearly give us and, Carol, you were mentioning the south west better information for targeting people who are truly earlier, is there a danger that they might focus on entitled to the various benefits in a much better local authority work and responsibilities rather than focused way than at the present time. At the present the benefits issues and pension credit? How do you time DWP are working on scans which do not input make sure that in working together the diVerent that information so that a lot of time is wasted in agencies are complementing each other and making contacting people who have, quite frankly, capital sure that they are dealing with the whole person and levels that would not bring them into entitlement for the whole of the benefits issue rather than just pension credit. looking at one aspect? Work and Pensions Committee: Evidence Ev 55

2 December 2004 Ms Carol Habberfield, Mr Terry Patterson, Mr Jim Dickson and Ms Janet Gurney

Ms Habberfield: When you are looking at the Q256 Mrs Humble: That was my next question: is structure of Joint Teams it is very important that the anybody evaluating Joint Teams and, if so, what is strategic boards which set up these teams encompass the timetable? all the existing partners who are delivering the Mr Patterson: At present only 4% of pensioners get services for older people, including representatives a home care service from their local authority. It is a from the Department of Health as an additional small group of people with a very good track record factor to bring into those partnerships. Then, when of income maximisation with that group, and we are they are actually set up, it is quite clear that there just building on that for the future. needs to be some very careful wording of any service level agreements as to what the teams do anticipate Q257 Mrs Humble: In terms of benefit delivery delivering and that if there are any changes, for Y through Joint Teams, again we have had references whatever reason, such as sta ng levels on either side made to attendance allowance and carer’s allowance of the fence, there are clear protocols over what and DLA, and they are exactly the problematic happens under those circumstances and everything benefits that Jim was talking about which are much is brought back to the strategic board at local level more personalised and invidualised and do not fit to decide how things are taken forward. The whole neatly into application forms. To what extent can we premise of benefit take-up will remain a high priority ensure that those sorts of benefits are mentioned to for local authorities working within Joint Teams and pensioners when they have any links into Joint obviously the other factor relating to that is that if Teams? they are working with, for instance, financial Ms Habberfield: The whole focus needs to be on charging units, how that work is factored in. some very good training in this arena and also any Regarding the delivery of older people’s services, it partners who come within that team need to have is also very clear from local authority work right some sort of accreditation procedure to show that a across the country that we need to engage older certain standard has been reached regarding benefit people in saying what services they want and that an advice. I think that would help in giving Joint Teams older persons’ representative does need and is keen some street credibility. to sit on the strategic board to drive forward the Mr Patterson: The phrase is “levelling down” of agenda and also to help with the evaluation at the good practice within local authorities and partner end of the day, because after all it needs to fit organisations. We aspire to well-trained, well- whatever local community is around, and they are thought out, holistic service and we maximise all very diverse. Some have rural set-ups and others entitlement across a range of issues. The Pension are in cities with large areas of ethnic minority Service is not quality market in that sense to give groups. The local strategic board and the advice. The big worry at the moment is the composition of that board is key to driving forward withdrawal of Local Service staV. the agenda and dealing with the issues. Ms Habberfield: I am pleased that DWP are starting to look at the issue of the quality mark with the idea Q255 Mrs Humble: That is very interesting but your of the Pension Service overall obtaining that. answer is a little diVerent from the impression I Mr Dickson: When you start to talk about previously had in response to questions that David attendance allowance and DLA, it is not that they Hamilton was asking because I got the impression are just personalised benefits. DWP staV hate filling there that you were extolling the virtues of more in the forms because they can take two hours to fill informal joint partnerships. For example, he raised in. They tie up huge staV resources and very few the issue of how you involve minority ethnic services are willing to stick their neck out and say, community groups, and indeed points were made by “We will take this on”. There is all sorts of sleight of others that a lot of welfare rights organisations do hand going on whenever you ask for a commitment not want to be formally involved in some sort of on helping people through the process of attendance structure involving local and national government allowance and disability living allowance. It is not because it might undermine their capacity to act as just about going out and seeing someone once with advocates, as lobbyists, on behalf of the group that those benefits. It is about repeat visits and follow-up. they are fighting for. Do you think that more I do not know what DWP are saying to you across informal joint partnerships have a role and are better the table but my experience is that they absolutely or do you think that we are on an inexorable road hate to give a commitment on that benefit because down to the formal structures that you have just they know how much it will tie them up in terms of been outlining, leading to the Joint Teams? resources. Ms Habberfield: Formal working of Joint Teams can still safeguard the independence of the organisation Q258 Mrs Humble: That leads me nicely onto as a separate piece of delivering services if that is another fear, that setting up these local teams might what that particular organisation wants to deal with, be shifting the responsibility onto the local but there are others. I am thinking of Richmond here authorities to do exactly this work because you are where Age Concern are actually running the Joint the experts: you run your Welfare Rights Services. Is Team and taking forward the management of that there a danger in that? In a way there might be two Joint Team. It is really down to the local discussion separate scenarios of local authorities, on the one as to how the structure works in practice. hand possibly taking on more responsibility because Mr Patterson: We are awaiting evaluation of the they are entering service level agreements as Joint Teams. members of these Joint Teams but on the other hand Ev 56 Work and Pensions Committee: Evidence

2 December 2004 Ms Carol Habberfield, Mr Terry Patterson, Mr Jim Dickson and Ms Janet Gurney it could also undermine their direct welfare rights would be more on the basis of joint work rather than provision whose funding can be variable, as you Joint Teams and looking at issues such as passing on outlined earlier, Carol. From a local authority point referrals and data-sharing. That is really much more of view surely there should be some alarm bells what we would be looking at rather than a more ringing here, wondering where it is going to take formalised approach. you, or do you think that this is all going to be wonderful? Q261 Mrs Humble: Carol, you wanted to say Ms Habberfield: Certainly the LGA are concerned something. about the lack of funding for benefit take-up work. Ms Habberfield: One of the things we must not lose They have further concerns when they see the sight of is that there are some eYciencies in one closure of some of the outlets, such as surgeries that person going down a customer’s garden path and have been running for quite some time with no face- obtaining all that financial information and then, to-face provision as any replacement for that. In one with suitable protocols in place, sharing that way local authorities welcome the freedom of information with whoever needs it. If we look at that Alternative OYces being able to give that additional overall that should enable all local authorities and service to customers, and in that way hopefully local Pension Service staV to get around to more enhance the take-up of benefit overall but we do people and have increased benefit take-up all round, have concerns that we may become unpaid oYcials. purely by sharing that data and making maximum use of the staV that are deployed in this whole arena. Q259 Mrs Humble: That leads me on nicely to Janet and Jim. Are either of your local authorities signed Q262 Mrs Humble: One of the other issues that has up or going to sign up to these Joint Teams or been drawn to our attention is the fact that, like me, Alternative OYces and, if you are, when, and, if you elderly people do not like sending oV original are not, why not? documents. If we had more Alternative OYces and Mr Dickson: In Lancashire the Pension Service have these Joint Teams, because you have already not been usually interested in this because we do not highlighted the problems of the cutback in the Local administer housing benefit because of the two-tier Service, can that be a way forward so that elderly structure. We have discussed Joint Teams with the people do not need to send oV their original Pension Service and the intention is to run a pilot at documents? some time in the future but, to go back to one of my Ms Habberfield: Absolutely, because they can then earlier points about turnover of Pension Service verify the documents in the person’s home without staV, we have had two or three diVerent partnership them having to send them anywhere at all, and that managers, so-called, and the negotiations have been obviously is a beneficial step. quite slow as a result of that turnover. I think Terry made the point that the Social Services are now Q263 Mrs Humble: In Leicestershire’s getting their act together in terms of increasing memorandum you said that there had been previous benefit entitlement for that small minority of agreements to allow your advice workers to verify pensioners that come into contact with Social original documents but that has been withdrawn. Services, because again the context is that the vast Ms Gurney: That is right. majority of our customers in Welfare Rights never come within a mile of a fairer charging assessment. Q264 Mrs Humble: Why? They live outside of all that. For that minority the Ms Gurney: We had an informal agreement, I intention is to have a pilot. suppose, about verification which was simply that we would photocopy the documents, attach a signed Q260 Mrs Humble: Is it the same situation in statement to say we had seen it and that the Benefits Leicestershire? Is it a problem for the county Agency, as it then was, reserved the right not to councils in that where you have two-tier authorities accept that but, to be honest, 99% of the time they it might be more problematic for the Pension did accept it. It was a fairly informal system that we Service, whereas if it is a unitary authority or a had. When Pension Service came in all the local metropolitan authority they deliver all the Local managers in Leicestershire came in from Services, so it would presumably be easier? Northamptonshire and told us that they had not had Mr Dickson: One of the problems with it is a such an agreement in Northamptonshire and that practical problem in that the housing benefits was not possible, and we have since been unable to verification framework does not accept verification negotiate for anything to replace it. We did also have being made by the Pension Service, so the intention similar agreements with some of the district councils of the Joint Team and the one visit approach would for housing benefit. It is something which is fairly not work unless you brought in the districts in informal and does not need us to go through the Lancashire and that would bring in 12 districts. strict type of verification training which Pension There is a practical problem in trying to get 12 Service are oVering to us but resolves in almost all districts on board. cases the diYculties we have had in that we would be Ms Gurney: I would largely agree with that. It is a trusted most of the time because we have a good practical problem. There are all sorts of doubts in working relationship with service users. We know Leicestershire because of diYculties we have already them and we may be trusted to take away their had with trying to negotiate partnership working. If documents and do the photocopying and take the we were to be trying to go forward with something it originals back and then sign to say we have seen the Work and Pensions Committee: Evidence Ev 57

2 December 2004 Ms Carol Habberfield, Mr Terry Patterson, Mr Jim Dickson and Ms Janet Gurney originals. I think it worked well. It resolved a lot of Q267 Vera Baird: I think, Jim, you also made a the concerns that older people have about handing special point about the potential diYculty with the over original documents without having to send severe disablement allowance and how that was someone else out to check them. It did not mean that calculated and whether it should or should not be welfare rights workers felt they were compromising caught. their integrity or entering into having to identify Mr Dickson: This is one for the anoraks and I am a fraudulent documents because the Pension Service former anorak. Severe disablement allowance for or Benefits Agency can reserve the right not to people over 60 for some reason is not qualifying accept them. income for savings credit, so what happens is—and it is mainly women who are caught in this position— that they have to come oV severe disablement Q265 Vera Baird: I want to ask you some questions allowance and claim retirement pension in order to if I may about the technical interaction between get an income which is going to qualify them for benefits, all of which you raised in your written savings credit. It involves a lot of form-filling and submissions, which were excellent, and for those administration and it can leave gaps of five or six many thanks. In particular you have picked up a weeks with people living on very little money while number of areas where the interaction between the administration is followed through and we pension credit and housing benefit is still quite cannot see any reason why that has not been complicated. Can you say where you think those key addressed. problem areas lie or impact on people who have to try to administer them? Mr Dickson: We raised a couple of specific points. Q268 Vera Baird: Again, Jim, your submission One is around savings credit because the operation particularly spotted how claiming carer’s addition of the take-up on housing benefit and council tax was complicated. Have you any suggestions about benefit means that people who receive an award on how that can be simplified? savings credit can lose 85% of that credit through Mr Dickson: Again, the carer’s allowance has to be housing and council tax benefit withdrawal, so that claimed in order for someone to get what is known as makes it diYcult for people to claim their underlying entitlement and this is where this classic entitlement if 85% of it has been lost through letter comes in that I love to mention to people, reductions in housing and council tax benefit. The where pensioners get a letter saying that they are not other issue we raised was around the mismatch of going to be paid this benefit but “you still need to tell capital rules on pension credit, housing benefit and us if you go to jail”. Again, there is a lot of form- council tax benefit. An example we raised in our filling and administration that goes into getting submission that someone with over £16,000 in someone accredited as a carer. There should be a savings but little income can qualify for guarantee way of short-circuiting the form that they have to credit and therefore get full housing benefit and complete, which is a massive document of over 20 council tax benefit with often nothing to pay, and yet pages. There should at least be a shortened form. someone with £16,000 in income will miss out on The communication can be bad at this end between guarantee credit, may get savings credit but may end the Carer’s Allowance Unit and pension credit so we up paying full housing and council tax costs, so there have to follow those claims up to make sure that is a mismatch there. I know there would be an the premium is awarded, and if there was an expense involved in aligning those rules but we improvement in communication between the Carer’s would make that suggestion because it is one worth Allowance Unit and the Pension Service then we considering. would not need to do that. Ms Gurney: I think you need to dissociate getting the carer’s additional allowance from claiming the Q266 Vera Baird: Janet, have you anything to add? carer’s allowance itself. I feel that there should be a Ms Gurney: I just want to mention the delays we are secondary way of qualifying for the carer’s having in getting housing benefit and council tax additional allowance, which is to allow the Pension benefit applications acted on until the pension credit Service (or income support if you are under pension decision has been made. Because the guarantee age) to make the decision on whether you are doing credit acts as a passport to the full rate of housing 35 hours of caring a week and caring for a person benefit and council tax benefit district councils will who meets the conditions for getting the Attendance not process claims until they have that decision. It is Disability Living allowance. You could allow them taking six weeks at the moment in Leicestershire to to make that decision when you are not going to get get decisions on pension credit, so if you then add on carer’s allowance itself but are claiming simply as a the time to process the housing benefit application mechanism for triggering this additional premium. afterwards you are having people left for long You are going through the whole bureaucratic periods without any help with their rent and their procedure in order to be refused benefit to enable council tax. I feel that there should be an expectation you to claim another benefit. We have lost people that they have to make a decision within a short along the way because they cannot understand that timescale. They may then have to revise it but I do they need to get turned down for something to get not think it is right that people are left for such long something else, and so people drop out of that periods without that essential help. process and never get their premium at the end of the Ev 58 Work and Pensions Committee: Evidence

2 December 2004 Ms Carol Habberfield, Mr Terry Patterson, Mr Jim Dickson and Ms Janet Gurney day. You have to cut that middle man out and allow step. The administration of it currently for local Pension Service to set the rules for qualifying for the authority charging oYces is quite complex and I additional amount. think it might be that they would be prepared to Mr Patterson: The Pension Service lost a lot of the allow local discretion to enhance the personal claims for pension credit linked to carer’s allowance allowance for those who did not qualify for the last year and we had about 3,000 people who were savings credit to bring them up to an average level. missing out who was in their system just because the If they did not feel that they were taking on the full computers did not talk to each other properly. I do costs they might be prepared to enhance it for those not know if it has been put right. It would be other groups. To some extent, certainly in interesting to know if there was a successful outcome Leicestershire, there is some level of enhancement for those 3,000 people. that goes on already but it is principally for younger people with learning diYculties. Of course, those Q269 Chairman: You mean they physically lost people under pension age do not get any them? enhancement. I suppose the only other way would be Mr Patterson: They did not process the claims until to make the personal expenses allowance itself more they trawled and they identified the 3,000 people generous and then say, “Okay, we will not have any who had been put in and were entitled to pension disregard”; I think that is the only other way. credit linked to a carer’s allowance claim using an Mr Patterson: As an alternative, the savings credit is underlying entitlement, so they had to take steps to disregarded in full for home care charges, so that put that right, and in the process repeatedly leaving what the Minister said does not quite fit. Currently staV training to try and improve the situation. Week it is a small disregard for savings credit for those in after week we come across cases where the severe residential care. disablement addition or the carer’s addition is missed and we need to take quite long term remedial Q273 Vera Baird: Yes, so you are saying bring it up action to get the stuV back in place. It is probably to being the same thing? down to the computer system and backdating. Mr Patterson: Ultimately it is a means test so that Ms Habberfield: Picking up on what Terry has said, people who have got even more savings will not we have raised the platform. They have altered benefit because they will be over the top, but they are procedures on current cases regarding carer’s better oV overall, so it is not an accurate argument premium but they have missed cases and there has to say— not, as far as I am aware, been anything done about Chairman: You are arguing yourself into getting a it. Can I make an issue regarding housing benefit and note supplied to the committee if you are not careful. council tax benefits? These benefits have not been reviewed since 1999 so that gradually their value has Q274 Vera Baird: How much will it cost? At what been eroded. The LGA have been lobbying strongly level do you think the personal expenses allowance for a review of these benefits and also for it to focus should be? in. It causes immense confusion with these cut-oV Ms Gurney: I would say something like £25 or so. I levels because once a pensioner thinks they cannot think some research should be done as to what sort get a particular benefit because there is a capital cut- of average needs people have whilst they are still in oV level then they will automatically start thinking residential care. that about pension credit and this confusion has caused some lack of take-up. Q275 Chairman: I will settle for that. Mr Patterson: Ask the people. Q270 Vera Baird: Can I move on to the issue of Ms Habberfield: Certainly we have a network within interaction with care charging? In your submission, the LGA to look at charging issues and I am certain Janet, you made the argument that savings credit that they would welcome having an input into that should be fully disregarded for residential care. very question of the level of personal expenses. Ms Gurney: Yes. Q276 Mrs Humble: One of the other issues that we Q271 Vera Baird: That would be easy to administer have been looking at in our inquiry has been the and also includes the personal expenses allowance. practicality of pensioners receiving their pension Ms Gurney: Exactly. credit. I have been in correspondence with Lancashire County Council, with the social services Q272 Vera Baird: As it happens the Secretary of department, and have similar concerns with regard State has already commented on that and he argues to Leicestershire where the local authority is that setting the savings disregard equal to the purchasing domiciliary care services. In the old days savings credit would produce the anomaly that when you had a pension book it was easy for the somebody who has got savings too high would be home carer just to go to the post oYce and pick up left with less money than somebody who has saved the pension and come back and give it to the less. Is there a better way of making sure that people individual. Now, with the introduction of direct in residential care benefit in full for the savings payments and the post oYce card account it is much credit? more diYcult. It is okay if you have got one formal Ms Gurney: It is diYcult, is it not? There is a real carer who can have their own pin number allocated need to boost income and the implementation of this and go and pick up your pension and your pension disregard on the savings credit was quite a welcome credit but if you have a variety of diVerent carers Work and Pensions Committee: Evidence Ev 59

2 December 2004 Ms Carol Habberfield, Mr Terry Patterson, Mr Jim Dickson and Ms Janet Gurney going into the home it is much more diYcult. I just number of who will be on direct payments. It is a wonder if the Welfare Rights Service in Lancashire little bit diYcult to answer at the present time. has been liaising with the Social Services Certainly the LGA have raised these concerns Department because in a recent response that I had directly with the Department of Work and Pensions from the Director of Lancashire Social Services he and have been working as closely as we can told me that he was in discussion with DWP about regarding some of these issues. There is not any easy looking at how this issue could best be overcome. I solution and local authorities right across the am just wondering if you have had any input into country are experiencing problems with some of that. their home care providers in doing this service now Mr Dickson: I have not been in discussion with because they see it as a security risk for some of their Social Services but I would be very interested to staV to have pin numbers or access to accounts. know how the problem can be overcome, especially Y as there are fewer and fewer post o ces for people Q280 Mrs Humble: Also, one of the so-called easy to go to anyway. We are finding customers are Y solutions that has been given to me is that if the coming to tell us about severe di culties they are elderly person is encouraged to open a bank account having. It is bad for advisers. I know that is not they can then write out cheques either to cash or in really what this is about but we are used to being able the name of the carer but again there are security to discuss people’s entitlement using the order book concerns with that. That has been the only answer as a crucial document and advising people from that anybody has ever been able to come up with to what we see on the order book. Now it is very hard me that sounded even remotely feasible. for people to tell you what benefits they get because Ms Gurney: The issue of multiple carers I have found they are scattered across these bank accounts and is beginning to be accepted but it is not the only issue are not clearly identified on a bank statement. In in that there is a security issue for the claimant’s terms of benefits being paid, our customers are money because it can accumulate in these accounts. getting taxis to banks in order to cash pensions and In fact, accusations against carers for taking money that cannot be right. are quite common, and they potentially do have access to all of that money. In Leicestershire we have Q277 Mrs Humble: A lot of elderly people who are had to get people back oV the post oYce accounts in receipt of domiciliary care are housebound. They onto order books and, hopefully, giros eventually do not get out and so it is a real issue. I wondered if because they simply could not manage. They were you had had any engagement with Social Services forgetting their pin numbers. Leicestershire Social because the people who they employ directly— Services are now keeping the pin numbers and where Mr Dickson: I understand that the solution is going there are changes in carers we are asking the new to be the exception service where a giro cheque is carers to phone us up and we are going out with going to be made, but the problem with that is that some of them; we are sending social workers out to the Pension Service have told us that they are access the accounts because of problems for carers in anticipating 4,000 cheques will go missing each week terms of financial security. Another issue we have across the country. That is 4,000 people who are had with the post oYce accounts which I have raised going to be without money. When there was a is that one person can only have one account and we network of Local OYces there was a route that have had situations where we have got an elderly people could go down in order to get emergency person perhaps who has their own benefits but is also payment. As the Local OYces have been shut and an appointee for, let us say, a child with learning there are fewer and fewer of those, people have been diYculties, but cannot have a separate post oYce diverted to call centres and we already know of account for the second person. They are only people who have been given the run-around because allowed to have one, which means that they cannot the cheque has not arrived; they are told—and these administer those benefits and keep separate are pensioners—to ring Jobcentre Plus call centres, accounts as they would want to. who are not interested in them, frankly. Mrs Humble: And also you might get the cheque the Q281 Chairman: I did undertake to give you a few day after your home carer has been and the home moments as the session came to an end to see if you carer might not be coming back for another two or thought we had missed anything. However, I want to three days. spend two or three moments contemplating evidence that is more directly relevant to the PCS. I am Q278 Vera Baird: You say that they expect 4,000 anxious to get your views about the eVect that you giros a day will disappear? are anticipating in terms of the staV cuts we are Mr Dickson: They expect 4,000 giros a week to go having in relation to re-clustering, and we have had missing. an announcement that suggests that 165 clusters under the Local Service and the modernisation Q279 Vera Baird: How many emergency giros do programme have been reorganised down to 133. they envisage they will have to issue, granted that the From Janet’s and Jim’s point of view, is that likely real point is to move to direct payment? to be significant? In addition to that, we have been Ms Habberfield: That is something which is told that the partnership liaison managers have been currently being worked through because the last cut by a third. I want to deal with these two things in order book should expire in the middle of February, detail but in answering that question I want to so until we reach that point there will not be a finite broaden it to the scope of what you think are your Ev 60 Work and Pensions Committee: Evidence

2 December 2004 Ms Carol Habberfield, Mr Terry Patterson, Mr Jim Dickson and Ms Janet Gurney concerns, if any, about the proposed cuts between Q283 Chairman: Have you got a consolidated list of now and 2008 and the net staV available to the DWP that kind of detail? That would be very valuable. empire as a whole. Mr Patterson: We can put it together. That is Mr Dickson: It goes back to an earlier point about in Surrey. Also, in the Midlands we have a verification. People do not want to send documents bereavement one-stop advice service which has through the post. The Local Service in Preston and involved the Pension Service, the local authority and Longridge, which have a population of over Jobcentre Plus. The Pension Service has walked 150,000, has been reduced already to one location away and now Jobcentre Plus has pulled out too. one day a week and so there is very little choice for people other than having to make very long journeys Q284 Chairman: It would be very helpful if you in order to verify documents. There already has been could do that. quite a severe impact in terms of the Local Service Mr Patterson: These are important services just restricting choice. Whether these Alternative OYces being pulled because of reduced resources in the will work or not I am not fully optimistic about. Pension Service. There are voluntary organisations in Lancashire Chairman: Even if it is a cross-section of the kinds of where, if you want to go in for advice, you already eVects it is having, that is quite dramatic and direct have to wait an hour to be seen by an adviser, so evidence. I know you have only seven days to get it people have been asked to take documents and wait to us and I know you are not looking for things to longer than an hour. Is that really the standard of do, but it would be very helpful to have it. service that we want to be providing? Ms Gurney: The re-clustering has not itself had Q285 Vera Baird: One very quick question. Jim, that much eVect in Leicestershire but I suppose what we 4,000 figure you mentioned: where did you get it have had is a reduction in the number of surgeries from? from the Local Service by about 20%. In the rural Mr Dickson: That was given to us at a local liaison areas that is a real diYculty. I am very concerned meeting. about the future cuts because there is no evidence at all that the Pension Service are able to cope with Q286 Vera Baird: They expect 4,000 nationwide to their current workload. The administration is poor, go missing every week? the backlogs are too long. I think that cuts should be Mr Dickson: Yes. driven by evidence that the service is working well Mr Patterson: They are reluctant to put a figure on and that they can cope with those cuts rather than how many people are going to go across onto the force the cuts onto a service that is already not giro cheque system. The figures are between a coping. quarter of a million and a million per year.

Q287 Vera Baird: And they get their potential loss Q282 Chairman: We were talking a little earlier figure from where? about cold-calling, the short-term move that has Mr Dickson: I do not know. been made, which is a matter of some concern to the Committee in this inquiry. Do you all concur with Q288 Chairman: A risk analysis of some kind, the view that this is simply target meeting which presumably. diminishes the service? Can we get a clear idea about Ms Habberfield: Basically they look at all the people that so that we can focus our question to the who are currently receiving benefit and from that Minister and the Chief Executive next week? they can analyse who has currently moved over to a Mr Dickson: The cold-calling is daft; it does not bank account or a post oYce account and look at the work. For every 100 visits they do they only get a residue and that is where the scan figures are coming handful of awards. They have had to stop doing from, by contacting at local level teams to promote, work that we have been referring to them which is shall we say, ACT payments on a fairly long term eVective. We have been identifying people who are basis. Of course, by doing that it reduces the amount entitled and referring cases for home visits, and up of manpower that is around for benefit take-up. One until recently the Local Service staV have been other point on the cuts I would like to make is that carrying out those visits and almost all of them lead there has been a rationalisation of the DWP estate so to awards of pension credit. Now they have to meet that sometimes where teams have been put in place a target which is not even about the number of and local authorities have found additional funding awards. The target I believe is about the number of to support the IT installation and all the rest of it, visits they do irrespective of the end product. To me some of those have been closed and we are being it is just daft. faced with additional bills. Mr Patterson: The staV are also regularly told that they have to do conversions to direct payment Q289 Vera Baird: I raised two or three issues arrangements, going away from the outreach work. regarding the Secretary of State’s emerging attitude The scale is quite dramatic in many places. In to shortfalls in take-up, which are that, by and large Newham there were nine surgeries; there are now they seem satisfied that they have got most people three after the decision of the Pension Service to who really need to claim and that the failures are reduce it. In the south east take-up referrals of local amongst those who are only either missing some authorities to the Pension Service, the Local Service, savings credit, which may be small, or are only have stopped. missing perhaps a very little bit of guarantee credit. Work and Pensions Committee: Evidence Ev 61

2 December 2004 Ms Carol Habberfield, Mr Terry Patterson, Mr Jim Dickson and Ms Janet Gurney

Your experience, Jim, in particular, and you told us money now that order books are being phased out. about some people who were undoubtedly missing It is only a matter of pennies really if we are talking out, suggested that that was not universally correct, about payment into bank accounts but it is still but is there any evidence to overpower that something that is expected. Basically, when argument from the Secretary of State which is disability benefits try to get attendance allowance beginning to emerge, that most of the job is done and paid locally there are major delays and in terms of that people who are not claiming are only not the people in residential care where they qualify claiming a small amount? because they have become self-funding, we are Mr Dickson: We can give you the information finding that the local Pension Service are not because we keep records not only of the number of accepting the decision that has been made at people who can get onto the benefit but also what the Blackpool and are initiating further inquiries to benefit is worth, and there is no sign from our work check that the person really is self-funding before that the levels of award are tailing oV. They have they implement payment. As I said, Blackpool are barely started. Whenever we do take-up work we now taking back the orders to pay and paying always get a mixture of results: people who are only themselves. They have told me that they have gone qualifying for a small amount each week and also into one local oYce, somewhere in this area actually, people who get large sums. It has not really changed. to talk to the Pension Service about problems with combining and we have requested now that they go Q290 Vera Baird: There is no change in that pattern? into the Leicester oYce to discuss this. I think it is a Ms Gurney: No. recognised problem that we are having.

Q291 Vera Baird: It is not getting smaller? Q297 Chairman: That is news to me. I do not know Mr Dickson: No. about other people. That is an important point; thank you for that. Q292 Chairman: We have done very well; we have Ms Habberfield: I would just like to say that the covered an enormous amount of ground. I did LGA welcome the two groups which are meeting on promise you at the beginning that if there was modernisation of benefits and also the simplification anything obvious that you would like to say to us of benefits and we look forward to seeing some and that we should go away and think about more improvement in all those arenas. The other area carefully we would like to hear it now. We will be which has not been mentioned is DoH guidance seeing the Minister and the Chief Executive next regarding fairer charging and I think there does need week and then we go into purdah in order to draft to be better national guidance regarding overall our report which will make recommendations to the treatment of benefits in this whole arena. We have Government. This is your last chance to draw our been trying to do some work with them at the present attention to things you would like us to pay time but it does need a better focus to look at the attention to. overall end result of gaining benefits and money in Mr Dickson: I have one very small request, to receive their pocket, and also there need to be links explored local authority based data. We get very little local regarding the single assessment process and the take- authority based data on pension credit awards and up of AA and links with pension credit. if we could get some local authority based data on a Mr Patterson: The Pension Service still need to monthly basis it would help us and other local improve on their leaflets and communications to the authority services. public. There is one positive thing, which is the Rights to Improve project, which is going to roll out Q293 Chairman: I am surprised that you do not get a range of translated materials, audio tapes, DVDs access to that already. for ethnic minority communities. We want to do that Mr Dickson: We do. We receive it quarterly well but we lack the resources to deliver on that. There is still a strong feeling about disability and Q294 Chairman: Monthly rather than quarterly is carers’ benefits. People really need to be brought the issue you are raising? more fully into the take-up agenda. Mr Dickson: Yes. Chairman: We were hearing about that yesterday. Vera Baird: Chair, if Terry did want to write a short note for us about the equity or not of savings Q295 Chairman: Because it is more useful to you to disregard— have it monthly? Chairman: I think he talked himself into doing it. Mr Dickson: Yes. Vera Baird: That would be very helpful—short and simple. Q296 Chairman: I did not know that. That is very helpful. Ms Gurney: I would just like to raise the issue about Q298 Chairman: It would indeed be very helpful. It combined payments of attendance allowance and is a tall order within seven days but it is just as useful pension credit which we are having lots of diYculty to us if we get it in eight because— with. In fact, it is now at a level such that DBU are Mr Patterson: It is okay because you already have a themselves de-combining. The combined payments precedent. We were referring to similar other is really a money-saving exercise and it saves far less arrangements, so that is easy. Ev 62 Work and Pensions Committee: Evidence

2 December 2004 Ms Carol Habberfield, Mr Terry Patterson, Mr Jim Dickson and Ms Janet Gurney

Chairman: Thank you all, both for your written inform our report. We are really grateful to you for evidence and particularly for your appearance this taking the time both to write it and to appear this morning. It has been extremely useful and will morning. Thank you very much.

Witnesses: Mr Paul Vizard, Pensions Service Trade Union Side, and Mr Keith Wylie, National OYcer, Public and Commercial Services Union, examined.

Q299 Chairman: We are concluding our inquiry into Service. We have grave concerns about the number pension credit and we are joined by witnesses from of cuts that are being proposed in Local Service and the Public and Commercial Services Union: Keith the impact that has on our members’ ability to Wylie, who is a National OYcer, and Paul Vizard, deliver the service that they want to deliver to who is the Pension Service Trade Union Side. pensioners locally. We set oV with the vision of being Gentlemen, you are both very welcome. We had a holistic service, a quality service that provides not some very helpful evidence from the PCS Union at just a telephone service to pensioners across the an early stage of the inquiry and we certainly had a community, and we believe that the cuts that are very useful visit, which Mrs Humble helped to being eVected now and are being proposed for the organise, in Blackpool yesterday, where we took the future will seriously jeopardise our members’ ability opportunity of visiting the departmental Pension to do that. It will reduce our influence locally, and it Service business units to talk to some of the local was interesting to hear from colleagues that were staV. It would be fair to say that you should not here earlier that it will reduce the influence that waste any of our precious time together this morning DWP and the Pension Service has with Joint trying to explain to us the depth of feeling and Working Teams, with the partnership arrangements uncertainty that is around because we have already in communities. It will reduce the amount of got that evidence of our own knowledge from the proactive work that we do in trying to identify the staV, a very impressive group of people who are poorest pensioners in society. The second area that obviously facing some real uncertainties. We have we know the Committee is aware of but on which we three or four areas that we would like to cover with want to expand a little bit further is the problems you dealing with some of the technicalities. Keith, that we have with the IT. I am sure everybody is why do you not just set the scene a little by saying aware of the problems that we had last week because what your perspective is from the union’s point of they made pretty good headlines. Whilst that was a view, bearing in mind that what we are really fairly spectacular crash, it was not typical and is not focusing on this morning is that in a week’s time we a good example of the problems that our members get to see the Minister and the Chief Executive and face. They are facing day-to-day problems with the we will as a result of that draft a report which will IT that they have to work with. We were told this include recommendations? The power that we have, week in a meeting with management that the savings if indeed it is power at all, is that we are able to that they had projected by the introduction of the require the Government to respond to our new systems, to use their words, are “not even on the recommendations and that gives us a chance of horizon yet” and that there is no real prospect of the making sure that we put things squarely to them that processing systems making any real savings before the witnesses put to us. If you could help us in that our staV are cut in the drastic way that the context this morning we would be most grateful. Government is proposing. The IT problems that we Mr Wylie: Thank you, Chair. First of all can we faced last week and that our members face on a daily record our thanks as a union to you for calling us to basis add to the frustration that they feel and the give us the opportunity to give evidence to you first disillusionment that is increasingly seen amongst hand. Maybe I should explain our roles in the union our members, which is a great pity because a large briefly. I am the National OYcer for PCS and an number of committed people work in the Pension employee of that trade union. My role within PCS is Service. The final and most important area, Group Secretary of the DWP Group, so I am the obviously, is the cuts. I know we will come on to that senior oYcial representing all of our members across but perhaps I can help the Committee by giving you DWP, including those in the Pension Service. Paul is some figures that we have recently been given. We the Secretary of the Pension Service trade union side, are told that in the Pension Service itself as at 1 April which is an organisation that umbrellas all the this year there were 19,620 staV. The target for the unions in the Pension Service, although obviously end of March 2005 is 14,500, which is a cut of over not at the bigger end of the three unions that are 5,000, and the target by 2008, which is the end point recognised by the Pension Service itself. Any of the Chancellor’s proposed cuts, is 11,500, which is questions on general policy and the wider issues I a cut from today’s figures of around 8,000 staV.We will be happy to answer. Paul is going to help me out are also told that from the present position of 29 on any detailed or technical questions about the pension centres the current proposals will take us Pension Service. I will be brief in terms of our down to 19 by the mid point of next year and we are opening remarks. I just want to outline the three expecting an announcement at some point in the areas that we see as the most important areas near future that that will move from 19 in 2006 to pertaining to your inquiry that aVect our members. nine pension centres. Therefore, over a two to three The first one is the rundown of the local Pension year period we will lose in the region of 20 pension Work and Pensions Committee: Evidence Ev 63

2 December 2004 Mr Paul Vizard and Mr Keith Wylie centres. We will probably talk more about the Mr Wylie: To an extent we were. At the outset it was consequences of these cuts but one of the biggest made clear to us that there would be what they consequences, as well as the impact on staV morale, described as a ramping up and then a ramping down is the attrition rates, which is a DWP term for the around the introduction of pension credit. What is number of people who are leaving the service, which diVerent from what was proposed to us at that time is even higher than management’s worst projections. is that, firstly, the ramp is a lot steeper coming down Our major concern is that we are losing new people than we had envisaged it and, secondly, that the in particular very quickly. There are a number of numbers being lost are far greater than were reasons for that. The low pay is one, the lack of projected in the early discussions we had with confidence in senior management is another, but it is Pension Service management. It is a quicker mainly because of the uncertainty of people’s reduction and a greater reduction than we were futures. Even if you are in one of the 19 remaining expecting. We were expecting it mainly to be dealt pension centres in the back of your mind must be the with by the use of people on fixed term contracts who constant worry that it could be one of the 10 that is would be employed for 12 or 18 months and then going in two years’ time and if it is in an isolated their contract would terminate: they would know at location the possibility of redeployment is reduced, the start of the contract that it was for a fixed period, especially redeployment to a department where they but we are now seeing, for example, with the closure will lose 30,000 jobs over the next three years as well. of York and Liverpool, and York in particular, We have a major concern, therefore, not just about people who expected to be there for a long time now the morale of staV in terms of these cuts but also the being told they are no longer needed and are being ability of the remaining staV to deliver the service redeployed. that we want to see delivered. Q303 Chairman: So the extent of it is a shock? Q300 Chairman: That is extremely helpful. We were Would that be putting it too strongly? I do not want under the impression—and to be fair to the new to start giving you leading questions. How do you Secretary of State he had only been in oYce six characterise the impact that the extent of all this is weeks when he came to talk to us about the having on your members? departmental report—that it would be the end of the Mr Vizard: “Shock” certainly is not too strong a year before the incidence of the cuts that the term. I was involved in discussions at departmental Chancellor announced in the comprehensive level before the Pension Service was set up. In those spending review last summer would be known. Do I discussions we were told quite clearly by understand that these figures that you are sharing departmental management that there would be this V with us this morning, which are certainly new to me; ramping up of fixed term contract sta , which we I do not know about anybody else, are the first fully agreed with and understood the need for, to formal intimation that the union has had of the help get the new benefit in and get it to steady state, incidence of the cuts for the Pension Service? and then there would be a gradual reduction by fixed Mr Wylie: These are the figures given to us as term contracts simply running out and then there projections by Pension Service management very would be a steady state and that would go forward recently. It may be that these figures change and we for the future. As part of the process of setting up the Pension Service and the other business units within were given a fairly clear health warning that they the DWP all staV were asked to express a preference would go down as well as go up but in order to make about where they would like to work. The people the Chancellor’s targets these are the figures for the who expressed a preference to go to the Pension Pension Service. Service were those who were committed to the vision that was being sold to us at the time, that we would Q301 Chairman: So if the Chancellor’s net reduction be helping to eradicate pensioner poverty, which is a by 2008 of 30,000 is to be met you are saying that the worthwhile thing for anybody to be involved in. professional management team that were giving you What we are seeing now is that the cuts that are being these figures say that that is the scale of the thing that envisaged to get us down to 11,500 and reducing the they would need to achieve to get there by that date? number of pension centres from 29 to nine is a far Mr Wylie: Within the Pension Service, yes. more serious cut than we ever envisaged. The arguments that we have had from Pension Service management up to now is that those cuts were Q302 Chairman: The first thing that strikes me is, predicated on IT solutions. I know that Alexis were you expecting job reductions? The way it has Cleveland, the Chief Executive, said that there been put to us, and I guess there is some logic and would be an IT solution that would make us all three coherence to this, was that if you are launching times more productive, which would be marvellous pension credit and there is a massive likelihood of if that came up. We have been sold this line at take-up at the beginning, nobody could possibly meeting after meeting ever since the initial cuts realistically expect that level of employment and announcement was made in June. At a very recent administrative back-up, processing and take-up meeting we had in SheYeld senior management eVort, to continue ad infinitum. Therefore, the turned round to us and said, “The IT solution is not argument goes, were you not prepared? Were you there. It is not on the horizon”. What they have said not expecting a reduction in the staV levels when the to ministers is that we can make the initial cuts that service was originally set up in 2003? were planned up to the end of 2005–06, because they Ev 64 Work and Pensions Committee: Evidence

2 December 2004 Mr Paul Vizard and Mr Keith Wylie were part of the ramping down that was envisaged give us some extra flexibility within the workplace. initially, but we have been told very clearly that Presumably you were aVected as badly as everybody senior management have informed the Minister that else last week with the upgrade in the operating future cuts are not possible. system. Can you tell us a little bit more about your understanding of what the additional functionality Q304 Chairman: That is very interesting. Let me be will deliver in the future? quite sure that I understand this. What you are Mr Vizard: We cannot share very much with you at saying is that if the planned changes and reductions all about that. In the discussions we have had with were left at the levels of 2005–06, both the scale and Pension Service management they have all along the extent to which the staV were being reduced, that said that this IT solution is imminent. is possible and sustainable but after that the phase two as it were would be unlikely to succeed without Q307 Chairman: It is more than the Pensions seriously diminishing the service? That is what you Transformation Project because we know that that said? is coming in 2005–06. Mr Vizard: That is it really. We were expecting a Mr Vizard: What management are looking at now, rundown in numbers once we got to some sort of having decided that the IT solution is not there, is steady state. Without the IT solution that has been ways of trying to improve the eYciency of the way in promised there is no possibility of us being able to which we work currently, so they are looking at HR deliver any sort of service to pensioners. It is policies, for example, and whether there are things indicative of the way the management are we can do there within the current departmental approaching the cuts, which is not simply running framework to improve eYciency, but we have not down numbers in pension centres but a clear attack had any real engagement on what that might look on the numbers involved in Local Service, which like at all. from our point of view has been a great success, as has pension credit. I want to make that clear from Q308 Chairman: There are some concerns, even with the start. I think that pension credit has been a the 2005–06 figures, about trying to make it as easy success story and as part of that Local Service has as possible to try and keep the corporate knowledge been a very important success story, actually going but be fair to people who are being released. It is out and doing that outreach work and starting to anecdotal to us at the moment but worrying, the reach some of the most vulnerable people in society. figures about attrition rates. Do you have any hard The way that management are making the cuts, data yourselves about how this is beginning to aVect however, is that right at the start of these cuts they people? You said earlier that it was appearing to be have started to decimate the Local Service. harder to keep newly recruited staV. Is there any way that before next week we could get hold of some Q305 Chairman: I want to come on to the Local figures or even estimates of the kinds of things that Service in a moment because it is a crucial part of the might be happening? inquiry that we are doing but, staying with the Mr Wylie: We can ask the question of the DWP central call-centre scenario, this might sound a naı¨ve management and they should provide it to us. We question but if you could be transported through to have got some broad brush figures that we used for 2008 and all these cuts that you have just been the purpose of pay negotiations this year but I am explaining to us actually took place, what would be not sure if they are broken down by business unit. the most obvious eVect on the service that applied to They probably are but they will be older figures in your clients’ perception of what was being oVered to any case and so they will not reflect the attrition rates them by way of the service? Is there any way that you that we have seen since the announcements have could try and capture for us the extent to which— been made and since it has been clear in the summer and I am anxious to concentrate on the central call- which oYces are closing. Our experience anecdotally centre if we are down to nine—that would aVect the is that the newer people who are coming in, who service to ordinary people? came in to work for the Pension Service because they Mr Vizard: It is virtually impossible for me to wanted to deliver that sort of service, are the first to envisage any sort of service being delivered if we are be going. The people with long service, with lots down to nine centres when it started at 29. We have more experience, are tending to hang around waiting already got backlogs building in the centres. We for the big package, which we do not believe will have already got problems of cases being lost, appear anyway, in that if you have got a lot of service important documents being lost, because we have it is worth waiting to see if there is a redundancy not really got the resources to deliver the service that package on oVer. One of the figures we can give you we are trying to deliver. I would find it very diYcult that we were given this week is that in York and to try and envisage any sort of service. The attrition Liverpool already, even though the closure of those rate when the next announcement is made, which we two oYces is not scheduled until the spring of next are told is imminent, will go through the roof. year, over 50% of the staV have been redeployed.

Q306 Chairman: Before I move to my final question Q309 Chairman: 50% redeployed? about attrition rates, which is a worry, I want to try Mr Wylie: Redeployed outside those centres. and tease out a little bit more about the background to all this. We were all hoping and expecting that the Q310 Chairman: Outside? Does that mean outside functionality would increase and that that would the department or outside the service? Work and Pensions Committee: Evidence Ev 65

2 December 2004 Mr Paul Vizard and Mr Keith Wylie

Mr Wylie: Either within DWP or to other Q313 Mrs Humble: Can I move on to the Local government departments. They have been Service which you both mentioned as a key part of redeployed out of the Pension Service. One of the the delivery of pension credit? Can you clarify for me points that was made to us yesterday is that the some of the statistics that we have been given? On the pensions management in York and Liverpool are one hand we have got the DWP saying that the beginning to wonder if there is going to be anybody reorganisation into new clusters is to align the Local left there to turn the lights oV when it finally closes. Service more closely with local government That is one of our concerns as well, that if you de- boundaries and make it more eYcient, joint motivate people and put them in a position where partnership working, etc You have told us that you they are so concerned about their future that they think that two-thirds of the partnership liaison go, then it becomes a self-fulfilling prophecy that manager posts are going to be cut, but the DWP you will lose those staV. have told us that it is only going to be a third of those partnership liaison manager posts which are going to be closed. What does it all mean? What is Q311 Chairman: That in itself suggests that there is happening out there? not what you would consider to be a coherent Mr Wylie: It depends when you start counting, does thought-out management process to try and help it not? From DWP’s figures, which we checked on V folk who are a ected by these cuts to find other work the way down, I think they are saying that the in the department or indeed outside. current level of partnership liaison managers is Mr Vizard: Management in the Pension Service have around 180 and they are moving it down to around a flight path, as they call it, which is their preferred 130, which is a reduction of about a third, but what attrition rate. They shared that with us quite they do not count in is the number of partnership recently. If you imagine their flight path being up liaison managers who have already left or moved on there (indicating), we are actually down here and our figures are based on the people in post some (indicating). We are told this is a success story for the time back at the point when we started counting in Pension Service because more people are leaving it the summer when the announcements were made. earlier than they want them to. We asked the What it also fails to count in is the empower pilots question, and Keith has just made the point, that where there were more PLMs than there were in presumably the people who are leaving are the very other parts of the organisation, but they are being people that they are going to want to keep for the lost as well, so we counted them in as well, which future because they have brought those in within the explains the discrepancy. It is a bit like the cuts in the last 18 months or two years and trained them in the CSA. We claimed that it was a third because they telephony systems, which is the vision for the call- were going from 12,000 to 8,000. They claimed it was centres of the future, but they are leaving because 20% because they had already lost 2,000, so they they are generally low paid, or they think they are were only going from 10,000 to 8,000. not going to have a future in the Pension Service, and I do have a vision if we carry on down this line, that at some point the only people who will be left will be Q314 Mrs Humble: I need a flow chart. There is a those who have 15 or 20 years’ service who are serious point. We were earlier hearing evidence waiting for a mythical package but are not about the importance of setting up the Joint Teams necessarily the people that the Pension Service ought with local authorities. If you have not got these to be trying to keep. partnership liaison managers how are you going to set up the Joint Teams? Who is supposed to do it? What role would they have in it? Q312 Chairman: You have not had any meaningful Mr Vizard: I think that is exactly the point, the discussions yet about packages, not that this is the damage the cuts are having. From our perspective, Committee’s work? We cannot negotiate packages; when the Pension Service was set up an absolutely that is the union’s job. You sounded pretty sceptical crucial part of it was the Local Service for the simple about whether people might wait long enough and reason that in pension centres there is no public be disappointed at the end. counter so the public cannot come in and ask Mr Wylie: There have been discussions at questions about their benefits. The whole vision was departmental level about redundancy avoidance based around phone contact but with Local Service. procedures which we finalised two or three weeks I know when Ian McCartney was Minister he used ago and reached agreement on, which the Secretary to major on this a lot, that he saw this as being an of State was personally involved in. He was quite absolutely critical part of the vision for the future, pleased that we had managed to reach agreement. that we would be out there working with partners in What it does not do is guarantee large sums of local authorities and Age Concern, Help the Aged, money for people to take early severance packages. etc, building these Joint Teams where we could There will be some areas where there is closure of an jointly do good outreach work to reach the most oYce and the possibility of redeployment is vulnerable sections of society. We have fully incredibly limited, where people will be paid supported that. In terms of members doing the jobs, compulsory redundancy terms even if they volunteer they very much enjoy the work and find it extremely to go because there is no choice, but those are quite rewarding and they are seen as good quality jobs. limited and the information we have from the What we have seen now, and please bear in mind department is that the Treasury have not given them that we are at the very early stages of the cuts, is that a great sack of gold to get rid of the 40,000 staV. in a lot of the Joint Team areas the Pension Service Ev 66 Work and Pensions Committee: Evidence

2 December 2004 Mr Paul Vizard and Mr Keith Wylie partners are walking away and saying, “We cannot are often the foot soldiers and if you have not got possibly deliver that any longer”. The good work foot soldiers then the managers have nobody to that has been done in building up those relationships manage and what is going to happen in the service? and starting to get the Joint Teams working is You mentioned cuts but do you have any figures patchy across the country. In some areas it has been about people who are resigning or walking away? very successful, but the Pension Service now seem to You said earlier a lot of the new people are giving up be saying, “Because we have got to deliver these cuts the work. Does that apply also to the Local Service? we can no longer deliver that sort of service. We are Are they walking away from that? not going to try and deliver that level of outreach Mr Wylie: The attrition rates are across the board, work any longer”. I think that leaves very vulnerable are they not? people with nowhere to go at all. We have been Mr Vizard: Yes. I do not think we have any hard doing some research in the last couple of weeks data on this but I suspect just from what I know building up to today, looking at the eVects on around the service that because the majority of surgery closures, which the Pension Service are now people who have got the Local Service jobs are calling information points. The evidence that we experienced civil servants who know the benefits have got up to now, which is relatively limited but I well and have had the training over time (I think am sure we could build it up, is that we are looking there would be a lower incidence of new recruits at something like 50% closures of surgeries because doing the Local Service work) the attrition rates we have not got the staV to run them. would be lower in the Local Service than they would be in the Pension Service. Q315 Mrs Humble: One of the other justifications for job losses is that the job losses will be amongst so- Q317 Mrs Humble: You have mentioned a holistic called backroom people in order to release resources approach and it has been mentioned before. Why for front line people. How are cuts in the Local has the service moved to cold-calling instead? Is that Service justified in those terms and are you seeing happening everywhere? additional staV appearing somewhere who are doing Mr Vizard: Yes. all the take-up work that the local teams currently do? Q318 Mrs Humble: Why? What is happening? Mr Vizard: No. One of the things that has angered Mr Vizard: It is happening everywhere. I think it is members as much as anything in the way this has management’s desperation in looking at the cuts been handled is the way that the cuts are being that they are planning to deliver. They have a target portrayed as a method of—“waste” is a word that to reach five million claims by 2016. At the moment has been used—moving waste out of the Civil we are at 2.6 million. Talking to colleagues in Local Service to the front line in terms of education and Service, they do not see any way that even the 2.8 health. Clearly, it is quite insulting to be described as million or the three million targets will be reached by waste anyway, for any public servant to be the correct dates. I think that in desperation denigrated in that way, but from our perspective I management have gone to this cold-calling am not sure how more front line you can be than Y approach. What is happening is that the being a visiting o cer in the Local Service, running department’s computers are being used to generate these surgeries, reaching the most vulnerable people scans. The first scans that were being generated in society. To suggest that by cutting these Joint seemed to be reasonably well targeted in that they Teams that is reducing waste I think is absurd. were looking perhaps at people on attendance Mr Wylie: You asked earlier, Chairman, how we allowance where you would expect that there would would envisage the Pension Service operating if we V be a good success rate on the pension credit claims. go down to 9,000 sta . We do not envisage it Now what we have been told is that it is a random working. What would increasingly happen is that scan for pensioners who have not yet got pension management would go for the softer targets in which credit or who have not responded to us. We are to make the cuts and the softer targets are in the contacting people and the stories are starting to Local Service. At the end of the day as a department increase now. We are cold-calling millionaires to ask we have to process benefits and we will carry on them whether they want pension credit. Vera processing benefits and it will be done in a big shed Duckworth was phoned last week to ask whether she somewhere in those nine locations, but if we have to wanted pension credit or not. I know in my own area cut back further than the anticipated cuts the easiest we were ringing somebody repeatedly. It is quite areas to cut are the Local Service and the outreach soul-destroying work for people who have workers. They have not started talking to us yet Y previously gone out doing quality outreach work to about the cuts for the number of visiting o cers but be repeatedly phoning somebody and finding in if the pattern for the middle managers carries on we desperation that they rang back and say, “Will you can expect them to be cut by a third and that will stop pestering me? I have got £3 million in the bank”. reduce by a third our capacity in the field and that is That is a complete waste of taxpayers’ money, a retrograde step as far as we are concerned. having executive oYcers in the Civil Service calling these people. What we should be doing quite clearly Q316 Mrs Humble: You as a union at your is building on the Local Service approach and the conference talked not just about the importance of Joint Team approach and going out with our middle management roles but also about the partners and literally finding the people who most importance of the “lower grade” staV, because they need our help, not just sitting at desks cold-calling. Work and Pensions Committee: Evidence Ev 67

2 December 2004 Mr Paul Vizard and Mr Keith Wylie

The information that we get from the scans is also credit or what else may be available to them. The very erratic. Quite often they will not have a phone diYculty with it, the frustration that is being fed number for them, so again civil servants are having back to us from the people who are doing the job in to find time trying to trace phone numbers. When Local Service, is that because it is so target driven, they get through, the experience is, “Where did you that as a cluster they must make so many calls in a get my number from? How do I know you are the week or so many visits in a week, the pressure to do Civil Service? You are asking me how much money the job as eVectively as they would like to do it is I have got in the bank, what my savings are. Are you building on them. Something that is being reported going to come round and rob me?” back to us regularly now is that the executive oYcers who are making these phone calls and these visits Q319 Mrs Humble: Forgive me if I am asking what feel that they are almost being told to harass people, you see as a simplistic set of questions but I do want the desperation is such in trying to hit these targets, to get this on the record. How does this cold-calling and that is not why people joined the Local Service. fit into any sort of scheme to target the hard to reach They joined to try and help people, not to harass pensioners? them. Mr Wylie: We do not think it does. Mr Vizard: It is completely random. It is an attempt Q324 Mrs Humble: You made the interesting point to get the numbers up from the 2.6 million figure up about some of your members who are dealing with towards 2.8 million and 3 million. In no way can it these calls having diYculty identifying telephone be described as targeting. numbers. They are not alone in doing that because there are some people who do not have any sort of Q320 Chairman: If you say that that is what is telephone but also people now do not always have a motivating you, how on earth do you think that this land line that is easily traceable and may change is going to help? their mobile numbers. How will that aVect this Mr Wylie: If you phone everybody in the whole system because at some point you are going to run country eventually you get your targets, do you not? out of telephone numbers and you are never going to That is what it seems to be getting down to. have 100% of pensioners who are at the end of a phone? What will happen then? Q321 Chairman: It must be driven by desperation. Mr Vizard: We have not had shared with us any Mr Wylie: It is desperation to meet the targets that information as to what they might get to at that are being set for managers. stage. At the moment they are simply churning out these scans and getting Local Service staV to make Q322 Vera Baird: You pointed out some potential the calls. One of the things that is being reported damage it can cause. Although it is obviously in a back to us quite regularly is that a fair proportion of very minor key of importance it is actually quite the people we are phoning are ex-directory and one good PR if you are going to have people who think of the first things they say to us is, “How did you get that the Pension Service is very good because it is my number?” It immediately sets alarm bells oV.I telephoning people to say, “Are you sure you are am sorry to keep repeating this but these are getting benefits?”, so it is not a fatal mistake to be vulnerable people, “Where did you get my number making in many cases, although I can see how it from? Why are you asking me about my savings? might upset somebody who is very rich. Why are you asking me about my money?”. I think Mr Wylie: If it were being done locally by it must be very worrying for the person at the end of experienced visiting oYcers, which is what we are the phone and it is very poor quality work for saying should be done, they would not be knocking executive oYcers in the Civil Service. on Vera Duckworth’s door. They would probably know before they got there. Q325 Vera Baird: Perhaps this links into what you Vera Baird: No, no, but I can see that behind it all it have just said about the distorting eVect of targets. I is not a terrible mistake to be making because it does need to ask you about staV training issues. Citizens have that subsidiary eVect of convincing people that Advice said that they believe that application line the service is good by people who do need it. staV had conversion targets, that is, targets for the numbers of calls resulting in a claim, and that these Q323 Mrs Humble: You can clearly have a holistic were capable of discouraging staV from oVering approach if you are sitting down with somebody and callers who were struggling with the phone a home you are going to be talking to them not just about visit or a paper application instead. Presumably pension credit but also about attendance allowance there are these conversion targets and in your view and other benefits that they might have an are they having that eVect of discouraging an entitlement to. What happens in cold-calling when alternative means of getting people to apply when you get through to somebody who is willing to talk they are not happy with the phone? to you? Do you still engage them in a discussion Mr Wylie: We are aware that there are targets by about entitlement to other benefits or is it just a take- cluster. We are not aware, and we have seen no up call for pension credit? evidence for this, that targets are applied to Mr Vizard: No. When we do get through to individual members of staV at this stage, although somebody who might genuinely qualify for the part of the new performance and development benefit we try and look right across the board at system, which we are opposed to, includes the other benefits that may be a passport to pension possibility of pulling those sorts of targets through Ev 68 Work and Pensions Committee: Evidence

2 December 2004 Mr Paul Vizard and Mr Keith Wylie to assess individuals’ performance. It may well be they have to deliver. The feeling they gave me was that peer pressure and the pressure on staV working that they are very broad and do not focus suYciently on those application line forms is great enough to on the sorts of cases that you are referring to. force people to behave in a perverse way. It is one of the worries that we have about performance pay, Q328 Vera Baird: Are we talking about training for that if you tell people, “If you hit this target you get conversion only now or across the job? that much money”, they will inevitably find a way of Mr Vizard: No, across the piece. There is not hitting the target which is not necessarily the way in suYcient training on the 90% of cases that you will which the employer wants to hit the target. Part of V deal with all the time. It is a normal experience the application line sta are organised by the private within the department that people come out of sector, by Ventura. I cannot vouch for what training and struggle and then eventually get the arrangements there are there in terms of targets on preformance levels improved but it seems to me that individuals. I can speak on behalf of the vast corners are being cut increasingly, trainers are being majority who are civil servants but I am not certain V put under pressure to cut the eight-week course about private sector sta . down further to try and get people out onto the sections clearing benefits as quickly as they can. Q326 Vera Baird: This may be a similar question but What we have certainly seen within the Pension all the witnesses we had earlier and Age Concern Service is an increase in ineYciency action against said that some people felt they had been put under members of staV who have failed to come up to the great pressure to convert to direct payments and that correct level of service. Not always but often that is they were concerned that that had resulted in a direct result of them not being trained properly in some cases of people converting when it was the first place. They have almost been set up to fail. inappropriate. All of the witnesses said that they felt Because there is this pressure and drive on managers they had experienced customers who had not been to hit the targets from centre manager down to first told about the exceptions and the cheque service and line manager level there is this enormous pressure on they had experienced staV who did not know about trainers to get people through as quickly as they the exceptions and about the cheque service. Are possibly can and get them out there in a sort of beau conversion targets onto direct payment again geste approach, that the more people you can throw perhaps playing a perverse role in this? Do people there it will solve the problem, whereas I know from feel under pressure to convert people to direct my experience as a benefits supervisor that what you payments and what training do they get so that they want coming out of training is someone who has had can recognise people for whom that changeover is the full package and is reasonably competent who not appropriate? you can then start to build up and raise their confidence and as their experience comes on board Mr Wylie: The straight answer to that is yes, there V is pressure. Our members report to us that they feel they become successful members of sta . What seems to be happening more and more is that they pressured by management to deliver targets on are failing when they come out of training and then, conversions. We have got many of the concerns because the trainers are too busy because of attrition about direct payments that were voiced by rates, we have got an awful lot of people coming who colleagues earlier today and that we have seen in are either leaving during training or come out of evidence to the Committee from Citizens Advice and training, pass what is called the line manager’s others. We have got concerns about the order book assurance, which suggests that they are pretty much being removed completely. We believe it should be up to speed and where they should be at that stage, retained as an option. If a pensioner wants an order and then resigning quite quickly. There is an book he or she should be able to have an order book. enormous churn going on with the trainers having to You are right: there are targets set on our members train new people all the time which has led to an to convert people to direct payment. We think that increased number of people failing when they come they are wrong. I am not sure about the levels of out of training. Anecdotally it has been said to me on training in terms of the exemptions from direct a number of occasions that the people who fail in payment, but certainly the impression we get from terms of being able to process the job we put on the local representatives is that there is pressure building phones. That clearly is not going to help anything up from senior management to convert as many long term, is it? people as possible to direct payments because it is cheaper and it saves the department money, and it means that they can cut more staV. Q329 Mrs Humble: You just highlighted the importance of training. Are training staV subject to the same cuts as the rest of the department? Are they Q327 Vera Baird: But you have no comment on the taking a disproportionate share of the cuts or are quality of the training? they being protected from the cuts? Mr Wylie: Not at first hand. Mr Vizard: No. I think training cuts are included in Mr Vizard: Before Pension Service was created an the general cut. Obviously, with the two centres that admin oYcer who would normally process the work are going, the trainers there will go with the centres, would receive 13 weeks’ training. Now in the and the others that transfer, as they transfer that Pension Service they receive eight weeks’ training. I expertise, will go as well. Inevitably the trainers are spoke to some trainers in the build-up to today. They our best people; they are the technical experts that are very concerned about the training packages that you would want to retain within the service. Work and Pensions Committee: Evidence Ev 69

2 December 2004 Mr Paul Vizard and Mr Keith Wylie

Q330 Vera Baird: You have made it pretty clear that Q333 Vera Baird: Can I ask a more general question, when you are talking about pressure on training it is going back to the staV? You said you expected some across the piece. Let me just be absolutely clear for cuts because you were introducing a new system and the record because I think all our earlier witnesses in once you had done it, ideally those cuts would have their memoranda, and Citizens Advice, were very been achieved by having temporary contracts worried that application line staV were sometimes anyway. As I followed it, and tell me if I have just giving wrong advice, particularly in situations misunderstood it, you have been surprised by the where there are overlaps with disability living speed and the depth of the ramp down and it was allowance, attendance allowance and so on. Do your rationalised on the basis of this new IT system which members say to you whether they have got suYcient was going to make everybody three times as eYcient, advice to be able to do a good service in these which is not available now according to senior complicated areas, do they say they have not, or management, and senior management is now what? looking for other ways of making the staV more Mr Vizard: No. The comments that we receive are eYcient. Is that right? that they feel under enormous pressure to clear the Mr Vizard: Yes. call. There is an IT system in place now which in my opinion, like the worst practices of private sector call Q334 Vera Baird: And on top of that—if this is not centres, will let the operator know how many calls too complicated—your clear view is that the flight are stacking up behind. Clearly, that could be used path, even for that process of getting rid of staV, well in terms of management being able to move the assuming the IT is going to be in place, has been work flow around so that people are not kept exceeded even though the IT is not in place. Is that waiting for a long time, but they are conscious of the right? fact that calls are piling up and human nature, if Mr Vizard: That is exactly the position. The nothing else, will tell you that the response to that frustration that we have is that that is described as a will be, “I need to clear this one because I have got success story because we have got more people another 10 calls stacking up behind me”. Something leaving the service than we can manage out properly. that is interesting is that the service conducted a Vera Baird: Yes, I heard you say that. mystery shopping exercise quite recently where they had people phoning in asking queries so that they Q335 Chairman: Am I missing something here or do could establish what the level of service was like. It you end up at the end of the flight path with no staV was a private sector organisation that was brought and no functional computers? in to do that, which suggests to me that the level of Mr Wylie: Yes, that is the real danger. That is questions that they would be posing would probably something that we have flagged up with senior be fairly straightforward. In the research that has management. If they are saying that the new now been published on that I think the answer was technology will increase eYciency when the new that 52% of the queries were answered correctly, so technology is in and when the eYciencies have been 48% were given wrong advice. realised, it would be diYcult for us as a union to say, “Keep these staV around twiddling their thumbs because they have always been here”. We would Q331 Vera Baird: Again, all of our earlier witnesses have to agree that they could reduce the levels of and others we have heard from have complained staV, but they are doing it the other way round: they about the quality of award letters in particular. are reducing the staV before the new systems are in Citizens Advice told us that the department seemed and before the eYciencies are realised. The danger of to give low priority to making them as clear as doing that is that the service will fail. possible. Do your staV talk about this to you? What are the obstacles to improving the quality of award letters? Q336 Vera Baird: They are put in a position where management are looking for other ways to make you Mr Vizard: It has been a problem. It pre-dates the Y Pension Service, if I am honest. The award letters are e cient to try to catch up with the fact that the IT not as clear as they could be. The answer that we get system is not in place, and at the same time it is not when we ask the question of management is that the their expectation of how steep the ramp is that they problem is that the letters are generated by the legacy have got to contend with; it is what is actually systems and they cannot do anything about it until happening because of the impact on the workforce they can improve the IT, and at that point they will of expecting to be dismissed soon, ie, lots of people are falling out. There is a broader and broader gap, be able to improve the letters. I do not know whether is there not? that is true. It does not sound too plausible to me but Mr Wylie: Yes. that is the answer that we get. Q337 Chairman: It is worse than that. I am not Q332 Vera Baird: I guess it could be the way the IT aware of any new functional technology that picks them out or the way the data is fed in. suddenly is going to magically transform the Mr Vizard: Yes. The software generates the letter. situation. It has always been the case that they set As the information is put in the software generates a pension credit up on the former system and made a letter which presumably means that there would point that this was a badge of honour, that because need to be some alteration to that front end of the they had had such bad examples of bespoke software. computer hardware problems they were going to Ev 70 Work and Pensions Committee: Evidence

2 December 2004 Mr Paul Vizard and Mr Keith Wylie stick with the tried and tested system. Of course, Q339 Chairman: I do not think I want to hear that. there are always new releases and upgrades and this Gentlemen, you have been very generous with your and that, but there is nothing that is a step change time. I did promise at the outset, however, that if that I was ever made aware of in pension credit there was anything that you felt you had missed out that would ever transform the technological that we ought to think about we would be pleased to functionality to the extent that you could get these hear it now in the dying moments of the session. stats. Mr Wylie: In summary, Chair, our belief and the Mr Wylie: We do not believe that it is the case. We points that we will put to the Secretary of State if and believe that it is a management myth that they can when we meet him, is that our members cannot make our members three times more eYcient deliver the sort of service that we think the through technology. We do not think it is possible. Government wants to be delivered to pensioners with the levels of staV that they are proposing. The only way we can guarantee that is to improve the Q338 Chairman: They are taking some pretty big technology, and we agree with that, but also to give risks in terms of the long term future if your fears are us the numbers of staV that we think are right to give well founded which, from the evidence, they are. the service we want to give. Mr Vizard: Already we are starting to see Vera Baird: But you did say that the cuts were destabilisation within the service. We were told manageable if they stopped at the 2005–06 level. recently that Nottingham Pension Centre is one of the centres that has been identified to transfer over Q340 Chairman: You think you could live with that to Jobcentre Plus, so we are in the process of moving and deliver a service that was worthy of the term? the work out of Nottingham to other centres. In Mr Wylie: The IT would have to be working discussions of a diVerent form with Jobcentre Plus properly as well. If the two things worked properly management I asked the question, “Have you got then at those levels we could do the service. It might dates for when Nottingham will transfer over to you, not be the Rolls-Royce service we would want to because clearly it will potentially aVect exit packages deliver but at least it would be a decent service. With and a number of other issues?”, and the Jobcentre the projected cuts in the longer term we feel that the Plus manager displayed quite a lot of anger, not at service will fall over and fail, and not just because of me for once, but because the Pension Service were the numbers but also because of the lack of morale not giving him the date he needed to put all his plans amongst the staV and staV trying to get out at every in place. He said that the latest argument he had had opportunity. That is a big problem now, not in 2008. was that they could not give a release date for It is a problem that exists at the present time. Nottingham because they might want to move work Chairman: That is very concise and powerful back in if the places that they are sending the work evidence. We are very grateful to you for your to started to fall over. appearance this morning. Thank you very much. Work and Pensions Committee: Evidence Ev 71

Wednesday 8 December 2004

Members present:

Sir Archy Kirkwood, in the Chair

Vera Baird Mr Paul Goodman Miss Anne Begg Rob Marris Mr Andrew Dismore Andrew Selous

Witnesses: Mr Malcolm Wicks, a Member of the House, Minister of State for Pensions, and Ms Alexis Cleveland, Chief Executive, Pension Service, Department for Work and Pensions, examined.

Q341 Chairman: Good morning, ladies and centres. Another development now is of Joint Teams gentlemen. Can I call the proceedings to order. We working with the local authorities so that we can are having an oral session of evidence at the end of better join up the local welfare state to benefit elderly what has been an important inquiry for the people, all to help us achieve our target of tackling Committee on Pension Credit. We are joined this pensioner poverty in the United Kingdom. morning by the Minister of State for Pensions, Mr Chairman: That is very helpful and sets the scene Malcolm Wicks, welcome back to familiar pastures, rather well. Can we spend just a few moments and with him this morning is Alexis Cleveland, who looking at where the benefit fits into the wider is the Chief Executive of the Pension Service. Thank pensions debate with Adair Turner, and all of that, you both, and thank you for organising our visits and looking ahead. I think it would be helpful to try and for the evidence which you have submitted in to understand a little bit more about where the written form. It is all very helpful. Malcolm, why do Government thinks Pension Credit will fit in, you not start by saying a little about where we are? looking forward. We have had the Pension Credit operating for over a year now. I guess you could say that the Q342 Mr Goodman: The Pensions Policy Institute introduction, relative to some other benefits which told us there was a consensus that there was a need have been introduced, has been quite successful in for reform of the system over time, with most many ways, but there are still some problems and we organisations calling for an enhanced, non-means- will come on to some of those in the technical tested component and a scaling down of the means- questions in a moment. Why do you not set the scene tested component. Presumably you agree with this, and give your own view about where we are and do you not, because you said recently, it has been where we are headed? much quoted, that Pension Credit is a short- to Malcolm Wicks: Chairman, thank you very much. It medium-term policy? is nice to be back under your chairmanship, albeit on Malcolm Wicks: I think what we have got to do is the wrong side of the tracks on this occasion. As you look at diVerent cohorts of individuals, in terms of say, Pension Credit was introduced in October last pensions. When we came to power in 1997, the year so we have had a year’s, or so, experience. previous administration thought it right that a single Statistically, by the end of October this year 2.6 person on Income Support levels should get £69 a million pensioner households were receiving the week, we thought that was wrong and unjust. Credit, and that is almost 3.2 million individuals. Therefore, we wanted to focus particular help on The average weekly award is just over £41 a week. that group. They tend to be the very elderly and two- Two point four million people are receiving more as thirds of them are women. Why? Because they have a result of Pension Credit. The weekly gain is not got occupational pension rights, because of approximately £17. We feel that, thanks to the caring responsibilities in the past and because they Pension Service and Alexis Cleveland, we have had are less likely to have a full National Insurance a very successful roll-out of the Pension Credit. I record and a full basic state pension, so we have know everyone is looking for failures in this kind of policies designed for that group of people. Also we policy but I am very proud of what the Pension need to think about that elderly lady’s daughter, and Service has achieved. We have learned lessons and indeed the granddaughter. All I would argue is that we have applied the lessons appropriately. After our thinking about today’s 20 year old, or 25 year year one we are now taking stock, we are looking at old, and his, or her, pension future, I think, is a a new campaign so that we can further increase take- diVerent kind of story from how we treat the up rates. There are some issues there which we are grandmother and we are trying to think that aware of, so we are pursuing a take-up agenda. I through. I see the pension future for younger people should also just add that it is still relatively early days as being one where, through a combination of state for our new Pension Service, the first time we have pension and occupational pensions and all the other had a dedicated service for elders in this country, savings, they are above the means-tested level when operating, as you know, through Pension Centres they retire in the middle decades of this century. but also, critically, with a human face in every That would be my analysis about the future. That is constituency, a Local Pension Service, that has now why, yes, in terms of its major impact, I do see made one million contacts with elderly people, either Pension Credit as more of a short- to medium-term through home visits or at information or advice issue. That is not to say that, just as there has been Ev 72 Work and Pensions Committee: Evidence

8 December 2004 Mr Malcolm Wicks MP and Ms Alexis Cleveland ever since the 1948 Act, there will not be a place for to do in the Department is initiate a debate about incomes-testing way into this century, but I hope it what we mean by pensioner deprivation. Clearly, will be of diminishing importance. with an ageing population, there will be judgments in the future to be made about extra resources going Q343 Mr Goodman: Clearly, you are part of this to health, social care, the Warm Front policy I have consensus, which brings me to the next question, mentioned and pensions, and I think we need a wider which is this. You said, and the Secretary of State debate about pensioner poverty, how we attack it has said, in what seems to be a breath of new and how it relates to something even more thinking, that the problem of abject pensioner important, namely, the well-being of elderly people poverty has got to be solved, and when it is solved in an ageing society. then we can really lift up our eyes to think about the future and the non-means-tested component, Q346 Mr Goodman: Do you agree that a problem possibly a citizen’s pension and all that. I think the with current arrangements is the rate at which big question is, when will we know? How is the entitlement to Savings Credit is growing, and is there Department going to measure, how are you going to a way to contain this cost while at the same time measure, whether you have solved this problem of continuing to uprate the Guarantee Credit in line abject pensioner poverty? How are you going to with earnings? measure it and what is your timescale? Malcolm Wicks: Can I say, at the moment, when I Malcolm Wicks: Of course, we do have measures, look myself critically at where we are, I am genuinely there are diVerent measures, and alongside the pleased by what we have done on Pension Credit measures we can see that we are moving ahead, in and, as I say, I am proud of our public service, the terms of tackling absolute pensioner poverty and Pension Service. When the public service also relative poverty. The Committee have got the occasionally comes in for criticism, I think figures, or we can supply the figures. We have been occasionally we should recognise achievement, and very, very successful in that respect. Particularly the as Minister I do recognise achievement there. When poorest third of elderly people are getting now a I look at it critically, we have been more successful, disproportionate percentage of the additional I suppose, on the important thing of getting people resource we are putting in, so while we are spending on the Guarantee element of Pension Credit. I think £10 billion extra a year on pensions, compared with the figures are that when you compare it with MIG a previous Government, Mr Goodman, a great take-up in April 2003 we have now got something proportion of that money is going to the poorest. We like 320,0001 more households on the guaranteed can measure that, and our objective is to eradicate element. In other words, we are getting the Pension poverty, of course it is, that must be our objective. Credit resource to the poorest group of elderly You do not do it just through income maintenance people. When you look at take-up figures, we might policies, you do it through things like the Warm later, that is always worth bearing in mind. I think Front policy as well, so it is a more comprehensive the challenge for us now is to get more people taking approach that we are taking to this issue. up the Savings Credit element, a group of elderly people who have not traditionally come into this Q344 Mr Goodman: Yes, but when and how are you part of the benefits system, so I see that as a going to know? When you are sitting around with challenge. I understand the question. There will be judgments to be made in the future about the relative the Secretary of State, looking at the figures and V looking at your measurements, how soon do you index-linking of di erent components of Pension think you are going to be able to say, “Right, I think Credit, in terms of our strategy over the next few we’ve solved this problem of abject pensioner decades. poverty. Now is the time to let our citizen’s pension proposals maybe take oV the ground”? Q347 Mr Goodman: It is not a question about Malcolm Wicks: We do not have one target, or we timescale. If reform of this growth rate is needed, do not have one date, but I think we have clear would it not be better to do it sooner rather than indicators of the direction of travel and the direction later? of travel is a very good one. As I say, we have got Malcolm Wicks: We have given pledges about index- impressive evidence on the attack on absolute linking for this spending round, and of course it will pensioner poverty, and indeed in terms of relative be for future ministers and parliaments to make poverty as well, so I think this Committee and judgments about the longer-term scale. Parliament can see and indeed discuss and argue about the progress we are making in future Q348 Mr Goodman: Perhaps understandably, you Parliaments. are a bit vague about the timescale. Can I put to you why that might be? A lot of people looking at this Q345 Mr Goodman: You do not have any timescale from outside, not just the Opposition political at all and it is not before Turner, presumably? parties but lobby groups and others who have got an Malcolm Wicks: I do not think it is before Turner interest in all this, are wondering who is in charge. two, no. I think it is a longer-term timescale. Indeed, On the one hand, we have thoughtful speeches from just as we have had a debate about what we mean by 1 This refers to 320,000 additional guarantee cases (or child poverty and whether it is just about income or households). There are just over 400,000 individuals within whether it should be about other aspects, say, those households which may include a small number of educational attainment, I think what we would like partners under the age of 60. Work and Pensions Committee: Evidence Ev 73

8 December 2004 Mr Malcolm Wicks MP and Ms Alexis Cleveland you and the Secretary of State about the citizen’s private sector. I do not know if you have dropped pension and all that. On the other hand, you look at that commitment but I think many independent the policy and this great means-testing machine that commentators will say actually this is quite a critical continues to grind on. The question a lot of people component of people’s long-term financial planning are asking is who is actually in charge of the policy, for a secure old age? is it the Department or is it the Treasury, is it the Malcolm Wicks: Let us remind ourselves of what the Secretary of State or is it the Chancellor of the Turner analysis is. I think the strength of the Turner Exchequer? Who is actually in charge of the ship? analysis is the long time perspective, because he tells Malcolm Wicks: Could I just say, Mr Goodman, us, with a very good evidence base, that these issues and through the Chair, that, you talk about the great were bubbling up in the 1980s, there was a kind of means-testing machine, I think it is time in Britain fools’ paradise, to use his term, because of booming for a rather grown-up debate about means-testing. stock markets. He also reminds us that at the The fact of the matter is, and we have known this for moment when people are retiring they are retiring on a long time, I have been aware of it for a long time, higher incomes, on average, than the previous that there are advantages and disadvantages to an cohort. He goes on to say that unless action is taken income-testing approach, and there are both. I think over the next few years there is going to be a real at the moment, not in this Committee, of course, it problem in, say, two decades’ time, so his focus is is too erudite, but outside, we have, in a sense, two very much on those coming up to the middle decades sides not really having a dialogue about this, and I of this century. We established the Turner think we do need a slightly more mature debate Commission to advise on these issues and I quite about it. You talk about this great means-testing accept that the judgments to be made about the machine, or whatever your rhetoric was, whereas future of occupational pensions, voluntary or actually I am rather proud, quietly, of the fact that compulsory, interface very much with judgments to whereas under your previous Government the single be made about state pensions, of course I recognise elderly person had £69 a week to live on, it is not for that. I hope they will forgive me, despite them not me to justify that, for next year it will be £109. This being top of my list, financial advisers, yes, have to great means-testing machine, as you call it look at these issues, although I do think it is slightly polemically, is delivering money to our elders and far-fetched to suggest that when you might be our betters and I am rather proud of that. In terms advising, say, the 30 year old, with somehow a career of who is in charge, the Government is in charge, and stretching before them, hopefully a good one, that indeed we intend to remain so. It is a collective eligibility for the then, whatever it will be called, responsibility. Of course, our Department is the Pension Credit is a key issue. I think that is naı¨ve, biggest spender and therefore our relationships with quite frankly. the Treasury are really very close on these issues and, perfectly appropriately, our policy is a matter of interest to the Chancellor, and of course we welcome Q351 Chairman: I understand perfectly the way you that interest. characterised the answer to that last question but I think that everybody who is looking at this agenda recognises that Adair Turner’s Report does provide Q349 Andrew Selous: Can I take you back to the line us with an opportunity, and when he comes up with of questioning that Paul Goodman was advancing the recommendations it is important to try, I think earlier on about when you are going to clarify your you would agree, to establish as wide a consensus future thinking. You said it will be post Turner two, around his recommendations as we can. It seems to but is not this really going to cause problems for the me, and this is actually a reformulation of Andrew Turner Commission unless the Government give Selous’ question, that the extent of means-testing some indication as to how it would like future which currently is in the policy could be one of pensions policy to run out in future? How are the biggest stumbling-blocks to achieving that financial advisers, how are people trying to make consensus. The question really is, and you are a plans now about their long-term future, going to be strong defender and you are sounding very able to take those sensible decisions if even when the passionate, and rightly so, about the achievement Turner Report comes out it is still unclear what you have made in terms of dealing with pensioner Government thinking is for the long term? poverty up till now, to what extent are you prepared Malcolm Wicks: Excuse me, when I think about the to concede that cashing in the extent of means- challenges facing us as a Government, in terms of testing might be worth doing if actually it secures a righting injustices and righting wrongs, the concerns cross-party consensus that sees us through to 2030, of financial advisers are not top of my agenda and 2050, in the way that Adair Turner is suggesting? other people come higher. Independent financial advisers are not giving it a lot of thought either, but actually the long-term policy Q350 Andrew Selous: Can I come back on that. We is very important for the United Kingdom. took evidence from Adair Turner and some of his Malcolm Wicks: It is important and the introduction colleagues on the Commission. They said that was of the Savings Credit really is quite interesting actually a very important part of future pension because, on the one hand, of course, for the first planning because financial advisers talk to people time, we are saying, in this kind of policy, because it about their long-term pension planning decisions. was not there under National Assistance, it was not When your Government came to power you wanted there under Supplementary Benefit or Income to have 60% of pension provision through the Support, we want to reward, recognise, rather than Ev 74 Work and Pensions Committee: Evidence

8 December 2004 Mr Malcolm Wicks MP and Ms Alexis Cleveland penalise, those who have modest savings and yet this residency test, basically will go to elderly people, seems to have unleashed a concern about a savings regardless of income and regardless of any incentive. Whereas, under another administration, contribution record, and that has many strengths. so the front bench spokesmen here, they can answer Against that there will be those, I think, who could for themselves, it was a pound-for-pound reduction argue for a kind of renaissance of the social against the old Income Support. Was their debate insurance principle, because contributions are then concerned about savings incentive? There is important, because it relates back to citizenship and something rather bizarre about that. I made my own rights and duties. I do not think that any of us would judgment clear on this, that I look forward to a say that the National Insurance scheme we have future where younger people today will accumulate now, with all these diVerent nuances to it, often savings, occupational pensions and state pension adversely aVecting women and, in the past, carers, is rights which will mean that when they retire they will the kind of modernised social insurance system you be significantly above any means-tested levels which would want. Frankly, I think that is where there then exist. That is our ambition and I feel very should now be an interesting debate. Also, of course, passionately about that. I do not want to see a nation it relates to things like the future of state second of elders where the great majority, say, are subject to pensions, and some may well argue that you can means-testing. It is not what it is about. We have got move towards a diVerent regime for a basic pension, a current situation, particularly facing women, and or universal pension, while maintaining a we are taking the right action. contribution code for an earnings-related pension Chairman: We could discuss that for the rest of the and indeed other benefits entitlement. That is where morning, but we have got a lot of ground to cover. I see the issue. The only other thing I would add, Ms We are going to move on to the position of women Baird, through the Chair, is that I think we need to and invite Vera Baird to continue the questioning. look at timescale on this. At the moment, the criticism, rightly, is that too few women retire with a full National Insurance contribution record, for Q352 Vera Baird: Minister, you are very well aware reasons we understand. I think, when you look of the concerns about women, indeed you have ahead a decade or two, because of Home referred to them a number of times. The benefit that Responsibilities Protection, because women today women have accrued from Pension Credit is clear, have fewer children and because they are more likely but it has always been a two-sided argument because to return to the labour market more quickly than it is on account of women as they get to pensionable their predecessors after having had their baby, then age being poorer than men are. Of course, the actually what you see is that the tiny percentages Secretary of State has referred to women’s pensions now of people on a full basic state pension starts to as, in a sense, a national scandal, and what he was change over the next two decades. You can see the talking about there and what I want to ask you a few way in which things like Home Responsibilities questions about is that only a small proportion of Payments will make an impact on the pensions, women in retirement have a basic state pension at its to use that example again, as it were, the fullest level. I think somewhere between 14% and granddaughters rather than the grandmothers who 17% have a basic state pension, a full one, in their are already retired. Indeed, it might be, Chairman, own right, and about 50% have a full one and the that I could try to share some of that evidence with V di erence in the two figures is it is widows, really, is it the Committee which I have looked at recently in my not, who substitute their husbands’ NI record? The Department. Turner Commission identified certain, what it Chairman: I am sure that will be helpful. Thank you. called, cliV edges in the state pension system which impede women, whose labour market participation is interrupted by caring, from accruing basic state Q353 Vera Baird: It is absolutely clear, what I think pensions. In particular, they talked about the 10 year the Turner Commission said, that there is rule, about the impact of the lower earnings limit convergence between men and women over a couple and about an inflexibility of the women having of decades, with men actually doing worse and responsibilities protection and suggested that if they women doing better. Nonetheless, if there are were changed then that could have an important structural defects in the pension system, either of the impact on the adequacy of pensions, particularly for kind we have already canvassed, about HRP, which lower-paid women. I am sure you are well aware of is not a weekly credit but is a system which means all of those diYculties in the system. Are you that a woman does not have to work for 39 years to considering addressing any of those changes? If so, get her full basic state pension for every year she is on how long would they take to feed through into Home Responsibilities Protection, she works a year realising better pension provision for women? Could less, but if you break through the lower earnings they be altered retrospectively? limit, if you do not have qualification for HRP for a Malcolm Wicks: I very much welcome the fact that full year you simply lose it, they are very inflexible, there is now a kind of new debate taking place about these structural changes. The question is, because the future of state pensions, and my Secretary of the PPI is very clear and I am very clear, so let me put State has very much led that debate. I welcome that. this to you, that although women will start to I am looking at it objectively and part of the debate converge they will never catch up with men as long will be between those people who argue for, what I as they take primary care responsibilities, because think they often call it, a citizen’s pension, or a HRP is too inflexible, because all of the other universal pension, which, based on some kind of problems we have talked about will not allow them Work and Pensions Committee: Evidence Ev 75

8 December 2004 Mr Malcolm Wicks MP and Ms Alexis Cleveland actually to catch up, do you change these problems Malcolm Wicks: No, in the sense I cannot give you for women in the structure of the pension system, or a date, and who knows what will happen next year. do you say indeed “That’s very complicated, it’ll There could be very important things happening take a long time to feed through and we have to look next year, we will take on the Presidency of G8, for for a diVerent method”? example, is what I had in mind there. I think, clearly, Malcolm Wicks: That is the issue, I think. As I say, after the Turner analysis, alongside that, the I think where the debate should be, because I think Government will need to make some judgments we need a proper debate about this, I do not think about state and occupational pensions and how they there is a monopoly of wisdom on either side, is interface with one another. between whether we go for the universal pension, regardless of any contribution record but a residency Q356 Vera Baird: Could I ask you about what is a test going on, which will then cut through a lot of big point for some women, a small point in the these issues and these issues will not arise, or context of what we have been saying. Savings Credit whether, if one feels the contributory principle still is introduced to recognise the importance of has some strengths associated with it, what would a rewarding people for saving but, of course, it applies social insurance system look like, fit for purpose, only to savings above the basic state pension, so all given people’s life patterns and life cycles in the 21st of those women who do not have a full basic state century, men and women? You would have to pension still lose, pound for pound, all of their address these issues. These is still a sense in which, savings, if they have any. Are there any plans to despite major advances, and let us not dismiss the change that? We have got a costing, I think, from advances, in terms of the Home Responsibilities your Department that to reward those with less than Protection, National Insurance reflects the a full basic state pension for saving it would cost Beveridge view of the 1940s. There is a quote I about half a billion pounds next year. Is that cannot quote accurately because it is not entirely in something you are looking at doing in the short my head, but basically Beveridge is saying that on term, irrespective of the major decisions? marriage women take on a new status, they are Malcolm Wicks: I think our view has been that we dependent upon their husbands, they perform vital, have to deliver to that particularly vulnerable group unpaid tasks in return for that dependency, etc., that of elderly people a guaranteed income, which next is almost a quote from Beveridge. Clearly, some of year will be £109 for single people and £167 a week V that sexist view about the modern family and the role for a couple. I think that has been our major e ort of men and women, in a sense, still is somewhat and it is where the Pension Service has done reflected in our National Insurance system, despite, remarkably well. As I say, I think the figure, and I emphasise this, the radical moves we have compared with April last year, is that an extra 320,000 people are now getting the guaranteed level, made, in terms of recognising that when you have a real impact on their wretched poverty, and I think children and when you are caring for elders you that is where our impact has been. I understand the should be credited into the system. issue about Savings Credit. Frankly, there are a number of things we could do to improve the Q354 Vera Baird: I think that is a very important mechanics of Pension Credit, and there are issues we recognition. How important in your view is the may get on to, I do not know, about the impact on contributory nature of the current system? Housing Benefit and Council Tax Benefit, for Malcolm Wicks: As I say, I think that is where the example. There are a number of changes you can debate is and I think one of the judgments about the make and most of them cost quite significant Y contributory principle would be whether in the amounts of money and there is always that di culty future it should underpin, as it does at the moment, and always that reality, of course, and half a billion the basic state pension, or whether if you moved pounds is quite a lot of cash. towards the idea of a universal pension it could become the major underpinning for any earnings Q357 Vera Baird: However, if the principle is that relation you have in the system. I think all these people should be rewarded for saving, why are not things are big issues. Frankly, there are advantages women in that category? and disadvantages to both, in my judgment, and we Malcolm Wicks: That is the argument we are putting need to discuss them. It should be a public debate, forward and I recognise the strength of the I think, Chairman, but obviously the Government, argument, but also I recognise the other side of the while taking part in that debate and having some balance-sheet, sadly. private discussions about it, will need to make a judgment about that. I think probably we will want Q358 Rob Marris: You have mentioned twice one to make that judgment in association with the possibility, of moving to a citizen’s pension coupled complementary debate that is going on about the with some kind of earnings-related scheme, which I future of occupational pensions, which we have suggest to you would disadvantage women, who asked Adair Turner and his colleagues to look at tend to earn less. Do I take it, from that, that the for us. Government is considering the possibility of reviving SERPS? Malcolm Wicks: No, I do not think you can take Q355 Vera Baird: Do you have a timescale by which that. The SERPS had many strengths but actually you intend to come to that judgment? it had some weaknesses, it was not the most Ev 76 Work and Pensions Committee: Evidence

8 December 2004 Mr Malcolm Wicks MP and Ms Alexis Cleveland redistributive mechanism, although I recognise that entitled to Pension Credit, this is always give or take many people in skilled trades are now going to 100,000, maybe 200,000 on either side. Mr Dismore, consider amounts of SERPS. We think that the state we talk about 80%, it could be more getting it, but it second pension, which as you know is the successor could be fewer, so there is always that element. to Barbara Castle’s SERPS, has its own strengths. The way in which carers are credited in, if a previous administration recognised those caring for children, Q360 Mr Dismore: If we want to look at this more in I am proud of the fact that our administrations the round, only 38% are claiming Savings Credit. I recognised what demographically is becoming think the point I would like to come back on, first of something as important, namely the care of elders all, is the question of the amounts involved. and we have credited in that group of people. The Certainly, as far as Savings Credit is concerned, state second pension, I think, is particularly bearing in mind the claw-back for Housing Benefit important for women. There are a lot of wide issues and Council Tax Benefit, are we talking really about here and there are three or four big subjects you need the 62% losing out on only minimal sums and is that to discuss together almost, and one of them, of why they are not claiming? course, is the future of the earnings-related Ms Cleveland: I think there is an issue about the component of state pensions through S2P, or state claw-back and what could be a full Savings Credit second pension. element, if also you are receiving Housing Benefit and Council Tax Benefit you are getting only 15p in the pound extra, so even on a full Savings Credit of Q359 Mr Dismore: I would like to talk about take- £15 it becomes a very small sum, though, of course, up, starting with the Guarantee Credit. You have it does passport people to other benefits as well. That got 80% claiming Guarantee Credit, which means is why it is important that we do continue to make obviously that 20% are not claiming. What do you those people take up their entitlements. know about the 20% who are not claiming? Malcolm Wicks: I think my colleague, Alexis Q361 Mr Dismore: Is there any thought about Cleveland, might want to add to this. We are getting looking at what we are actually trying to achieve better evidence now, it is not hard and, I do not think here, by reference to not so much the numbers who at the moment, statistically robust evidence, but I claim but the amount, the global amount, which is hope it will improve, by the way, and we can share it not being claimed? Would that be a better target to with the Committee, about diVerent barriers to non- look at? take-up. If I can list just some of them, it is not just Malcolm Wicks: It would be interesting to know about the Guarantee, by the way, some of it is about what Alexis Cleveland feels about this. I do not think the other elements as well. There is uncertainty we have got the data yet but certainly I would want about eligibility among some people, 20% believing to see data when it is robust which would, as is savings would exclude them, for example, from one traditionally the case on these occasions with means- group of evidence we have. I know it was not your tested benefits, let us see what the percentage take- question but the savings side we need to emphasise. up is by individuals or by households, both, but also Interestingly enough, and this might puzzle some in terms of what the percentage take-up of the cash people but I can only report what we are told by entitlement is. I would guess, at the moment, I think elderly people, some say they will not claim because it is a reasonable guess, that the percentage take-up they feel they can manage, financially they are okay, of monies would be higher than the households they tell us. I still want them to get the Pension claiming, because I think the evidence we have got Credit, by the way, but that is actually what they are shows pretty well that it is the ones who gain most reporting to us. There is the worry still, yes, among who are most likely to be receiving Pension Credit. some about disclosing information to strangers and Ms Cleveland: My view is, it is a matter of principle, we need to try to overcome that problem. Some that I would favour a percentage of the money people think the size of any gain may not be worth available as a target, because I think actually that the eVort. I think the evidence emerging now, and it focuses you very clearly in that direction. What I has always been the case with means-tested benefits, cannot come up with is a way of measuring that, is that those gaining least, maybe the odd £5 a week, given the uncertainties about the underlying say, are least likely to apply, whereas those gaining population and the adequacy of some of our data most, say £50, seem to be at a much higher take-up about their income levels and reported income levels rate than even the 80%. We are looking at all these that you pick up in survey information as well, which factors, but I think, Mr Dismore, you are right to we know tends to be underestimating that. imply that if we think it is about 80% claiming the Guarantee element there is a challenge out there for us with the rest. Can I say, Chairman, through you, Q362 Mr Dismore: Is there any thought about that there is the usual health warning on this, that looking again at the claw-back and seeing whether because our data on entitlement is based on the we can adjust the claw-back so that not so much gets Family Resources Survey, date of 2002–03 projected taken away for Housing Benefit and Council Tax forward to 2004–05, as this Committee recognises, Benefit? I had a pensioners meeting last week and being based on a sample, there are always margins of this woman came up to me and said, “I claimed error. Whenever we talk about estimates of Pension Credit, I got £7.50 and found I ended up entitlement, and I have got an estimate here, that we with about 4p by the time I’d finished. What was the think 3.85 million pensioner households were point of all that?” They feel cheated. Work and Pensions Committee: Evidence Ev 77

8 December 2004 Mr Malcolm Wicks MP and Ms Alexis Cleveland

Malcolm Wicks: Can I just say, and this is an aside records, those who are likely to have an entitlement on the last point, that sometimes when people write to Pension Credit. That is the next stage of the to me through their Members of Parliament about campaign that we are running through now. this there is often some confusion because you have got two agencies, the local council and our own Q364 Mr Dismore: Going back to the Local Service, Department. In terms of timescale, people are saying I think you may get some more questions about that, sometimes actually they are worse oV, whereas in are you going to be able to sustain that? fact they are not if you compare like with like. I agree Ms Cleveland: Certainly on the plans that we have that, as Alexis Cleveland says, the actual gain can be got at the moment, we are not looking to reduce the really rather small. We will still argue, I think, that numbers in Local Service over this period. it is important for people to claim their entitlements, because for those people who may say, for example, Q365 Mr Dismore: That has happened already “I’ve got my Pension Credit, I won’t bother about though, has it not? Council Tax Benefit,” once you are entitled to these Ms Cleveland: We have reduced the numbers in line things you often remain entitled, so it is important. with the eYciency challenge that we have been set in Mr Dismore, in answer to your question, yes, we are the Department, but also reflecting the fact that we looking at that. Again, I have to be realistic because have been over a peak of activity. There is an nothing comes cheap in social security and there are opportunity to put more work into this as we move quite significant costs associated with this. through the direct payment activity, because we are having to balance our resource in this area between now and next March for visiting, for direct payment Q363 Mr Dismore: Looking at the numbers who conversions and for Pension Credit, where possibly started to claim towards the March 2004 deadline we are trying to integrate the two in a single for targets, there was a significant increase just conversation with the customer. That resource, from V before that date and then it seems to have fallen o March next year, will be available more directly for somewhat since then, and I think only 15,000 Pension Credit take-up. claimed in September. Why do you think that is? Ms Cleveland: I think there are two things. There Q366 Mr Dismore: Can I address the question of V was a peak in March and that was a big e ort on our take-up of Attendance Allowance, and you were part to make sure we processed cases and it was considering a target in June 2003 for take-up on driven by a target at that point, but it was part of a Attendance Allowance. How did that end up? very long campaign we have been running since Malcolm Wicks: We do not have a target for April 2003 for take-up. We have done a great deal of Attendance Allowance. very detailed work on customer segmentation that will come through, which comes back to what do we Q367 Mr Dismore: You were talking about it, that is know about take-up so far. During the first 12 what I am saying? months of the campaign we wrote to every pensioner Malcolm Wicks: I am happy to take that back as an household in the UK informing them of Pension issue. We are concerned for all of these benefits, and Credit. We tailored the letters particularly to recently we had a big campaign on Council Tax encourage those people we thought were most likely Benefit, for example. A flyer has gone out with every to apply to come through, and we ran that and that Winter Fuel Payment about Council Tax Benefit. was running through till the beginning of this year. We are very concerned that those eligible for The impact of that really came through into the Attendance Allowance should receive it, so we are take-up in March. We had planned a campaign happy to look at that again and discuss that with the where we expected over the summer this year, Minister responsible. through work we were doing with our partner Ms Cleveland: Certainly, from an operational area, organisations, another surge of claims in September, Mr Dismore, when we are doing Local Service visits, when it came towards the end of the 12-month back- a lot of our people are identifying the unclaimed dating period, because of the policy change and Attendance Allowance and also Carer’s Allowance continuing with the back-dating period which I and picking up cases like that. Again, some of the think will help us more with take-up in the future, diYculties about take-up of Pension Credit, actually but we did not get that surge of claims. I think we assessing the underlying population for Attendance were a little slow in not anticipating that in the order Allowance is going to be very diYcult. of revitalising the campaign, and that is what we are doing now. Although we would not expect to see the Q368 Mr Dismore: Can I go on to some of the increase probably until now and into next year, suggestions which have been made about increasing actually we have relaunched our campaign, or are take-up. Citizens Advice have suggested that when reapproaching, for example, everybody who has people reach 60 and they are already on Income contacted the Pension Credit Application Line and Support, why can you not just passport them filled in an application but not returned it to us. We straight through? are contacting those people, saying “Why is this still Ms Cleveland: We have arrangements with sitting on the mantelpiece?” to take that forward. Jobcentre Plus to make sure that we pick up these We are doing other calling and Local Service visits to cases, but the rules for Income Support and Pension people who look to be, from data-matching we have Credit are slightly diVerent, particularly in terms of done within the Department and according to our the capital rules. It should be a seamless process. I Ev 78 Work and Pensions Committee: Evidence

8 December 2004 Mr Malcolm Wicks MP and Ms Alexis Cleveland know, in some cases, it has not been and this is to pick some of the near misses, people who are not something we are working on very closely with quite qualified now but you might want to come Jobcentre Plus at the moment, to make sure there is back to and do a review of that case maybe in two not any break in entitlement or break in payment for years’ time, because some of the impact of uprating these people. might bring people into this category as well. We have not got any firm proposals on how to do the Q369 Mr Dismore: The other problem, of course, is near misses yet, but certainly that is something we perennially having to fill in very similar forms for are looking at very actively. diVerent benefits, like Housing, Council Tax and Pension Credit. Where have we got to, in trying to Q371 Mr Dismore: Presumably you can organise work towards supplying information once and that your computers to do a flag or a trigger to say “This being used across the range of benefits? person is facing” presumably from data projection, Malcolm Wicks: I share your frustration about that. “an estimate of where they are likely to be,” There are diVerent bits of the welfare state which assuming that Pension Credit increases in line with require this kind of information about personal earnings? details, income and savings. I am absolutely clear Ms Cleveland: You are absolutely right. It is just that where we have got to move towards, and I finding the best way of doing that within our cannot give you a timescale but we are actively systems. looking at this, is a situation where one part of the Malcolm Wicks: I am sure our computers, as ever, welfare state collects in that information and then are well up to that task, Chairman. can share it with others, subject to all the rules about data protection, etc,—there are some barriers we Q372 Andrew Selous: Just to continue, very briefly, need to look at there,—we can share it with other, the earlier exchange we had, I am concerned, legitimate people within the welfare state who need Minister, that we are not recognising a problem that that information. I think, from a customer’s point of is raised quite frequently with my constituents, who view, where we are now does not seem to make any perhaps are seeing their own occupational pension sense at all. Where I think we are at the moment is collapse, and they are saying to me that their to see whether in our Department we can move children are saying very clearly to them that they do towards a situation where we would prepopulate not think it is worth saving for a pension, and this is application forms for other things, like Housing what the younger people in my constituency are Benefit, for example, and pass them to the individual telling me as well. I do not think that any of us could so that she, or he, can send it to the local authority. say honestly it would be the great triumph of any There are a number of kind of halfway-house future Government to claim that even more people measures, I think, Chairman, on the route towards are claiming Pension Credit, or whatever, because a much better joined-up approach. I understand the they decided not to save in the early days. If you are force of the question. It frustrates me, as a prepared just to give some recognition to that, I constituency MP, that we are where we are, but I would find that comforting. Just purely for the think there are a number of ideas around now to record, you did mention the unsustainable boom in move in the direction that you are suggesting we the stock markets in the eighties, I think it is only fair should, and I agree with you. to mention that the UK stock market performance, Ms Cleveland: I think our proposals would still which of course is essential for occupational and involve completion of probably more than one form. personal pension savings, has been pretty poor The objective we are looking at in the shorter term is internationally over the last six or seven years. that you only have to complete the information Really it is that earlier point about younger people which has not already been provided to either the and saving I want you to make a further comment local authority, as part of a Housing Benefit claim, on? or to us, as part of a Pension Credit claim. Malcolm Wicks: The Turner analysis was saying basically that, in a sense, some companies thought Q370 Mr Dismore: Going back to some of the earlier they could have occupational pension schemes for questions, as means-testing does look as if it is going almost nothing and the booming share prices would to increase in the short term, certainly people who just carry them forward, and that is what Adair may be retiring now may not be entitled to Pension Turner and his colleagues called the fool’s paradise Credit, but in three, four or five years’ time they may then. I do recognise these issues. We have just passed well become entitled. What are you trying to do to a weighty, I hope in both senses of the term, Pensions make sure you have got arrangements to catch Act, which establishes from April a Pension people later on, rather than just coming to Protection Fund. I am saddened when I meet groups retirement, although I understand what you say, of workers, I met some yesterday, I have met many that the real push comes at that time? groups with MPs, who have been in company Ms Cleveland: Absolutely. Certainly we need to pension schemes, final salary schemes, so-called DB make sure we get the gateway right, so that when schemes, and, crash, the company goes bust, and people are entering retirement we pick up their suddenly, lo and behold, the pension scheme does entitlements. Also we are looking at reviews we not have enough money for all the pension liabilities might take at certain life events. That might be into the future. That is why we have established the reaching a certain age to look at a review, potentially Pension Protection Fund, so from April we will be at the death of a partner for review, but also trying able to say to those workers, and we do not want the Work and Pensions Committee: Evidence Ev 79

8 December 2004 Mr Malcolm Wicks MP and Ms Alexis Cleveland companies to go bust, we have got the regulator to Q375 Andrew Selous: In the future, will the amount try to get these schemes into better shape, of course, of training be reduced going forward? as well, look them in the eye and say, “If the worst Ms Cleveland: If you look forward, the amount of happens, you’ll get 90% of your pension rights if you training actually increases, because that is related to are a worker and 100% if you’re already a company the Transformation Programme we are trying to pensioner.” That gets security back into that aspect bring in. Also, it tackles some of the issues about of social security. They have had that in the States completeness, because as we move forward we want since the seventies. If it is good enough for American to have more of our clerks able to deal with a wider workers it is good enough for British workers. Do we range of topics without having to hand customers on need to do more? Yes, we do, and so this whole issue to another member of staV oV. Also to provide more of how we get more people into decent occupational in the way of help screens, to make sure they do not pension schemes is the key set question for Adair miss some of the key and very diYcult technical Turner, and we will look at his answers in his next points, but also so that they know when to hand a report later next year. case over to someone who is more of a technical expert in a particular benefit. Q373 Andrew Selous: Moving on to some of the more technical questions in relation to Pension Q376 Andrew Selous: In terms of errors or delays, as Credit. We have had evidence from a number of far as applications are concerned, are you satisfied organisations that some of the Application Line staV that your staV are getting on top of that, in terms of have not always been giving wholly accurate advice, dealing with those issues? particularly in relation to Attendance Allowance Ms Cleveland: In terms of the processing times, we and Carer’s Allowance. I had one of my constituents are doing better under Pension Credit than we did recently as well who had a slightly complex issue under Minimum Income Guarantee. There is a risk about council tax arrears and I think he had been that it might take longer, given that there are the two told by the local authority that this could not be components of Pension Credit, that we are hitting taken back from Pension Credit and then he had our internal targets on processing. There are still been told by his Local Pension Advice Service that it some cases which take longer than we would like and could, so obviously he was confused and came to me. we are looking to reduce those, largely by improving What comments would you have to make on these the quality of the information which comes through. sorts of issues? One of the eVects of sharing information with local Ms Cleveland: Just for clarity, I think that would be authorities and suchlike means that in future we may a call to one of our main Pension Centres rather than have to do less verification, which again will speed the Pension Credit Application Line, because really up the service. We have not yet got the first external that is just taking the applications. Certainly, in view of the accuracy of payments, for example. That terms of the Pension Service telephony service and will come as part of the normal cycle of these checks. the training of our staV, we take any concerns like Our internal checks are showing that we are that very seriously. Where it is very complex like performing well against our targets. We have that, it seems to me that someone should have ensured, as we have recruited new people into the referred that to someone more technical in the Service, that we have something called a “line organisation. We do know there is an issue with manager’s assessment” and that before someone people trying to help too much sometimes when they moves oV 100% checking of their work they have to do not know the detail. We are doing a lot with team be able to demonstrate they can make these leaders listening in to telephone conversations, as payments accurately. part of the ongoing training, for our staV to pick up issues like that. Also we have introduced the Q377 Andrew Selous: Finally, in terms of the award “mystery shopping” process, whereby National letters that go out, when changes need to be made, is Opinion Polls, on our behalf, ‘phone in sometimes it the case that there are diYculties with that, with some quite complex information, just to check perhaps because of older computer systems? that our staV are giving not just the correct Ms Cleveland: Yes. The changes to the letters have to information to a particular question but making be fitted in within a cycle of upgrades to the technical sure they have got complete information. It is systems, and just the way they are constructed makes important for us that the customer has that full it quite diYcult to change those letters. As part of information but also it is important because it saves our Transformation Programme, we are looking to another call to us. have the agent who is dealing with the customer being able to structure the letter that goes out to Q374 Andrew Selous: You mentioned staV training someone, rather than it being just an automatic ongoing. Is it the case that is being reduced and it is award letter generated from a section of paragraphs going to be reduced yet further? of the computer system. Sometimes, I freely admit, Ms Cleveland: In terms of absolute numbers of when you look at them, they are quite diYcult to training days per year, it has reduced slightly, but follow through. that reflects the fact we were recruiting so many people in the run-up to the launch of Pension Credit. Q378 Chairman: I noticed that there was a PQ In absolute days it has reduced, but in terms of the answer, I think the Minister answered it himself, training for our staV, they will have the training that saying that 10% of calls to the Pension Service go they need to do their job. unanswered and there was a qualifying sentence Ev 80 Work and Pensions Committee: Evidence

8 December 2004 Mr Malcolm Wicks MP and Ms Alexis Cleveland which said that this is an industry standard packages which are used by banks and building comparator. 10% seems quite a lot, to me. Is that societies and insurance companies, to pool those something you are actively working on at the together so that the information is presented moment? through to the agent who is taking the call. They will Ms Cleveland: Yes, we have been actively managing not need to have the understanding of how to our telephony. This was new to us and we have been operate those systems because the front-end system working very carefully with a private sector partner, will just scrape the data they need and present it to Ventura, who are supplying some of the Pension them in a diVerent way. Credit Application Line service for us, about how you manage this. You have got to be quite careful Q382 Rob Marris: That is not what you seemed to about how you interpret some of these figures, say to Andrew Selous about these letters, that the because it is whether someone does not get a reply system would not do it? and it is quite how quickly they hang up, because Ms Cleveland: This is actually quite complicated. In sometimes people get distracted and they hang up terms of the letters, they are generated through from after a few seconds because someone has rung the our back-end, mainframe systems at the moment doorbell. If they have hung on for over 35 or 40 and they are quite complicated to change. One of the seconds then that is a real issue for us, from that diYculties our agents have at the moment is that perspective. Calls abandoned are also an issue. they have no visibility of the letter which has gone to a particular customer. What we are looking to do, Q379 Chairman: It could be people throwing the through the changes we are bringing in, is make the ‘phone at the wall? letter that will be generated visible to someone, so Ms Cleveland: I sincerely hope not, after two or three that they can tailor it to the particular individual, minutes. On any comparator we have done, we are using the front-end systems and using just the basic providing a good service. It is one of the things we word processing available in the oYce with them, to are picking up also as part of our mystery shopping, tailor something more specifically through the Chairman, and we score nil points if they cannot get agent. an answer, and that is a big incentive for us. Q383 Rob Marris: That sounds more laborious? Q380 Rob Marris: I want to pick up on your reply, Ms Cleveland: I do not think it is, because I think, as Ms Cleveland, to the last question from Andrew part of the way you collect the information that you Selous about the letters, and so on, when you were are taking in, and the fact that we are doing this only talking about giving the worker a bit more power once rather than three times, at the moment there are over the letter. The union, PCS, have told us that you some big eYciencies in removal of duplication. In told them that an IT solution in the Pension Service terms of looking at our eYciency agenda, some of it would make them three times more productive. is delivered through new IT but some of it is not However, the union now say to us that senior troubling the customer many times for the same management are saying to the union that there is no information and then spending time keying it into such technology on the horizon. Your last answer to our systems many times. Andrew Selous, to my mind, rather confirmed that but I wanted to put it to you. Have the union Q384 Rob Marris: I appreciate there is a potential misunderstood what you told them, are the union quality of service gain, but it does sound to me that it misunderstanding what senior managers are telling is not going to be much less laborious for your staV, them, or is there no IT saviour on the horizon? albeit they will be putting forward a better service. Is Ms Cleveland: Probably I will not be able to say who that a correct characterisation? said what to whom, but can I explain what the Ms Cleveland: I think it is going to be a step position is, Mr Marris? We are looking at taking a improvement in the work that our staV do and their fundamental change in the Pension Service, about interaction with our customers. Certainly, on the moving away from an organisation which is focused evidence we have had, we are looking to begin to roll on people who handle Pension Credit, people who this out in October next year. We have already got handle Winter Fuel Payments, people who handle the first cut of some of this front-end IT available retirement pension, and put the customer at the now. We hope to have some people testing the heart of our business process. Instead of an system from January. Having shown it to our individual having to phone a diVerent telephone frontline staV, admittedly just a few of them, they number at a diVerent time to give the same have come up and said, “Is this the sort of thing that information over again to someone on the actually will make your job a lot easier and quicker?” retirement pension Application Line and to They loved it. someone on the Pension Credit Application Line, they can do that with one call. Q385 Chairman: Is this the Transformation Q381 Rob Marris: That suggests to me data-sharing, Programme? which suggests fairly sophisticated technology. Ms Cleveland: Yes. Have you got that technology, or is it in prospect? Ms Cleveland: We would still be using our same Q386 Chairman: All that you have been describing legacy systems. What we are looking to do is to Mr Marris is part and parcel of that? integrate that through just some commercial Ms Cleveland: That is right, yes. Work and Pensions Committee: Evidence Ev 81

8 December 2004 Mr Malcolm Wicks MP and Ms Alexis Cleveland

Q387 Rob Marris: What I have picked up, and I may Q391 Rob Marris: Perhaps I could turn to you, have misinterpreted what you have been saying to Minister, on this. Ms Cleveland, and the Pension me, is that you have been emphasising, quite Service, has a cunning plan to do this, to use my understandably, quality of service to the customer. words, a plan, but when the Secretary of State, Alan Yours plans from March 2004, I think, are for a 43% Johnson, came to us in October he seemed to be cut in Pension Service staV, that is what we have saying that there was not yet an overall plan for the been told, from about 20,000 to about 11,300. You DWP, in terms of job cuts, in terms of the are talking about rolling out this stuV next October, specificities of where they would fall and how they in 10 months’ time. There is now talk of additional would fall. He said: “with regard to where it all fits job cuts above the figures I have just given you from right across the DWP . . . we are not in a position to March. I may have misunderstood those, but do you say [until] . . . the New Year.” Yet we have here the think you are going to be able to deliver this Chief Executive of the Pension Service saying, as I increased quality of service with some software understand her to be saying, that she has got it all bought from the banks, as it were, and I use that under control, there is going to be roughly 50% of from what you were saying, with what seem to us to job cuts and it is all going to work. Are you as be very swingeing job cuts? confident as she is overall? Ms Cleveland: I am confident. I am confident that IT Malcolm Wicks: Yes, I am, and I think what the can help support us in this. I am more confident in Secretary of State was saying was that there is a huge the fact that we have been through every single one challenge for our Department, because in terms of of our business processes. We have looked at how we job reductions we are the biggest player in Whitehall can rationalise those processes both to the benefit of V and there are still a lot of issues to determine across our sta and to the benefit of the customer. I am the Department. The Pension Service is playing its confident that the work we are looking at is about full part. We might even be somewhat ahead of some reducing the amount of verification that we ask for. of our colleagues on working out the implications of I am confident that the fact that we are taking more this. I am confident. It is a tough challenge and of a risk-based approach to some of the checking obviously we are very concerned about those of our that we do, the combination of those things actually staV who have felt insecure, that we should oVer will deliver a much better customer service and more other jobs within the Department or other jobs rewarding jobs for our people. within Government or one or two things we might be able to announce soon about one or two of those Q388 Rob Marris: With half the staV? issues. I am very concerned about the staV security Ms Cleveland: Yes, with half the staV. The numbers side of it. In terms of the customer focus, I am that you have quoted, we have shared these numbers confident that we can deliver in this way. I will just with our staV, we have shared the numbers with our say, Mr Marris, that although it is challenging we are trade unions, because I think that is the best way to not the first organisation in the world to be able to operate with people. They reflected the numbers reduce staV numbers while maintaining, or even under the Spending Review 2002. Currently, in the enhancing, customer service. This is a trend you see Department, we are looking at the Spending Review in organisations across the western world, surely. 2004 and as part of the Spending Review 2004 we have got two new targets. One is the increased target for Pension Credit, the other is the Informed Choice Q392 Rob Marris: Could you name two large target, about issuing more forecasts. Both of those organisations that in a four-year period cut their have had a head count. We have been asked to staV by 50%, in the white-collar sector, and have look also at the timing of the Transformation additional output, such as Informed Choice, and Programme. The numbers that you have will vary greater quality of service on the oVer they are slightly over that period and when we have those making currently? figures we will share them again with our trade Malcolm Wicks: It is a good question. I have not got unions. a good answer for you. I have not got four in my top pocket that I could name which satisfy the statistical Q389 Rob Marris: I just want to be clear on this, criteria that you are making. I am making the more because I am slightly sceptical, I have to say, and I general point that surely there are a lot of think some of my colleagues are, and you will correct organisations in the private sector which, in order to me if I get it wrong, but you seem to be saying that survive, have had to do this while meeting their own you have a plan, a cunning plan, to use Baldrick’s customer targets. I do not think this is so unusual. phrase, to cut staV by 50% but to improve the quality Ms Cleveland: Could I just oVer, where we do some of service and oVer additional services, such as benchmark comparators is with the Internal Informed Choice, and you are going to do this Revenue Service in the United States and Centre within a relatively short timeframe, less than three Link, the social security organisation in Australia, years. which is actually a bit ahead of us in the way that Ms Cleveland: By 2008. they have been taking their service forward.

Q390 Rob Marris: So four years. Am I Q393 Rob Marris: They are making roughly understanding the situation correctly? equivalent job cuts, are they? It is the same sort of Ms Cleveland: Yes. scenario as you have been setting out? Ev 82 Work and Pensions Committee: Evidence

8 December 2004 Mr Malcolm Wicks MP and Ms Alexis Cleveland

Ms Cleveland: They have been through some of this be held until you are confident that progress can be in advance of us, so they have delivered on quite a lot made only if that customer service is maintained. I of the changes. In terms of the actual nature of the have to say, you leave these places very proud of the benefits that they deliver for pensioners, which is an staV quality and the commitment that they make, entirely means-tested, old-age support, then it you cannot question their duty, as they see it, as is slightly diVerent in terms of their staYng public servants and they are very important jobs for requirements and the levels of reduction they have the local economy too. They said to us, quite clearly, made, but I think that reflects the nature of their “We were up for the 2006 kind of scenario, but we business. can’t see how we can do the 2008 scenario without damage to the customer service.” What the Committee needs from ministers is an undertaking Q394 Rob Marris: A final question, Ms Cleveland, in terms of the demographic profile of the staV that, okay, the Gershon agenda I think is ambitious currently and what you envisage it may be, or what and challenging and all that, but what we want is it may in fact turn out to be with these job cuts. Are assurances that it will not be pushed to the extent you going to get into a position where you have got that you are getting people hurt who the system is a lot of senior workers still with you, hanging on for designed to serve. I think we deserve nothing less, to redundancy, and the newly-trained ones either on be honest? fixed-term contracts or newly-trained leaving for Malcolm Wicks: First of all, can I thank you for your V pastures greener elsewhere? acknowledgement that we have great sta , both in Ms Cleveland: That is not our experience so far, our centres but also, of course, at Local Pension though there is a diVerence in, as people have been Service level. They are doing a remarkable job. Yes, leaving us, where they have gone, but the people with I would give you that assurance. There are longer service tend to go on to other parts of DWP government targets and we are a key player in that, or other government departments. The people who in our Department. I am confident that the Pension have come in, perhaps people who are more used to Service can deliver. When I visit centres and see the having a two-year period of employment, they tend very large numbers of people that we employ, I do to have moved on to other organisations. I think, as not think it is a hopeless task, far from it, and I think we announced it, and I think it links back to the that we can still deliver to the customer with a point the Secretary of State made about plans in the reduced staV. We have a very large staV, we have had New Year, we were able to tell our staV about the to build them up to deliver Pension Credit, for detail of the plans. Actually, our staV want to stay example, so I am confident about it. Yes, Chairman, with the Pension Service overall, and even through I would give you that assurance. The purpose of my our staV surveys, and we have just done a cultural Department, the purpose of Government, the audit, they are very committed to our particular purpose of the Pension Service is to deliver a first- customer group. class service to our elders in this country, among other things, to attack pensioner poverty. That is our target. We are not in the business primarily of Q395 Rob Marris: Certainly they are in reducing staV, we think we can do both. Wolverhampton, unfortunately, where you are closing the oYce? Ms Cleveland: We are passing part of DWP into Q397 Chairman: If it took to 2010 to do it properly Jobcentre Plus, who will be very anxious to have it Y and was not too late, you would be knocking back because of the good performance of that o ce. on the Treasury’s door? That is a question. Malcolm Wicks: Chairman, I do know that Her Malcolm Wicks: It is a fair question and if I Majesty’s Loyal Opposition have downsized genuinely felt that reducing staV numbers as planned considerably, in parliamentary terms, since 1992, was not on, was inhibiting the Pension Service, yes, but whether they can make the customer satisfaction I would knock on the Treasury door, and I am sure criteria is not for me to judge. my Secretary of State would.

Q396 Chairman: However, I have to say that as a Committee we were in Mexford House, in Q398 Mr Goodman: You do acknowledge, do you Blackpool, last week and you could not miss the not, that we have had similar answers from ministers extent to which the staV were riven with uncertainty. in the past on the subject of the CSA? Does that give They are a centre, they do not know whether they are us grounds for confidence? going to exist in two years’ time or not and the Malcolm Wicks: Those who set up the CSA must collapse in morale is palpable. I think the answer for the performance of the CSA and you questioning and the way they all put it, I think have had a committee hearing recently on it. I think, carefully and accurately, is that it is going to be a Mr Goodman, when faced with the real success of very good trick if you can achieve these challenges the Pension Service, at local level, at regional level, successfully. What I want from you, Minister, if I when we are tackling pensioner poverty, when we can put it that way, is that, if you really believe, in are giving more money to our elders, particularly your heart of hearts, that the process is damaging women, I think, with all due respect, as they say on and it reaches a point where it does start to impinge these occasions, suddenly to throw the CSA at this on and damage customer service, these staV cuts will one is a bit of a nonsense. Work and Pensions Committee: Evidence Ev 83

8 December 2004 Mr Malcolm Wicks MP and Ms Alexis Cleveland

Q399 Vera Baird: The CSA is not working and the Q401 Miss Begg: I am not entirely sure about that. Pension Service is, you do not want to lose them? I did not actually find out. I am assuming she has still Ms Cleveland: You mentioned Gershon. You got an order book but I am not absolutely sure of should not blame Sir Peter Gershon for the that. It is just the frustration of the younger members reductions and the eYciency agenda we are trying to of the family not being able to solve it for the elderly, make in the Pension Service, because the work we and this is a service which is meant to be accessed by were doing predated the Gershon Report and it was vulnerable old people. Why does it have to be so driven very much internally, so if it is anyone it is me, bureaucratic, and it seems to be not just the Post and it was driven from a perspective of how can we OYce being bureaucratic but also the DWP? deliver customer service but also how can we deliver Ms Cleveland: Let us unpack some of the things in value for the taxpayer? there. One, the Post OYce Current Account is just Chairman: You are right to mention that. I am sure one choice that customers have in terms of the that it was within our knowledge that you were accounts that their pension can be paid into. It is not already moving in that direction, but I think that the the only account that is accessible through the Post Gershon agenda, in the Comprehensive Spending OYce because basic bank accounts and some Review statement of 2004 gave it all a new push, but current accounts are accessible through the Post you are right to mention it. OYce as well, many of those without having to have the pin number. One of the initial parts, in terms of our interaction with pensioners for their direct Q400 Miss Begg: I think what Vera said about the payment, is to explain the options that come Pension Service working relatively well is borne out through. I think one of the messages that we have by my own experience over the summer, when I went not clearly got across to people, and I think it is a into all my sheltered housing complexes and actually message that is being pushed in the Post OYce, is “If was inviting complaints about how the new Pension you want to access your money through the Post Service is working. Generally they were very OYce you have to have a Post OYce Card Account.” complimentary and thought that the telephony was Some of the criticism we have had about “Why are working well, including one younger pensioner in a you telling us about all these things?” is that we are block of flats who had ‘phoned up just to see how trying to explain to people their choices. If people easy it was, because she knew others would come to then make the choice to go for a Post OYce Card her, only to discover that she qualified herself, which Account, these are quite limited accounts, you can was quite an interesting exercise on her behalf. only have benefits paid into them, you have to take However, the big complaint I got on almost every the money out in one go from them,2 you cannot housing complex I went into was about direct have Standing Orders, or anything else, run through payment and the problems with the opening of Post them. Really it is just the electronic method of OYce Card Accounts. Older people are loyal to the getting the money to the Post OYce and you can Post OYce, they want to keep the local Post OYces access it only during Post OYce hours. open, they have been under threat in my own constituency and it is predominantly the pensioners Q402 Miss Begg: The fact that these accounts are so who have signed the petitions, campaigned to keep limited, do you not get the sense that perhaps the the Post OYces open and they want to support the Post OYce did not really want these accounts? They Post OYce by opening a Post OYce Card Account, have just been forced into it, partly because we have but they are still facing enormous diYculties and an said that they must have this option of being paid enormous bureaucracy. They have to have an through the Post OYce and that it is the Post OYce invitation letter from the DWP before they can go that have done everything in their power to make and open an account and I had a ‘phone call from sure that these accounts are just not worth the the son of one of my constituents, he lives in candle? Edinburgh, she lives in Aberdeen. She tried to open Ms Cleveland: That predates any of my expertise in a Post OYce Account some months ago. Even this area. Certainly it is something we could look at though she told them at the Post OYce that the name and come back to you on, but I do not know what on the form was wrong, her first name was wrong, the conversations were about the decisions to set up and despite two ‘phone calls from my oYce to our the Post OYce Card Account. hotline to get the name changed and being assured it Malcolm Wicks: I think what we have got to was, she is still not getting her money into this remember is that the old system of pension books account because the name still has not been changed. really was not, to use that phrase, fit for purpose. I The son was on the ‘phone to me, he is in Edinburgh used to have responsibility in the Department for and he cannot do it on the ‘phone because they say our attack on fraud and we were losing something the mother has to write. The mother is now in like £50 million to £70 million worth of social hospital, the mother is not in a fit state to write or security money in the system. People knew that even to sign the letter. He is in Edinburgh, she is in books were flushing around the system and they Aberdeen and how does she get it? She is still not were thieving them, so it was a very, very ineYcient getting her pension. All of this extra bureaucracy is system, also extraordinarily costly to run on behalf being incredibly frustrating, as you can appreciate. 2 Why is that the case? Customers do not have to take all of their money out of their card account in one go. They could, for example, make a Ms Cleveland: I do hope she is getting her pension number of £10 withdrawals on consecutive days if they but just not paid into her Post OYce Account. wished. Ev 84 Work and Pensions Committee: Evidence

8 December 2004 Mr Malcolm Wicks MP and Ms Alexis Cleveland of the taxpayer. Every order book foil costs us is not going to arrive on time. Have you looked at something like 68 pence. A giro cheque costs us how you can get around that? Would it be possible £1.47. The electronic transfer is costing, I think, to send out, for instance, four weekly cheques, or a somewhere between one penny and two pennies. cheque once a month, rather than every week? I This is a modern system, but because Government mean four cheques, so that they could cash them and all of us are so concerned to try to maintain the individually each week? Surely that would help to local Post OYce network, what we have got to do is alleviate some of the worry but also it would be turn the local Post OYce, the Sub Post OYce, into a cheaper, presumably? modern banking system. Those who choose to, and Ms Cleveland: Certainly we are looking at sending large numbers of pensioners are choosing to, by the out cheques to make sure people will get them on way, I have got a figure here that 2.7 million people, time, so we are bringing forward the date on which pensioners, have requested a Post OYce Card we will issue them because we know that not all first- Account, many of them are using them quite class post arrives the next day. I cannot remember successfully. Also, very often, by being able to cash whether it is two or three days earlier we are looking your cheques or cards from your building society or to post them. We already have special arrangements bank account, we can turn the local Post OYce into in place in the Department for advanced payment a modern banking centre. That will help save the around Bank Holidays, and suchlike. It has not been network. In addition, as you know, the Government used so much within the pensions arena to date, but has put about £2 billion into those local Post OYces. certainly for Jobseeker’s Allowance, for example, The system did have to change. Chairman, I do there is a facility to make prepayments there. All of recognise that, for many elderly people now, both those are available across the Department as well. with the Pension Credit and the new direct payment Y system, it is a di cult time and really we need to be Q405 Miss Begg: Minister, you mentioned fraud in on top of the communications task, and I think we the old order book system. Is there not a danger that are but we are not complacent about getting that weekly cheques are going to be even more insecure, message across to people. as things can go wrong with the post, and so on? Malcolm Wicks: Let us be clear about this. The Q403 Miss Begg: Because of the way that the Post major options are to have your money paid into a OYce Card Account operates and the need for the bank account or a building society account, and pin number, there is a real problem for elderly people some of these institutions now have the basic bank who use their carers to get their pension, especially account, or into your Post OYce Card Account. if they have got diVerent carers coming in each week That is the most secure way of delivering money to and they do not want to give out their pin number to the elderly person, but in response to pressure, and everyone. From what you said, Ms Cleveland, that indeed our understanding of human circumstance, there are other bank accounts which can be accessed we recognise there are some people, maybe because through the Post OYce, I am fairly sure that most of multiple carers, or whatever, where none of these pensioners are not aware of those, and whether those systems seem to be suitable. Therefore, talking would be a better option for them in solving the about it with the Royal National Institute for the problem we have with regard to carers. Is that a fair Blind, listening to colleagues, my own experience as solution? a constituency MP, we thought that there should be Ms Cleveland: Certainly, if people are phoning up, an exception service, and the only way we can think when they are invited, about their direct payment of doing that is to send a cheque through the post. I change, the contact centre which operates that, am not here to say this is the ideal method, of course which operates for the whole Department, does try it is not, there is a fraud issue there, which is why the to explain to people the various options that they exception service has to be relevant only to have. I have seen in Post OYces, the conversation exceptional circumstances, because, like you, I there tends to be “If you want to carry on getting worry about this, of course I do. One cannot have it your money at the Post OYce, get a Post OYce Card both ways. You cannot demand an exception Account.” People have a good relationship with service, which is simple, cheque-based, and then their local Postmaster, so I think that is largely what worry about the consequences. I worry about the is driving a lot of people’s decision-making and consequences of this, but it is responding to people’s information about it. One of the things we are doing concerns which has led us to have this exception as part of the move to direct payment, the service. alternative, if people have not made a choice, is that we move onto a cheque payment. For some people Q406 Chairman: We heard last week in Blackpool of that may still be the right way of receiving their an estimate of 4,000 cheques being lost when the money, but for many people it will not be and we exception service is fully implemented. Is that a want to go out and talk to as many people as possible figure that the Department has got any knowledge to make sure they make the right choice. of? Somebody must be doing some estimate. It will be a number, but 4,000 cheque units getting lost in Q404 Miss Begg: Moving on to the issue of cheques, the post under the new exception system was slightly at the moment these cheques are going to be weekly, concerning for those of us who were listening to the but in weeks where there may be a Bank Holiday, or evidence at the time. If you have not got an answer during the Christmas period when the post is much to that now, maybe you could let us have a note, slower, elderly people are frightened that the cheque would that be possible? Work and Pensions Committee: Evidence Ev 85

8 December 2004 Mr Malcolm Wicks MP and Ms Alexis Cleveland

Ms Cleveland: Were they suggesting that was a week, third of them who have already left without being a year, or what? replaced, and you are starting, as it were, from a low base. How can you justify getting rid of Partner Q407 Chairman: Each week, they said to us, 4,000 a Liaison Managers when you have got only 25 Joint week was a worry to us. If that is wrong, can you put Teams working? us right? Malcolm Wicks: Ms Baird, would you mind if I start Ms Cleveland: Yes. oV on this and then hand over to our Chief Malcolm Wicks: I hope, Chairman, that those who Executive, because I would like to share with the have deliberately stirred up cynicism about Post Committee our thinking on this and then we will OYce Card Accounts and have said “It’s all come on to the issue about staYng, and Alexis impossible, it won’t work” will take this on board, Cleveland can deal with that. I think we were because if they have too many people in the touching on earlier that for some elderly people the exception service it opens up new diYculties for welfare state locally looks a bit confusing, do you go those elderly people and new worries for them. here, do you go there, is it DWP, is it the local Chairman: The point is well made. council, etc What we are trying to do is make the local welfare state more coherent for the elderly Q408 Miss Begg: Minister, you said that it is person, and the carer where that is appropriate. At important to distinguish between those who the moment, we have in being 29 Joint Teams, and definitely need the exception service, or for whom it by Joint Teams I mean the social service department, is most appropriate, and those for whom it would be the social work department, I guess, in Scotland, far better if they had a Card Account. What kind of working with our Local Pension Service. A Joint training do your staV have on the telephone lines to Team means that one person only does, for example, identify those pensioners for whom a Card Account the home visit and she, or he, is charged with the task is just too complex or too big a challenge? If they are of looking at social service issues, fairer charging, for in their eighties or nineties, sometimes it is the example, as well as all the take-up of benefits. We culture change that is too big. What kind of training have got 29 Teams. We have signed agreements, I do your staV get? think, with 100 local authorities, I will check that Ms Cleveland: Within each of our Pension Centres figure but it is of that order, and indeed our plan is we have a specialist team dealing with direct that this will roll out across the whole nation. I think payments conversations. If someone ‘phones up and the good news is that in some areas Housing Benefit says “I want to change to a bank account and here and Council Tax Benefit people also are coming in. are the details,” routine staV will do it. If it is a more In one or two areas I have come across more than complicated position, we have a Direct Payment one or two. Twickenham, I went there, the Age Y Team in each oYce who have been specially trained Concern local o ce is part of the Joint Team in this, but more often with cases like that we would arrangements. I know of at least two authorities, it refer it for a local visit, to send someone out to their might be more, where the Primary Care Trust is also home to go through their circumstances with them, involved. This is our vision and this is where we want to tell them what the options are and, if they are to get to, so that almost whoever the professional going to go for a Post OYce Card Account, help calling on the elderly person can look at their needs them through that process. holistically. We have had some nice stories already of how our Local Pension Service people have Q409 Miss Begg: Through that local visit, if they are almost forgotten the Pension Credit application for a while because the house is so wretchedly cold that worrying, do you sit and do a calculation to make Y sure they are not entitled to more money? you have got to get some energy e ciency into it and Ms Cleveland: Of course, yes. draught-proofing, and all the rest. I am not saying we are there yet, Chairman, on fulfilling that vision, but that is our vision and, with the Joint Teams and Q410 Miss Begg: That is part of the procedure? our document published recently on Link Age, you Ms Cleveland: Absolutely. We try to link those two can see where our ambitions lie on that. Now on the together. Similarly, if as a result of one of our staYng issues: Alexis. particular data scans we did a visit for a Pension Ms Cleveland: We are up to 29 actually coming on Credit, we would also be checking what was their stream. payment position and have a conversation about direct payment with them at the same time. Q412 Vera Baird: Yes, I gathered that from what the Q411 Vera Baird: My questions are about Joint Minister has just said. I said 25. Teams and their drive to set up joint working with Ms Cleveland: We are in discussion with 100% of local authorities with a view to giving an integrated local authorities. I think it is on the fingers of one service to older people. These Joint Teams, I think hand the number of places where we do not think we that currently there are only 25 of them, though you are making a great deal of progress, two or three say 70% of local authorities, Ms Cleveland, have where we cannot see that we are going to get there agreed in principle to setting them up. At the same just yet. On all of the others we are making good time, though there are only a few working, Partner progress and, as I say, 70% have agreed in principle, Liaison Managers appear to have been cut fairly and in principle means we are beginning to start the drastically, I think by a third, down to 203, and the planning for when we are going to start up these PCS say that this figure does not include another particular joint ventures. Also some of the planning Ev 86 Work and Pensions Committee: Evidence

8 December 2004 Mr Malcolm Wicks MP and Ms Alexis Cleveland is about whether people are going to be sited in DWP out the most relevant cases. They are used first to try premises or in the local town hall, or some of them for a telephone contact, and if we do not get them in voluntary sector premises. It is at that stage of through the telephone to try to arrange a home visit. planning with them now. The rationalisation we Vera Baird: They said, for instance, that Vera brought in, in the Local Service, is to try to align our Duckworth, from Coronation Street, had been service more closely to the primary tier local approached to see if she wanted to make a Pension authorities, and so we have gone from 165, I think it Credit application. I did ask if she did want to, but I is, down to 133, that actually it improves our think not. Also they referred to, in fact, just alignment. We have looked also at the ratio of our telephoning people out of the blue, including those Partner Liaison Managers to our Customer Liaison who are ex-directory, who said, as a first response, Managers and we have got over 8,000 partnership not surprisingly, being elders, “Who are you? How agreements in place with various national and local did you get my ‘phone number? Why are you asking organisations. Once those are established, you need me questions about my money?” less resource focused on the partnership side to maintain that rather than to set it up in the first place. We are looking at reducing the number of Q415 Chairman: Let me reinforce that. It was a very, people marked as Partner Liaison Managers and very powerful piece of evidence we took last week, transferring, not losing, that resource, transferring it and again it was being done in good faith, people to Customer Liaison management roles. If we get were saying “If we were allowed to get on with the that wrong in a particular area, Ms Baird, then we business as we know it, visiting, doing the personal will move some of that resource back again, but we stuV, it would be much more eVective than this,” and are trying to focus as much of the resource as we can they almost hated it. They were professional, they locally into frontline people who are out visiting our were doing it because that was what they were customers, either just as Pension Service visits or as charged with doing, but really they hated it and joint visits with local authorities and the voluntary thought it was a waste of time and it produced all sector. sorts of untoward, perverse visits. Malcolm Wicks: Can I just say, Chairman, I have a feeling that Vera Duckworth helped us with Q413 Vera Baird: Thank you for that. Can I pick up the take-up publicity on an earlier occasion. the issue about visiting. We saw PCS last week and In all seriousness, however sophisticated our they said that the overwhelming priority that is put campaigning, occasionally will we get it wrong? Yes, upon their staV is Pension Credit take-up. They we will. Will we sometimes target the think that the service more broadly is being multimillionaire? I guess, occasionally, we will. compromised by that drive. Information Points are Vera Baird: They were not talking about being cut and they refer specifically to visiting occasionally getting it wrong. These are responsible oYcers being desk-bound now because you have professionals who were complaining that this was introduced a system of cold-calling, working from happening far too frequently. scans of potential PC recipients. They say, in addition, that it is very poor targeting. They quoted to us a couple of multimillionaires who had been Q416 Chairman: They do not like it. approached by your scanned process. What do you Malcolm Wicks: I suppose these multimillionaires say about that? Is it being changed from a visiting verified their multimillionaireness with the Local service into a cold-calling service? Pension Service, so I guess some of these things are Ms Cleveland: No. Certainly we do not cold-call rather apocryphal rather than evidence-based. anyone. Chairman, as I say, if we are getting some of these things wrong we will learn lessons from it, but if I had been sitting here, as I would not have been as a Q414 Vera Baird: The scan process is cold-calling? Minister, 10 or 15 years ago, all of the questions Ms Cleveland: We do not call people if we have not would be about why on earth are we not better at written to them in the past about that. As part of our communicating welfare rights to people, why are we take-up for Pension Credit, we did a lot of very so secret about it, are we really in the business of not detailed customer segmentation, coming back to getting people to claim their entitlements? If we have some of the discussion with Mr Dismore about how gone too far, and now the criticism is that we are we can target the people we think are most entitled communicating too often and occasionally getting it to that. These are people who already have an wrong, I would rather be there than where we were entitlement to Housing Benefit but we have no 15 years ago. I have been on a Select Committee and record of a claim for Pension Credit from them. I know they can have it both ways, but I am They are very likely to have an entitlement and so we conscious of the need to get the balance right. use those records. We try to make contact by telephone first, because actually that is a more eYcient way for us to do it, and many of our Q417 Chairman: That is a monstrous attack. customers can do that. Also we use the scans to drive Ms Cleveland: I recognise also that the staV do not our Local Service visits, so we have people going like it, because they enjoy the face-to-face customer through to identify the cases from the scans, and if contact, they enjoy that activity, but we have to they do not come out completely accurate from the balance out what that delivers in terms of results for computer systems we have to go through and select us in terms of the take-up as well. Work and Pensions Committee: Evidence Ev 87

8 December 2004 Mr Malcolm Wicks MP and Ms Alexis Cleveland

Q418 Vera Baird: It is not just their enjoyment Q419 Chairman: Certainly it was an essential part of though, they feel that is the best way to communicate the bargain that was put to the House by your with older people, and I think that is very colleague, the Right Honourable Member for understandable. Can I ask you just quickly, the local Makerfield, when he set this thing up, that the Local authority Welfare Rights service as well as the PCS Service was an integral part. We were picking up last have said the number of Information Points in local week that it would be an easy hit, if you are all under authorities have been cut, is that right? pressure, and you are, to achieve these targets, that Ms Cleveland: We have rationalised those, but we some of that pain and agony would be visited are seeing more people at the centres, the ones that disproportionately on the Local Service. What you we have retained. We keep this constantly under are saying to us is, you are assuring us that will not review, and we have kept it under review because, be what will happen, that you will protect that Local running an Information Point in a particular area, Service as a continuing, integral part of the future and we have taken these out to particular housing Pension Service? estates, and suchlike, you run it for three or four Malcolm Wicks: Yes. months and then the number of people attending Ms Cleveland: It is the key face-to-face channel as we go forward. drops oV because you have satisfied the requirement in that area. We have tried to be flexible in terms of Q420 Vera Baird: You can confirm too, can you, moving these around. that there should be no suggestion that you are Malcolm Wicks: I think that is right, Chairman. I shifting the burden of funding and accommodation visited a lot of these advice centres early on and some to the local authorities? I would go to and there would be queues and at some Ms Cleveland: What we have agreed overall is that there would be hardly any customers, and it is not probably it will be about 50–50, in terms of wrong that we have rationalised. I hear your accommodation. We would expect 50% of the Joint concerns about what will happen in the future, but Teams to be placed in our accommodation across at the moment I think, at so-called Information the country and probably 50% in the local authority Points, or advice services, we have seen almost half or voluntary sectors. a million people and the number of home visits have Malcolm Wicks: In the future, we are talking about been 720,000 to date. I am very determined that we a better service for elderly people. maintain that kind of human contact with our Chairman: Can I thank you both for your written customers, hopefully not the multimillionaires but evidence and for your appearance this morning. It the people who really need our help. has been most helpful. Thank you very much. Ev 88 Work and Pensions Committee: Evidence Written evidence

Memorandum submitted by the Department for Work and Pensions (PC 01)

1. Summary 1.1 The Department’s memorandum to the Select Committee’s last Inquiry into Pension Credit, which reported in April 2002, described in detail the policy objectives and design of Pension Credit. Pension Credit was successfully introduced in October 2003. This Memorandum does not rehearse in full the background to Pension Credit but rather focuses on progress since the Committee’s last report, the impact that Pension Credit is having on pensioners’ lives, the coverage it is achieving, and how it is being delivered.

Pension Credit Introduction and Progress 1.2 In 1997 around two million people aged 60 and over were living at or below Income Support levels and the gap between the incomes of the richest and poorest pensioners was growing. The pension system was also failing to provide security in retirement for future generations of pensioners. The priority when the Government came to power in 1997 was to take rapid steps to tackle pensioner poverty. It did this by introducing the Minimum Income Guarantee in April 1999, and other measures such as the Winter Fuel Payment and above-inflation increases in State Pension, to get more money to all pensioners, but most to the poorest pensioners, as quickly as possible. 1.3 The Minimum Income Guarantee, though eVective, was only intended to be a short-term measure pending more fundamental reform. This came in October 2003 with the introduction of Pension Credit. Whilst continuing to tackle poverty, Pension Credit for the first time rewards people who have saved for their retirement, ensuring that it pays to have saved on top of the foundation of the full basic State Pension. 1.4 To ensure that those already receiving the Minimum Income Guarantee saw no break in their payments and that The Pension Service could deal eVectively with the new claims generated, the introduction of Pension Credit followed a carefully planned and managed take-up campaign, starting in April 2003. By 6 October 2003, all 1.8 million Minimum Income Guarantee households had been successfully transferred to Pension Credit. This included 50,000 households identified as eligible for Minimum Income Guarantee for the first time as a result of the Pension Credit campaign. An 18-month take-on period, coupled with generous backdating arrangements, also ensured that The Pension Service dealt eVectively with the large volume of applications and that no pensioner lost out on their entitlement. 1.5 As at 31 August 2004, 3.17 million individuals in 2.61 million households were getting Pension Credit, with 2.36 million individuals in 1.94 million households getting extra money compared with the Minimum Income Guarantee. The average weekly award is £41.71 and the average gain compared to the old system is now £16.33 per week. Of the 2.61 million total, 2.06 million pensioner households were receiving the guarantee amount, combating poverty and reaching more people than under the Minimum Income Guarantee.

Impact on Pensioner Poverty 1.6 Huge inroads were already being made into pensioner poverty following the initial reforms set out in paragraph 1.2. Figures1 published on 30 March 2004 showed that measured by income after housing costs, pensioner poverty had fallen by almost a fifth in relative terms and two thirds in absolute terms between 1996–97 and 2002–03, lifting 1.8 million older people out of absolute poverty. For the first time in two decades, pensioners were no more likely to be in low income households after housing costs than other age groups. 1.7 Pension Credit is making further significant improvements to pensioners’ income and targeting help on the very poorest. Nearly 60% of the extra £2 billion spent each year on Pension Credit goes to the poorest third of pensioners, and around 80% to the poorest half. The poorest third of pensioners will be, on average, around £600 a year better oV than if an equivalent amount of expenditure had been spent on raising the basic State Pension. 1.8 Women’s historical working patterns and the pension system itself have meant that a disproportionate number of the poorest pensioners are women. Around half of those eligible for Pension Credit are single women. When partners are included, around two thirds of the people who benefit from Pension Credit are women.

1 Households Below Average Income 2002–03 (DWP, March 2004). Work and Pensions Committee: Evidence Ev 89

How Pension Credit fits with Other Benefits

1.9 Steps have been taken to ensure that the measures to improve pensioner income fit coherently together. The Pension Credit reforms increased the Housing Benefit and Council Tax Benefit applicable amounts to ensure that pensioners would not see all their gains from Pension Credit clawed back. The Housing Benefit/Council Tax Benefit income test for pensioners has been simplified to mirror Pension Credit. As a result around two million pensioner households will qualify for more help, or get help for the first time, with their council tax and/ or rent. 1.10 Receipt of Pension Credit may entitle the customer and their partner, even if under 60, to other benefits, including some provided by the NHS. Customers may also be entitled to enhanced amounts of Pension Credit if they are entitled to Attendance Allowance and Disability Living Allowance. The income customers receive from Attendance Allowance or Disability Living Allowance is ignored in the calculation for Pension Credit.

Take-up of Pension Credit and Other Benefits

1.11 The Government wants as many pensioners as possible, particularly the poorest and hardest to reach, to claim their full entitlements. In the 2002 Spending Review the Department for Work and Pensions signed up to a Public Service Agreement target to be paying Pension Credit to at least three million pensioner households by 2006. The Department is on track to meet this target. In the 2004 Spending Review the Department agreed a new and more challenging target to pay Pension Credit to 3.2 million pensioner households by 2008, with 2.2 million of these in receipt of the guarantee element to maintain a focus on the most disadvantaged. 1.12 A comprehensive Pension Credit advertising and media campaign continues to raise awareness of the new entitlement. EVorts are now being focused on contacting pensioner households that are believed to be eligible for Pension Credit, but which have not yet taken up their entitlement. Data-matching techniques and lessons learned from a series of Hard-to-Reach Pilots in July 2003 are enabling The Pension Service to target more eVectively important groups of vulnerable pensioners, including single women pensioners and older people from ethnic minority groups. 1.13 Partnership is key to ensuring that older people are aware of all their entitlements. To promote this, the Department for Work and Pensions is oVering short-term funding to local and national organisations, including the voluntary and community sector, to establish and manage initiatives that increase the take- up of benefits by older people, particularly the vulnerable and those in harder to reach groups.

Delivery of Pension Credit

1.14 Delivering Pension Credit in modern, eVective ways that meet customers’ needs and preferences is the key both to maximising take-up and therefore reducing pensioner poverty, and to releasing eYciency savings that will enable the Department to focus spending where it is most needed. The service delivery vision for Pension Credit is of a telephone-based application process backed up by a Local Service which is increasingly operating in joint teams with local partners. 1.15 At 31 August 2004, the freephone Pension Credit application line had issued 1.85 million application forms. Of these, 1.33 million, representing approximately 72%, were completed during the call. In the remaining 520,000 cases the customer asked to be sent a form for self-completion. The average length of a call to the application line for that month was around seven minutes and the average time to complete an application was less than 20 minutes. 1.16 The option of a face-to-face appointment with The Pension Service Local Service remains. The Local Service works closely with its partners to provide a dedicated service for older people that goes beyond assessing and paying financial entitlements. It provides information points and sessions in appropriate locations and home visits, if required. Since April 2003, over a million older people have had contact with their Local Service either at home or during a session. 1.17 A significant development is the creation of joint teams through integrating partners from local authorities and the voluntary sector into multi-skilled teams with a single operational management structure. Joint teams are reaching pensioners who have not yet engaged with The Pension Service and delivering on customers’ wishes not to have to provide the same information many times over to access entitlements and services. As at August 2004, 136 local authorities in England, Scotland and Wales, have agreed in principle to forming joint teams with Local Service, with eighteen joint teams now up and running. The aim is to achieve full national roll-out of joint teams by April 2006. Ev 90 Work and Pensions Committee: Evidence

1.18 Further improvements will be delivered through Alternative OYces, where other organisations, such as local authorities and voluntary sector, are authorised by the Secretary of State for Work and Pensions to receive and verify social security claims made by older people. This is now permitted following an amendment to the Social Security (Claims and Payment and Miscellaneous Amendments) Regulations 20032 and the Department is piloting the concept in partnership with Age Concern. The Government has set out its strategy for further joining up services for older people across and beyond government in Link- Age: Developing networks of services for older people3 and is now consulting on the document’s proposals. 1.19 The Pension Service is entering a period of further modernisation to deliver better services to customers by eliminating duplication and ineYcient processes. With the planned workload reduction following the initial take on of Pension Credit, this means that in future The Pension Service will provide a more eVective and eYcient service to pensioners from a smaller number of pensions centres. 1.20 Following eYciency measures to implement the Budget announcement on staYng, the work of 10 pension centres will migrate to other sites. For staV, the aim will be to re-deploy all those aVected. Although not ruled out, compulsory redundancies will be kept to a minimum. Customers will be able to contact The Pension Service in the same way as they do now.

Customer Experiences of Applying for and Receiving Pension Credit

1.21 The Department for Work and Pensions aims for a high quality customer experience from initial contact through to receipt of payments. Independent research4 commissioned in 2003 to assess levels of satisfaction amongst callers to the application line found that customer reaction to this primary method of applying for Pension Credit was very positive. 1.22 The Department for Work and Pensions has a target for 85% of all customer payments to be made by Direct Payment in 2005. The move to Direct Payment increases choice and reduces fraud: over 100 pensioners have their order books stolen each week and some £50 million is lost each year though lost or stolen order books. 1.23 People who wish to continue collecting their cash at a Post OYce can do so: many bank accounts can be accessed at Post OYces as well as the Post OYce card account. For customers who are not able to change to Direct Payment, cheque payments will be available from October 2004.

2. Pension Credit Introduction and Progress

2.1 This section recapitulates some of the primary reasons for the introduction of Pension Credit, describes its successful implementation in October 2003 and sets out the latest position on numbers receiving it.

Background

2.2 In 1997 around two million people aged 60 and over were living at or below Income Support levels and the gap between the incomes of the richest and poorest pensioners was growing. The pension system was also failing to provide security in retirement for future generations of pensioners. The Government’s strategy for pensions is designed to ensure that all pensioners, today and in the future, have a decent and secure income in retirement and share fairly in the rising prosperity of the nation. 2.3 Pension Credit is a key plank of that strategy and a major reform of the welfare system. Its three main objectives are to: — tackle pensioner poverty; — reward those who have saved; and — make it easier for pensioners to take up their entitlement. 2.4 The Government’s aim is to target help on the poorest pensioners who need it most. Pension Credit does that through its guarantee credit and also rewards people aged 65 or over who have saved for their retirement.

2 Social Security (Claims and Payments and Miscellaneous Amendments) Regulations 2003, SI2003 No 1632. 3 Link-Age: DWP in conjunction with Department of Health, OYce of the Deputy Prime Minister and Local Government Authority, 26 August 2004. 4 Pension Credit Application Line Customer Satisfaction Market Research Report, prepared by Continental Research on behalf of the Department for Work and Pensions for COI Communications (2003). Work and Pensions Committee: Evidence Ev 91

Implementation of Pension Credit

2.5 Pension Credit replaced Minimum Income Guarantee on 6 October 2003. The Government recognised that a smooth transition to the new Pension Credit would be the key to its success. A controlled and measured marketing campaign was designed to produce a steady build-up of Pension Credit applications. Lessons from previous campaigns were taken into account, as was the advice of the National Audit OYce in the report Tackling Pensioner Poverty: Encouraging take-up of entitlements.5 An 18-month take-on period enabled The Pension Service to manage the increased workload successfully and special backdating arrangements ensured that no pensioner lost out. 2.6 The Pension Credit campaign began in April 2003. Known factors of pensioners’ circumstances were taken into account to allow for tailored communications. These factors included age, gender and marital status, census-derived information on residential neighbourhood wealth and whether Housing Benefit and/ or Council Tax Benefit were being paid, given that a pensioner known to be in receipt of Housing Benefit is highly likely to be also eligible for Pension Credit. 2.7 By encouraging pensioners to apply in advance for Pension Credit during the months April to September 2003, many households were identified as being eligible not only for Pension Credit when it came into eVect, but also for the existing Minimum Income Guarantee. Through this early campaign activity an additional 50,000 poorer households received the financial assistance they were entitled to, with the overall number of households receiving Minimum Income Guarantee increasing from 1.75 million to 1.8 million during this six month period. 2.8 Independent research suggests that pensioners generally are aware of and satisfied with Pension Credit. A recent Age Concern report on Pension Credit6 showed that levels of awareness of Pension Credit were high (89%) and that for most (70%) the application process was easy and simpler than for the Minimum Income Guarantee, with 85% saying that they would recommend applying for Pension Credit to others.

Progress: Latest Data on Numbers Receiving Pension Credit

2.9 As at 31 August 2004, 3.17 million pensioners in 2.61 million households were getting Pension Credit, with 2.36 million in 1.94 million households getting extra money every week compared with the Minimum Income Guarantee system. The average weekly award is £41.71 and the average gain compared to the old system is now £16.33 per week. 2.10 Of the 2.61 million total, 2.06 million pensioner households were receiving the guarantee, combating poverty and reaching more people than under the Minimum Income Guarantee. 2.11 Since 6 October 2003, an extra 260,000 households have been receiving the financial assistance they need but did not receive with Minimum Income Guarantee. As at 31 August, the average weekly rate payable to new households receiving guarantee credit was £39.39. This significant financial improvement for large numbers of the poorest households is a notable success of the take-up campaign to date. 2.12 As well as the guarantee element, Pension Credit rewards people who make modest provision for their retirement, ending the old pound-for-pound deductions. As at 31 August 2004, a total of 1.85 million pensioner households were receiving the reward for saving. This represents 71% of households receiving Pension Credit, with levels increasing each month. Take-up figures for the 11 months to August 2004 also show that 85% of all new households during this period are being rewarded for making provision for their retirement.

2.13 Overall around 548,000 households who would not have been entitled to anything under the Minimum Income Guarantee are now being rewarded through the savings element. This marks a significant step towards meeting one of the primary objectives of Pension Credit, rewarding people who save for their retirement.

2.14 Pension Credit incorporates generous rules on backdating payments to help ensure that no one loses out on their entitlement if they do not apply straightaway. Customers whose applications are successful in the period up to October 2004 may have their entitlement backdated to 6 October 2003 or to the date of entitlement if this is later. As from 6 October 2004, payment may be backdated to the date of entitlement for up to a maximum of 12 months. Significant sums of money, often hundreds of pounds, are being paid to pensioners as a result of these provisions. Analysis of the payments made during July shows that those gaining most are the poorest pensioners, with the average backdated payment for guarantee households amounting to around £1,400.

5 Tackling Pensioner Poverty: Encouraging take-up of entitlements, National Audit OYce, HC37 Session 2002–03. 6 Age Concern, June 2004, The impact of Pension Credit on those receiving it: Report of a survey among older people. Ev 92 Work and Pensions Committee: Evidence

3. Contribution of Pension Credit to Incomes of Current and Future Pensioners 3.1 This section sets out what Pension Credit means for the reduction of pensioner poverty.

The Impact of Pension Credit on Pensioner Poverty 3.2 Even before the introduction of Pension Credit, the Government’s basic strategy of getting more money to pensioners, particularly the poorest, was making significant inroads into tackling pensioner poverty. The latest figures available7 show that by 2002–03 absolute pensioner poverty, the number living below the 1996–97 low-income threshold, had fallen by two-thirds, or 1.8 million. The number in relative poverty, those below the contemporary low-income threshold, had also fallen by half a million, which shows that reforms have actually helped the poorest pensioners, narrowing the gap at a time of rapid income growth. As the Institute for Fiscal Studies8 reported earlier this year, measuring incomes after housing costs, for the first time in almost twenty years, a pensioner drawn at random from the population is less likely to be in poverty than a randomly selected non-pensioner. 3.3 Pension Credit has had a direct impact on pensioner poverty by giving around 1.94 million households, 2.36 million individuals, more money. Some 75% of all households receiving Pension Credit at the end of August 2004 were getting more than under the previous system. The number and proportion of households gaining have risen in each of the months since October 2003 and this positive trend is set to continue with increased take-up levels.

Figure 1

THE GROWTH OF THE PENSION CREDIT CASELOAD FROM OCTOBER 2003

Pension credit Households increased by 818,000 (45%) in 11 months 3,000

2,500 Minimum Income Guarantee Households Increased by 66,000 (4%) in 2 years 2,000

1,500

1,000 No. of Households of No.

500

0 Aug '01 Nov '01 Feb '02 May '02 Aug '02 Nov '02 Feb '03 May '03 Aug '03 Nov '03 Feb '04 May '04 Aug '04

3.4 Pension Credit targets help on the poorest pensioners. Nearly 60% of the extra £2 billion spent each year on Pension Credit goes to the poorest third of pensioners, with around 80% going to the poorest half.

Help for Women Pensioners 3.5 Women’s earning and employment patterns in the past, as well as the pension system itself, have meant that women are less likely to have their own State Pension entitlement, less likely to have savings, and more likely to be in poverty. Women’s greater longevity contributes to the fact that about three quarters of single pensioners are women, and single pensioners are also likely to be the most deprived. The 2002 Pensions Green Paper, Simplicity, Security and Choice,9 included a chapter on the position of women and their pension needs and the Department has undertaken to produce a further report for next year.

7 Households Below Average Income 2002–03 (DWP, March 2004). 8 Mike Brewer et al, 2004 Poverty and Inequality in Britain, Institute of Fiscal Studies Commentary 96. 9 Simplicity, Security and Choice: working and saving for retirement, Cm 5677, December 2002. Work and Pensions Committee: Evidence Ev 93

3.6 Some steps taken in the past are now beginning to help younger women pensioners and more action has been taken that will help future women pensioners. Since 1978, people—mostly women—who take breaks in their working life to look after children under 16 years old have their basic pension rights protected through Home Responsibilities Protection. 3.7 In 2001 the Government introduced the State Second Pension, reforming state provision especially to help carers, parents of young children and low-earners, all of whom are often women, build up a second pension. It benefits up to around 15 million low and moderate earners, 2.5 million carers and 2.5 million disabled people. A higher proportion of women than men are now accruing State Second Pension, helping to close the gender gap for the next generation. 3.8 From April 2000, the starting point for National Insurance contributions was separated from the lower earnings limit for employees and aligned with the personal allowance for income tax. From April 2004, National Insurance contributions only became payable on earnings from £91 per week, whereas entitlement to National Insurance benefits including State Second Pension started accruing at £79. This helps some low earners, including many women, gain National Insurance benefits without having to pay National Insurance contributions.

3.9 Because record numbers of women are in work, more women than ever will be benefiting from occupational pension provision. For those working full time, there are now as many women as men building up entitlement.

3.10 Other measures in place or proposed will improve the position for people with fragmented working lives, who are predominantly are women. For example: — full transfer values for early leavers, allowing people in short-stay jobs to take the full value of their pension with them when they leave; — Trivial commutation covering small amounts of pensions, whereby the maximum amount at which pension funds can be taken as a lump sum payment on retirement is being increased from around £2,500 to £15,000; — informed choice measures, such as work-place financial advice, will be of most help to those excluded in the past.

3.11 However, these measures, even those dating from 1978, came too late for many current female pensioners. Pension Credit is doing much to tackle poverty for women today. Around half of those eligible for Pension Credit are single women. When partners are included, almost two thirds of the people who benefit from Pension Credit are women. As at 31 August 2004, there were already 2.11 million women within Pension Credit households, compared to 1.06 million men (rounded to the nearest 10,000). Figures two and three illustrate the comparative extent to which Pension Credit benefits female pensioners.

Figure 2

PENSION CREDIT RECIPIENTS BY GENDER FROM OCTOBER 2003

2,500,000

2,000,000

1,500,000 Female Male 1,000,000

500,000

0 MIG 3 Oct Oct-03 Nov-03 Dec-03 Jan-04 Feb-04 Mar-04 Apr-04 May-04 Jun-04 Jul-04 Aug-04 Ev 94 Work and Pensions Committee: Evidence

Figure 3

PENSION CREDIT RECIPIENTS BY GENDER, AUGUST 2004

1,200,000

1,000,000

800,000 Female 600,000 Male 400,000

200,000

0

Guarantee Guarantee Savings only and savings element element only 3.12 Taking into account all the Government’s measures for pensioners, analysis of the Department for Work and Pensions’ data on Households Below Average Income shows that the number of female pensioners in absolute poverty is down by 1.3 million since 1996–97 (on an after housing costs basis).

The Implications of Pension Credit for the Private Pensions and Insurance Industries 3.13 The Government is determined to continue tackling pensioner poverty to ensure that all pensioners have a decent and fair income in retirement and that they share in the nation’s rising prosperity, while at the same time ensuring that the state pension system remains sustainable. Securing good pensions all round will mean people saving for their own retirement, as well as employers providing for their workers. So the Government aims to promote saving for old age and to ensure people have opportunities and incentives to do so. It has taken a number of important steps in this direction. 3.14 In its response last year to the Department for Work and Pensions Select Committee’s Third Report on The Future of UK Pensions,10 the Government recognised that it is important to improve its understanding of how people make decisions about saving and how savings incentives work. Saving behaviour is determined by a wide range of factors. Research11 suggests a number of barriers to saving for retirement, including aVordability, the complexity of pensions and the diYculty of understanding the choices on oVer. Current reform programmes in private pensions focus on the role of the workplace in providing appropriate information to employees so people can make the best possible, informed, choices about providing for their retirement, as well as boosting confidence in saving in occupational pension schemes.12 3.15 It is important, too, that people are confident that the tax and benefit system will ensure it pays to have saved. Pension Credit was designed with this consideration in mind. Whilst tackling pensioner poverty, Pension Credit eases the very steep marginal deduction rates faced by many pensioners (which could have dampened the incentives to save). 3.16 It is this extra money payable to people aged 65 and over who have saved that has made Pension Credit such a big step forward. In considering the introduction of Pension Credit, the Financial Services Authority said, “The Pension Credit will now mean that for most people most of the time it will pay to have saved.”13 3.17 The issue of incentives to save, and the role of taxes and benefits within it, is a complex one. Whilst the potential disincentive eVects of income-related benefits are much discussed, the potential disincentive eVects of less targeted benefits—such as the State Retirement Pension—tend to be ignored. It could be

10 Work and Pensions Select Committee Third Report: The Future of UK Pensions (14 April 2003). 11 Hedges, A, 1998, Pensions and Retirement Planning, DSS Research Report No. 83, CDS: Leeds; Mayhew, V, 2003, Pensions 2002: Public attitudes to pensions and saving for retirement, DWP Research Report No. 193, CDS: Leeds. 12 The document Simplicity Security and Choice: Informed Choices for working and saving (Cm 6111) sets out the Government’s plans to ensure that people have the information that allows them to make the best possible choices when taking decisions on how to make provision for their retirement. The document Simplicity security and choice: Working and saving for retirement: Action on occupational pensions (Cm 5835, June 2003) sets out Government proposals to improve member protection by introduction of a Pension Protection Fund to give members a specified minimum level of pension when the sponsoring employer becomes insolvent. 13 Financial Services Authority: Stakeholder Pensions—introductory notes and decision trees. Work and Pensions Committee: Evidence Ev 95

argued that all forms of State income will tend to displace private saving both because people will be able to achieve their desired replacement rate with less need for private income and because the contributions required to fund State income reduce the aVordability of private contributions. Pension Credit aims to strike a fair balance between rewarding and promoting saving, and delivering most money where it is needed most, at a sustainable cost. The Government’s wider policy on saving will continue to be developed on the basis of the evidence. The Government wants to engage with academic and other experts to explore how best to assess the influences on savings behaviour. It has established the independent Pensions Commission to monitor and keep under review the voluntary system of private pensions and long-term savings.

Evaluation 3.18 The Department for Work and Pensions is finalising plans for its own evaluation of Pension Credit policy, thoroughly examining the performance of Pension Credit using the statistical information at its disposal. It is intended that this evaluation will take the form of a series of reports to be published over the next 18 months and will focus on how successful Pension Credit has been in tackling its three policy objectives set out in paragraph 2.3.

4. How Pension Credit Fits With Other Benefits 4.1 Looking at Pension Credit in isolation does not tell the whole story about the help that is available to pensioners. This section examines how Pension Credit interacts with other benefits including Housing Benefit and Council Tax Benefit, and with Local Authority care charging policies to deliver security for older people in retirement.

Housing Benefit and Council Tax Benefit 4.2 Council Tax Benefit and Housing Benefit make an important contribution to the financial security of over 4.5 million people on low incomes. 4.3 Customers who are entitled to the Pension Credit guarantee will be entitled to maximum eligible Housing Benefit and Council Tax Benefit. A customer receiving only the reward for saving will have their additional income taken into account in the local authority’s assessment. Local authorities are required to accept The Pension Service income assessment data in these cases so that the customer does not need to provide it twice. 4.4 The Housing Benefit and Council Tax Benefit applicable amounts for people aged 65 and over have been increased to reflect the maximum savings reward, and the more generous income and savings rules in Pension Credit also apply to Housing Benefit and Council Tax Benefit. This means that gains through the Pension Credit savings reward are protected. To target resources most eYciently the Housing Benefit capital limit of £16,000 capital has been retained for people aged 60 or over who do not qualify for the Pension Credit guarantee. 4.5 Pension Credit therefore means that around two million pensioner households now qualify for more help, or qualify for help for the first time, with their council tax and/ or rent. This includes around 300,000 pensioner households who will be newly entitled to Council Tax Benefit.

Interaction of Pension Credit and Local Authority Charging for Residential Care 4.6 In general, the financial assessment for residential care takes account of an individual’s income and savings, leaving each resident with an amount of money for their personal expenses of £18.10 per week (£18.40 in Wales). Local authorities fund the diVerence between the resident’s contribution and their care home fees. 4.7 Pension Credit is taken into account in the financial assessments of those residents who require local authority funding. However, those residents who qualify for a reward for saving are provided with a savings disregard of up to £4.65 per week (£6.95 for couples). This disregard also applies to those supported residents who have made provision for their old age but have too much income and/or capital to qualify for the savings reward. They receive up to £4.65 per week (£6.95 for couples) on top of their personal expenses allowance, meaning that people living in care homes who have made modest provision for retirement will see some benefit from having done so. Residents in receipt of Pension Credit who do not require local authority support, continue to receive Pension Credit in full. 4.8 An estimated 210,000 care home residents who are supported by local authorities are better oV due to this provision which allows older people living in care to keep more of their savings. The disregard enables older people in residential care to have a little more disposable income. Ev 96 Work and Pensions Committee: Evidence

Interaction with Attendance Allowance and Disability Living Allowance

4.9 Attendance Allowance and Disability Living Allowance are non-income-related, tax-free, extra-costs disability benefits. They are a contribution towards the extra costs severely disabled people incur because of their disability, and receipt of Pension Credit has no eVect on entitlement to, or payment of either Attendance Allowance or Disability Living Allowance. As well as being ignored in the calculation of Pension Credit, people in receipt of these benefits may also be entitled to enhanced amounts of Pension Credit. As at May 2004, 22% of all Pension Credit recipients were receiving the severe disability addition.

Interaction with Carer’s Allowance

4.10 Carer’s Allowance provides a measure of income maintenance for people who provide regular and substantial care for a severely disabled person getting Attendance Allowance, the middle or higher rates of the Disability Living Allowance care component, or the equivalent rates of Constant Attendance Allowance under the Industrial Injuries Disability Benefits Scheme or the War Disablement Pension Scheme.

4.11 Pension Credit has no eVect on entitlement to, or the payment of, Carer’s Allowance. Carer’s Allowance is taken into account as income for Pension Credit though a pensioner getting Carer’s Allowance will be entitled to an extra amount of Pension Credit. The carer’s additional amount is doubled in the case of couple where both partners are entitled to Carer’s Allowance.

4.12 In October 2002, the upper age limit on claims for Carer’s Allowance was abolished. This change means that carers aged 65 and over can now claim and gain entitlement to the allowance and to the carer’s additional amount in Pension Credit. People with entitlement to Carer’s Allowance will receive the carer’s additional amount in Pension Credit even though they may not actually be receiving any Carer’s Allowance due the overlapping benefits rules, for example, where they are receiving State Pension at a higher rate. As at May 2004, 5% of all Pension Credit recipients (households) were receiving the carer’s addition.

Interaction with Other Benefits

4.13 Recipients of the Pension Credit guarantee, and their partner, will be entitled to free NHS dental treatment, vouchers towards the cost of glasses or contact lenses, free NHS wigs and fabric supports and repayment of necessary travel costs to receive NHS treatment under the care of a consultant. This latter also applies to dependants. Partners under 60 of recipients of Pension Credit guarantee will be entitled to free NHS prescriptions and free NHS sight tests, which are already free for those over age 60.

4.14 Pension Credit recipients have access to the Social Fund funeral and cold weather payments. Pensioners in receipt of Pension Credit also have access to Social Fund budgeting loans.

4.15 The Government also recognises the special position of War Pensioners and £10 of the basic War Pension is disregarded when calculating Pension Credit. In addition War Pensions are treated as qualifying income for the savings reward.

5. Take-up of Pension Credit and Other Benefits

5.1 Entitlements that exist on paper only cannot improve people’s lives. The Government wants to ensure that as many pensioners as possible, particularly the poorest and hardest to reach, claim their full entitlements. This section sets out progress to date on maximising take-up and describes plans for the future.

Pension Credit

5.2 The Government wants all those who are eligible for Pension Credit to apply and is determined that its delivery arm, The Pension Service, should reach all groups and oVer them the opportunity to take up their entitlement. To underline its commitment to this, in the 2002 Spending Review the Department signed up to a Public Service Agreement target of paying Pension Credit to at least three million pensioner households by 2006. The Department is on track to meet this target and in the 2004 Spending Review a new, more challenging, target was agreed—to pay Pension Credit to 3.2 million pensioner households by 2008. Work and Pensions Committee: Evidence Ev 97

5.3 The Department has recently refined its estimate of the number of pensioner households eligible for Pension Credit, using more up-to-date information from the Family Resource Survey for 2002–03.14 This shows continuing growth in pensioner incomes. The new estimates are that for the year 2004–05 an estimated total of around 3.75 million households are eligible for Pension Credit. This corresponds to and compares with earlier estimates of 3.85 million households or 4.9 million individuals. Despite these revised figures the Public Service Agreement will remain unchanged. Meeting the targets from this smaller number of individuals estimated to be entitled will require even higher rates of take-up, and will mean that to hit the target, more than three in four of those who are eligible will be receiving their entitlement. To maintain a focus on the most disadvantaged the new Public Service Agreement target requires that at least 2.2 million of the 3.2 million households receiving Pension Credit by 2008 must in receipt of the guarantee element. 5.4 As at August 2004, 11 months after the introduction of Pension Credit, more than two-thirds of the increase required to reach the Public Service Agreement target for 2006 has been achieved, in a third of the time available. A planned, carefully managed and continuing take-up campaign has played a large part in this progress. 5.5 Further targeting measures are planned for those pensioners yet to take up their entitlement. Steps being taken include using proven data-matching techniques to identify people most likely to qualify and targeting marketing activity accordingly. The Pension Service is writing again to the people most likely to be eligible and Pension Credit Application Line staV are telephoning customers who have yet to make contact. Local Service activity is focusing on one-to-one contact rather than events for large numbers as the individual approach is often more productive in generating applications. 5.6 The Pension Service is working with a range of partners, not just with local authorities and the voluntary sector, to ensure that all possible avenues are explored to get the Pension Credit message to customers. For example, information about Pension Credit has been issued with utility bills to help maximise take-up.

Marketing Research 5.7 Research has been carried out since March 2003 on the impact of the marketing messages on the pensioner population. A survey of over 1,000 pensioners has been regularly carried out, aimed at measuring the extent of awareness and understanding of the messages around Pension Credit. The marketing messages aim to alert pensioners and their families to the introduction of Pension Credit as a new entitlement for the pensioner population, its purpose, and whether they could be eligible to receive it. 5.8 The survey gives valuable customer feedback on the success of the marketing messages and allows for opportunities for improvement to be identified and addressed. The survey has shown an increasing awareness of Pension Credit as the campaign has progressed. The June survey results showed that awareness of the term “Pension Credit” was at its highest level to date at 78% of those surveyed. 5.9 The Department has recognised that, from a customer experience perspective, it is important for pensioners to realise what Pension Credit stands for. It is also important that a clear message is given about who is entitled to Pension Credit, so that pensioners understand that not everyone will be eligible. The survey findings show a consistently high appreciation of the main objectives of Pension Credit to increase the income of the poorer pensioners and to reward saving for retirement.

Hard-to-Reach Pilots 5.10 Much eVort has been put into ensuring that all eligible pensioners are contacted and encouraged to apply, including people known to be harder to reach. The term “hard-to-reach” is used to mean older people who are less likely to respond to the Pension Credit media advertisements and direct mailings, for example, because of physical, psychological, cultural or geographical reasons. This group includes people who may be socially excluded because of their disability or because they live in remote rural areas, older people from ethnic minorities15 and single female pensioners.

14 Family Resources Survey 2002–03 (DWP, 30 March 2004). 15 Ethnic minorities—For the purposes of this memorandum, “ethnic minority” is meant to broadly denote a group which an ordinary person might consider to be in the minority in terms of ethnic representation in the country. Therefore, in the context of the United Kingdom, generally speaking this will denote people principally of Black African, Caribbean (specifically, Afro- Caribbean) and Indian sub-continental (ie principally India, Pakistan, Sri Lanka and Bangladesh) descent. Its use as a broad “umbrella” label is deliberate, to signify reference to a wide variety of ethnic minority groups. Where greater precision is required with reference to specific component groups within the ethnic minority population, allowances and departures from this term are made in the text. There is, inevitably, considerable debate and disagreement on the question of race, ethnicity and nomenclature. No specific political or sociological inference should be drawn from the use of related terminology in this report. For the sake of clarification, though, the relevant legislation (Race Relations Act 1976, section 3(1)) defines “racial group” as meaning a group of persons defined by reference to colour, race, nationality or ethnic or national origins. White—As with the term “ethnic minority”, the generic label “White” should be used with some caution. The existence of distinctive ethnic groups within the “White” category is gradually being acknowledged: notably, in the 2001 Census of Population people of Irish descent are recognised as a separate ethnic group. Ev 98 Work and Pensions Committee: Evidence

5.11 Pension Credit hard-to-reach pilots were carried out to establish and evaluate the most eVective approaches for targeting these customers in order to encourage maximum take-up. The Local Service and its partner organisations ran 17 pilot events in nine regions during July 2003, reaching the following groups of older people: — carers and the cared for; — homeless; — isolated rural communities; — housebound; — sensory impaired; — poorer elderly; and — ethnic minorities. 5.12 The pilots demonstrated the importance of good working relationships between the Local Service and its partner organisations. Existing partnerships were strengthened and new ones were formed. Older people valued the personal approach of face-to-face contact, personalised letters and the availability of private rooms to discuss personal aVairs. They also welcomed the fact that the events were tailored to them and were held in safe, comfortable local environments. 5.13 The evaluation of the pilots shows that a variety of approaches is needed to target the hard-to-reach customers. As a result, Local Service staV have been provided with a series of information sheets that set out the barriers faced by hard-to-reach customers, how those barriers can be overcome and the products available to support Local Service to assist their outreach work.

Local Service Take-Up Activity 5.14 At the beginning of February 2004 more than 100,000 customers were contacted by Local Service through visits, telephone calls, surgeries, and through partner organisations to encourage applications for Pension Credit. 5.15 Innovative ideas to contact the hard to reach older people included: — working with the Women’s Royal Voluntary Service to distribute Pension Credit flyers through their meals on wheels service; — working with local authorities to issue Pension Credit flyers with Housing Benefit/Council Tax Benefit mailings; — working with local authorities to issue Pension Credit flyers when issuing concessionary bus passes; and — ensuring Pension Credit information was available at GP surgeries and health centres for older people receiving their flu vaccination.

The Partnership Fund—Supporting Initiatives for Older People 5.16 The Department for Work and Pensions is oVering short-term funding to local and national organisations, including the voluntary and community sector, to establish and manage initiatives that increase the take-up of benefits by older people, particularly the vulnerable and those in harder to reach groups. 5.17 The scheme, known as the Partnership Fund, also aims to: — encourage, improve and integrate joint working between partners to improve older people’s access to services; — promote independence in older people; and — gain a better understanding of older people’s needs in a specific community, or region, including those of ethnic minority elders. 5.18 Funds are available for the current and next financial years and will be awarded for proposals that meet the above aims, and create links between services such as health, housing, benefits and social care for older people.

Improving Take-Up by Single Female Pensioners 5.19 The Pension Service has identified that single female pensioners are likely to be amongst the poorest. The marketing strategy for Pension Credit identified the appropriate single occupier households and a tailored mailing pack was sent to them, inviting them to apply. Prior to the introduction of Pension Credit, 1.13 million single-female households were receiving Minimum Income Guarantee. An additional 413,000 single-female households are now receiving Pension Credit as at August 2004 and this accounts for over half Work and Pensions Committee: Evidence Ev 99

of all the additional households newly entitled over the last 11 months. Single-female households now account for 59% of all households receiving Pension Credit and are evidence of the campaign’s success in ensuring that single women take up their entitlement. 5.20 The vulnerable group of single female pensioners aged 80 and over has also been targeted by the campaign for take-up of their entitlement. Prior to October 2003, there were 528,000 in receipt of Minimum Income Guarantee in the age group 80 years and over. As at 31 August, 11 months since Pension Credit was introduced, an extra 217,000 single-female households in this age group, an additional 41%, have taken up their entitlement. As at August 2004, there are now around 953,000 households aged 80 and over, and single female households account for 74% of this total.

Improving Take-Up Among Older Ethnic Minority People 5.21 The Department for Work and Pensions commissioned BMRB Social Research to carry out a qualitative research project16 which aimed to understand the barriers to the take-up of benefits among older ethnic minority people. Strategies were found to be most eVective when developed in partnership between the Department, the local authority and with the voluntary and community sector. Partnership working is the key to the development of joint teams.17 5.22 Findings from the research will be used to ensure that the needs of ethnic minority groups are incorporated into plans and processes. Outreach and the provision of face-to-face services were emphasised by both older people and those working with them as being central to increasing take-up. 5.23 The Pension Credit marketing campaign has ensured that, in addition to all ethnic minority pensioner households being included in the national mailing and advertising programme, ethnic minority groups have been targeted through specific activities and communications. Communication materials were designed to meet the needs of ethnic audiences across the range of communication media. This included: — targeted English and translated press articles appearing in ethnic press titles, with one advert per month across 20 diVerent publications from September 2003 to April 2004; — Asian, Chinese and Black Caribbean pensioners appearing in TV advertisements and direct mail packs, with 28 advertisements being aired per month across 12 diVerent ethnic minority TV channels; — specific radio advertisements on five ethnic minority radio stations, targeted at ethnic minority pensioners and their friends and family; — information leaflets containing translated information; and — at a local level, working with ethnic minority partner organisations to help raise awareness of Pension Credit. 5.24 The Department recognises that it is important to know the extent to which pensioners from ethnic minority groups are responding to the invitations made to take-up their entitlement to Pension Credit. To this end, a customer research initiative took place during May and June 2004 aimed at callers to the Pension Credit application line as the main route for customer applications in the first year of Pension Credit implementation. A total of around 13,000 calls were monitored at random during the period and customer reaction to the initiative was very encouraging, with a participation rate of over 99% of the callers sampled. Information was gathered on caller levels across 16 diVerent ethnic minority groups and the results were then compared against the ethnic mix data for people aged 60 and over in the 2001 census.18 5.25 The initiative concluded that callers to the application line closely matched and in most cases exceeded the census ethnic mix levels. Analysis showed that, overall, 4.6 per cent of callers to the application line were non-white as compared to the level of 3.3 per cent in the 2001 census. According to census data, the two largest non-white ethnic groups in the pensioner population aged 60 and over are Indian and Black Caribbean. The number of callers from the Indian ethnic group accounted for 1.04% of all callers sampled as compared to the census figure of ethnic mix of 0.98%. Similarly, callers from the Black Caribbean ethnic group accounted for 0.97% of all callers sampled compared with a census figure of ethnic mix level of 0.84%. 5.26 Further work is being considered to examine take-up amongst people from ethnic minorities using other application routes, for example through the Local Service, and a continuation is planned of front-end ethnic monitoring at the application line. However, it is encouraging at this stage that the response levels found during the customer application line research study oVer some evidence that pensioners from ethnic minority groups are responding to the take-up invitations specifically addressed to them. 5.27 The Local Service in every region has carried out many initiatives aimed at promoting take-up from pensioners in ethnic communities. For example: — In CardiV the largest single group of immigrants are Somalians. The Local Service there has made inroads via the community elders and now provides an outreach service to this community.

16 Barnard, H., and Pettigrew, Nick, Delivering Benefits and Services for Black and Minority Ethnic Older People, Department for Work and Pensions Research Report 201, December 2003. 17 Joint team working is explained more fully in section 6. 18 National Statistics 2001 Census Data. Ev 100 Work and Pensions Committee: Evidence

— A regular information session is run from the Bolton Asian Elders Centre, one Local Service oYcer being from the Asian community herself. Both sides feel the partnership is bringing success, especially in tackling hard-to-reach customers directly through the Centre and through its regular newsletter. — In Birmingham the Local Service provided a presentation at the Parji Shree Pragati Mandal Temple to older people from the Hindu community; this proved so successful that it generated two surgeries to handle the queries and benefit information required by this community. — In Reading Local Service staV are members of the Reading Refugee and Asylum Seekers Forum, which meets quarterly. They have a partnership agreement with the Indian Community Centre in Reading. — In Glasgow the Local Service provides fortnightly information sessions to the Senior Asian Welfare organisation and to the Wing Hong Elderly Forum. Working in partnership with Local Service the host organisations provide interpreters to assist with benefit information.

Regional Take-Up 5.28 The Government wants to ensure that pensioners in all parts of England Scotland and Wales and in all types of area are equally able and likely to take up their entitlement. The Pension Service and the take- up campaign reaches all areas throughout Great Britain. Regional take-up is set out in Table 1.

Table 1: Breakdown of Pension Credit Households by Country/Government OYce Region

Region Pension Credit Pension Credit Average Pension Households as at 31 Households as % of Credit award (£) Aug 2004 National Pension Credit Households Eastern 212,000 8.1 39.20 East Midlands 187,000 7.2 39.50 London 275,000 10.6 57.90 North East 154,000 5.9 37.10 North West 347,000 13.3 41.50 Scotland 272,000 10.4 40.30 South East 268,000 10.3 38.60 South West 216,000 8.3 38.60 Wales 153,000 5.9 41.90 West Midlands 270,000 10.3 41.80 Yorkshire and Humberside 252,000 9.7 38.30 National 2,607,000 41.70

Household totals have been rounded individually to the nearest thousand. Monetary levels have been rounded to the nearest £0.10. 5.29 As part of the national coordinated take up campaign for Pension Credit, the Local Service is making best use of data matching to identify customers who are likely to be eligible for Pension Credit but have not applied. The Local Service is using an intranet-based interactive tool to target local authority areas where potentially entitled pensioners live. This is proving to be a most eVective way of reaching the most vulnerable. The system will initially be used to support Local Service staV to identify individuals or geographical areas where targeted action to increase Pension Credit is likely to be more successful.

Council Tax Benefit and Housing Benefit 5.30 It is not just Pension Credit that makes the diVerence to older people’s incomes in retirement. Because of Pension Credit, around two million pensioner households will qualify for more help, or get help for the first time, with their council tax and/or rent. 5.31 Based on 2001/02 figures, the latest available, there are estimated to be up to 2.3 million people who are still missing out by not claiming Council Tax Benefit—up to 1.7 million of whom are pensioners. Up to £1 billion of Council Tax Benefit is going unclaimed, up to £770 million of this by pensioners. This means that up to four out of 10 pensioners are entitled to, but are not claiming, Council Tax Benefit, compared with fewer than two out of 10 pensioners who, it is estimated, are entitled to, but are not claiming, Housing Benefit. 5.32 The Department for Work and Pensions has already taken steps to support local authorities in promoting awareness of Council Tax Benefit, and will continue to give priority to this issue. Earlier this year the Department launched a national awareness campaign and issued local authorities with a Best Practice Guide to help maximise take-up. Levels of awareness of Council Tax Benefit were measured before and after the press publicity campaign, which took place between 8 and 26 March, to coincide with the issue of council Work and Pensions Committee: Evidence Ev 101

tax bills. Overall, the research suggests that the campaign had a positive eVect in raising levels of awareness amongst the main target audience with the proportion of those aged 65 years and over who had seen or heard something about paying less council tax rising from 19% before to 29% after the campaign. 5.33 The Pension Service considers eligibility to Housing Benefit and Council Tax Benefit as part of its holistic approach to take-up of entitlements by pensioners. It issues a Housing Benefit/Council Tax Benefit claim form to everyone who calls the Pension Credit Application Line and wishes to claim. Visiting oYcers will complete the Housing Benefit/Council Tax Benefit claim form when they visit pensioners to take an application for Pension Credit. 5.34 The Department has launched a tailored Housing Benefit and Council Tax Benefit claim form for pensioners which reduces the existing form from 36 to 24 pages to make completion easier, and is now looking to shorten it even further. The Department is also looking into the feasibility of issuing a separate, Council Tax Benefit only, claim form for owner occupiers. 5.35 The Department is looking at further ways to streamline the claims procedure, so that for example, where a person claims Council Tax Benefit together with other benefits information on personal and financial circumstances has to be provided just once. 5.36 The voluntary sector plays a pivotal role in helping to promote take-up. The Department for Work and Pensions is building closer and more eVective partnerships with the voluntary sector, backed up with funding to support innovative pilots to increase the take-up of benefits across the board, including Housing Benefit/Council Tax Benefit.

Attendance Allowance and Disability Living Allowance

5.37 The number of people over State Pension age who receive either Attendance Allowance or Disability Living Allowance has increased by more than 18% in the last five years and, as at February 2004, stands at over two million people. This represents nearly 20% of the overall pensioner population. New, simpler and better focused Attendance Allowance claim forms were introduced nationwide in October 2003 and are making the claiming experience more customer-orientated. 5.38 The Department acknowledges that one of the most eVective ways of increasing awareness of these extra-costs disability benefits amongst those potentially entitled is via their contacts with local authorities and welfare rights organisations. These organisations are important partners in maximising take-up of Attendance Allowance and Disability Allowance. The Disability and Carer Service’s contacts with a wide range of local, regional and national voluntary and welfare rights organisations, and the personal front-line service provided by The Pension Service have had a positive influence on the numbers of people over State Pension age claiming Attendance Allowance and Disability Living Allowance. The Pension Service Local Service staV consider eligibility for Attendance Allowance at all face-to-face contacts with customers. This is particularly the case with joint teams who look at the customer’s whole social care needs. 5.39 As at August 2003, there were 933,500 households in receipt of Minimum Income Guarantee who were also recipients of Attendance Allowance/Disability Living Allowance. Five months after the introduction of Pension Credit this had increased by 6% to 985,900, an extra 52,400 households.

Carer’s Allowance

5.40 The increase in the number of carers over State Pension age who have claimed and gained entitlement to Carer’s Allowance to over 175,000 as at February 2004 stems mostly from the removal in October 2002 of the upper age limit of 65 years on Carer’s Allowance claims. Where The Pension Service identifies a possible entitlement to this allowance pensioners are encouraged to claim.

6. Delivery of Pension Credit

6.1 Customer service is at the heart of Pension Credit policy. Delivering Pension Credit in modern, eVective ways that meet customers’ needs and preferences is the key both to maximising take-up, thus reducing pensioner poverty, and to releasing eYciency savings that will enable the Department to focus spending where it is most needed. The service delivery vision for Pension Credit is of a telephone-based application process backed up by a Local Service which is increasingly operating in joint teams with local partners. This section examines how these approaches are working so far and sets out plans for the future. It also describes the implications of the Department’s plans to reduce its workforce and the number of pension centres. Ev 102 Work and Pensions Committee: Evidence

Delivery of a Telephone-Based Service

6.2 The Department decided at an early stage that the normal way of applying for Pension Credit would be by telephone to a freephone application line. The application line became operational on 7 April 2003. During the advance application period, which ran until 6 October 2003, the application line received some 842,000 calls, which resulted in some 236,000 advance applications. By the end of August 2004, the application line had received 4.48 million calls. 6.3 StaYng levels in the application line have been flexible, to ensure that the line could deal with the forecast number of calls at any given time. At its peak, the application line had approximately 1,300 whole- time equivalent staV handling customer contacts. At the end of August 2004 the number of whole-time equivalent staV handling customer contacts was just over 650. 6.4 Under published performance standards, The Pension Service aims to answer telephone calls within 30 seconds. For the 16 months ending August 2004, 94% had been answered within 30 seconds. 6.5 The average length of a call to the application line during August and the immediately preceding months, was around seven minutes and the average time to complete an application for Pension Credit was less than 20 minutes. The application line deals with general enquiries as well as taking applications. 6.6 At 31 August 2004, the application line had issued 1.85 million application forms in response to customer requests. Of these, 1.33 million (approximately 72%) were completed during the call and the completed form was sent to the customer to sign and return for processing. In the remaining 520,000 cases the customer asked to be sent a form for self-completion. 6.7 The Department has introduced a customer promise to ensure that customers know what to expect once they have made an application. The promise is for customers who call the application line to have their application dealt with in four to six weeks of all necessary documents being received by the appropriate pension centre. The Pension Service aims to ensure that customers calling the application line understand the application process and their part in it. 6.8 Pension Credit applications are being handled more quickly than was the case for the Minimum Income Guarantee. Since April 2004 the application handling time, once a complete application form is received at the pension centre has been around nine days on average. This represents a significant improvement in the customer experience. 6.9 The Department continues to review and improve the application process in the light of experience, including comments from customers or their representatives.

Helping People Whose First Language is not English

6.10 For Welsh-speaking customers, the Department’s recently launched Welsh Language scheme outlines how it implements the Welsh Language Act 1993. This means making it as easy for the public to use Welsh, or access information in Welsh, as it is in English. The Local Service in Wales has 23 Welsh speakers and has met all customer requests for home visits by a Welsh speaking member of staV. Customers who wish to make their telephone application in Welsh are handed over to Welsh speaking staV at the CardiV site. 6.11 For other languages, The Pension Service has a contract with the Language Line, enabling the application line to oVer a telephone interpreting service, in up to 150 languages, to customers whose first language is not English. Between April 2003 and August 2004 there were 371 requests for an interpretation service. 6.12 The application line also oVers a textphone service for customers with hearing diYculties. All staV operating this service receive training approved by the Royal National Institute for the Deaf. These services are standard in The Pension Service.

Other Options

6.13 The Department has recognised that the telephone application line is not suitable for everyone and oVers alternatives to suit individual circumstances. If customers prefer, a paper application pack can be issued which they can complete in their own time. A pack can be obtained either through the application line or by returning the tear-oV slip included in the Pension Credit leaflet and in press advertisements. In addition, the paper application pack has been made available through Local Service outlets of The Pension Service and from partner organisations. The paper application pack is also available on the Pension Service website, where customers can either print out the application form or complete an interactive version and then print it out for signing. Work and Pensions Committee: Evidence Ev 103

Delivery of Local Services 6.14 A further alternative, is for The Pension Service Local Service to arrange to see a customer face-to- face at a mutually convenient location, such as a local information session or in the customer’s own home. Customers, or people phoning on their behalf, can use the application line number to ask to be referred to the Local Service, who will get in touch with the pensioner or his or her representative. Information regarding how to contact The Pension Service is now available on the Internet. 6.15 The Local Service is working closely with a range of partners to provide a dedicated, holistic, face- to-face service for older people. This is in line with the 2001 Manifesto commitment that the Government would develop an integrated service to provide a joined-up gateway to health, housing, transport, financial benefits and social care for older people. This future service will provide the holistic information that older people need to ensure they have more choice and control over the services they use. 6.17 Overall, the views that have been expressed on partnership working, both by statutory and voluntary organisations and by customers, are very positive, not only in relation to the eVectiveness of the Local Service, but in relation to the overall commitment of staV to improving services for older people. 6.18 It is clear that if the gaps in services for older people are to be closed and services better co-ordinated, then improved forms of joined-up planning and service delivery are required. Services used by older people need to be responsive, flexible, customised, integrated, holistic, seamless and of high quality. 6.19 The Local Service, working with its partners currently provides information sessions and information points in partners’ locations that are regularly visited by older people such as local community centres, Welfare Rights and Age Concern outlets etc. Appointment-based sessions oVer a service that covers the full range of Pension Service benefits (State Pension/Pension Credit/Winter Fuel Payments and take-up of Direct Payment) as well as sign-posting to other benefits and local services where appropriate. Regular reviews ensure these sessions continue to meet vulnerable customers’ needs. 6.20 Where pensioners cannot attend a session and have diYculty conducting their business over the phone, the Local Service visits them at home. Since April 2003, over one million older people have had contact with their Local Service either at home or during an information session.

Joint Teams 6.21 Since becoming fully operational in April 2003, the Local Service has been developing towards a network of services for older people. Part of this development is the creation of joint teams through integration with social service Fairer Charging staV or, in some teams, voluntary sector partners into a multi-skilled team with a single operational management structure. 6.22 The development of joint teams is providing the opportunity to reach pensioners who have not yet engaged with The Pension Service. For example, referrals to the joint teams for a social care fairer charging financial assessment have captured a much wider customer base. 6.23 By reaching potential customers who have not previously accessed the full benefit system, joint teams have made a significant impact on benefit take-up across all benefits. As an example, in Plymouth a joint team has been formed with the Social Services Financial Assessment Team, the local authority Housing and Council Tax Benefit Team and the Local Service. During an appointment or home visit, a customer’s potential entitlement to a range of benefits is discussed. 6.24 As at August 2004, 136 primary tier local authorities in England, Scotland and Wales (67%), have agreed in principle to forming joint teams with The Pension Service Local Service, with 18 joint teams now up and running. The aim is to achieve full national roll out of joint teams by April 2006. 6.25 Prior to the introduction of joint teams, many older people who requested help for social care packages, such as Home Help, would not necessarily access the benefit system. These customers are some of the harder-to-reach, excluded pensioners. Social Services previously only dealt with the care elements and the fairer charging assessment. 6.26 Local Service management information systems are now in place to capture not only volumes of activity but also the outcomes for customers. For the period April 2004 to August 2004 the total weekly award of benefit as a direct result of Local Service and joint team activity was £752,332.19 6.27 Work undertaken with the Audit Commission on Fairer Charging20 shows that joint teams are significantly reducing duplication of eVort, and delivering on customers’ wishes to provide information only once to access the services they need. This eVectively increases the total capacity available to all partners for the delivery of services and therefore increases ability to contact and support the most vulnerable members of society. Building on this approach, on 26 August, the Government published Link-Age: Developing networks of services for older people,21 which sets out its strategy for further joining up services for older people across and beyond government. It is now consulting on the document’s proposals.

19 The Pension Service Management Information Local Service System. 20 Charging With Care, Audit Commission on Fairer Charging, The Audit Commission, 2000. 21 Link-Age: Developing networks of services for older people, DWP in conjunction with Department of Health, OYce of the Deputy Prime Minister and Local Government Authority, 26 August 2004. Ev 104 Work and Pensions Committee: Evidence

Alternative OYces 6.28 Further improvements will be delivered through Alternative OYces, where other organisations, such as local authorities and from the voluntary sector, are authorised by the Secretary of State for Work and Pensions to receive and verify social security claims made by older people. This is now permitted following an amendment to the Social Security (Claims and Payment and Miscellaneous Amendments) Regulations 200322 and the Department is piloting the concept in partnership with Age Concern. The process means that the date the application is received by a partner organisation can be accepted as the date of claim, thus minimising any potential delay or loss of benefit to the customer. The Department is currently developing training and accreditation to increase the number of designated partners. 6.30 The Pension Service is currently working with a range of organisations who have committed to developing partnership services with it. Over the next 18 months, it will be making opportunities available to selected partners with the necessary skills and knowledge to take part in this across England, Scotland and Wales, improving customer choice. 6.31 Early work has shown this to be a sustainable approach for The Pension Service, partners and customers and further limited piloting is planned over the next six months to ensure the process is suYciently robust and eYcient.

The Consequences of the Department’s EYciency Plans 6.32 The transformation of The Pension Service is part of the overall modernisation of the welfare system. It will deliver a business supported by new technology with changes to processes, IT, job roles and organisational structure that will enable the Department to deliver a service: — That is more accessible for customers—for instance, where customer needs will be captured at the earliest point such as the need for large print or Braille material — Where claiming is simpler—customers will be able to speak to one adviser who in most cases will be able to handle all of their needs — That is more eYcient—unnecessary steps in the claim process will be removed to enable faster responses to customers — Continues to build on the success in increasing the take up of entitlement—improved use of customer information will support the identification of entitlement to benefits 6.33 The initial take-up phase of Pension Credit has been successfully completed and The Pension Service is moving forward to achieve the Department’s Public Service Agreement target of at least three million Pension Credit households by 2006. An increase in staYng levels was necessary at the start of Pension Credit implementation to launch the campaign and it was always planned to reduce the levels of staV once Pension Credit was up and running. 6.34 Since the Budget announcement, detailed planning has been taking place across the Department. This has included discussions on the future size and shape of The Pension Service. 6.35 As a result the work of 10 pension centres will migrate to other sites. Six pension centres (Derby, Norwich—Baltic House, Nottingham, Wolverhampton, Stockton and Wrexham) will transfer to Jobcentre Plus as part of its own programme to modernise benefit processing. The Appeals Service will take over Burnley and the Child Support Agency will take over Plymouth. 6.36 Two pension centres, those in York and Liverpool, will no longer carry out Pension Service business from later this financial year. Opportunities to transfer these pension centres to other parts of DWP have been sought. To date no alternative businesses have been found to take over York or Liverpool. EVorts to secure alternative interest from other government departments and the private sector continue; however, if no opportunities arise these sites will close. 6.37 The selection of those pension centres that would no longer continue to process Pension Service work was based on the Department’s ability to re-deploy staV internally and a set of operational and economic criteria. 6.38 There will be further reductions in the number of pension centres carrying out pension service work in the future. Decisions on which sites will remain will be based on robust, operational, economic criteria. Options for redeploying sites not required by The Pension Service in the longer term are being actively pursued. However, the possibility of some further centres closing in the future cannot be ruled out. 6.39 The priority is to redeploy staV from pension centres that will either close or be transferred. Local structures are in place to identify redeployment opportunities across businesses and other government departments and The Pension Service has set up a Redeployment Unit to facilitate this. In the event that staV cannot be redeployed there is a risk of some localised redundancies. This option would be the last resort. The intention is to maximise voluntary redundancy schemes and a business case for this is being developed.

22 Social Security (Claims and Payments and Miscellaneous Amendments) Regulations 2003, SI 2003 No 1632. Work and Pensions Committee: Evidence Ev 105

6.40 The Pension Service is taking steps to ensure it sustains the high levels of customer service during this period of change. Customers should see no reduction in the service delivered by The Pension Service. Customers will still be able to contact The Pension Service in the same way they do now. The ability to meet customers’ special needs through home visits remains. 6.41 The Pension Service continues to be firmly committed to working with its partners. There remains an emphasis to create joint teams with local authorities. This will maximise potential for increasing take up and enables less invasive processes by gathering customer information at one contact point.

7. Customer Experiences of Applying for and Receiving Pension Credit 7.1 With the introduction of Pension Credit the Department has aimed for a high quality customer experience from initial contact through to receipt of payments. In the latter case, this includes the move to Direct Payment which is taking place for all social security benefits. This chapter describes how the Department is going about providing a smooth and simple experience of the Pension Credit process, including Direct Payments, and sets out findings from research and feedback on this subject. 7.2 The application process has been designed to be straightforward through a freephone telephone service where trained staV ask only those questions relevant to that particular caller. The Pension Service then sends the completed application form to them to check the information, sign the form and return it, with any documentation requested. 7.3 In 2003 the Department commissioned independent research to assess the level of satisfaction with the application process among callers to the application line. Research23 was carried out in late 2003, with over 400 callers interviewed about their experience. The research found that customer reaction to the Pension Credit application line was very positive. The main findings of this research are outlined in paragraphs 7.4 to 7.6 below. 7.4 Most of the respondents said they were able to make contact with the application line at their first attempt and that their application was dealt with fully at that point. Respondents were overwhelmingly satisfied with each of a range of elements measured, with over four in five very satisfied. Particularly positive ratings were given for the manner, friendliness and politeness of the application line staV. 7.5 The majority of respondents were aware that their call to the application line was free of charge. Callers were overwhelmingly happy with the amount of time they spent on the call, with the vast majority of calls lasting less than 20 minutes. 7.6 Nine out of 10 respondents who were taken through the full application on the telephone said that the process and application form were well explained to them. Of those who were subsequently found to have no entitlement to Pension Credit, around 75% were told when they called that they were unlikely to be entitled. Of those told they would not be entitled, four-fifths said they were given a clear explanation of the reasons why. 7.7 The results of this research suggest that a high quality customer experience is being delivered. This has been further recognised through a major industry award24 for the successful development and implementation of the Pension Credit Customer Relationship Management System. The award recognises and rewards achievement in the field of customer relationship management. Industry recognition at this level supports the reported customer experience. It also reflects successful management of Information Technology projects in The Pension Service. 7.8 The importance placed by The Pension Service on the customer experience is also reflected in the very low level of complaints made to the application line. Recognised complaint handling procedures have been in place since the beginning. By the end of August, the number of complaints was 13,500, around 0.3% of the total number of calls. (The industry average is 10 times this, at 3%.)

The Customer Experience of Receiving and Changing to Direct Payment 7.9 Direct Payment into bank and building society accounts and the successful introduction of banking services at post oYces provides customers with greater choice and flexibility over where, when and how they access their money than ever before. Direct Payment is a safe, convenient, and more modern way of paying benefits. Over the years, many pensioners have found order books to be convenient but Direct Payment will help move away from the situation where over 100 pensioners have their order book stolen each week and some £50 million is lost each year though lost or stolen order books. Each Direct Payment costs the Department around 1p compared to 68p for an order book foil and £1.47 for every girocheque.

23 Pension Credit Application Line Customer Satisfaction Market Research Report, prepared by Continental Research on behalf of the Department for Work and Pensions for COI Communications (2003). 24 “Pension Credit Project for the Department for Work and Pensions” won the “Public Sector CRM Project of the Year” at the UK CRM 2004 Industry Awards. Ev 106 Work and Pensions Committee: Evidence

7.10 Direct Payment is already the normal method of payment of pensions and benefits. In the UK, 90% of pensioners already have an account suitable for Direct Payment. It is also evident that Direct Payment is becoming increasingly popular, particularly with pensioners. Around 91% of new pensions customers are choosing to be paid by Direct Payment. 7.11 The large number of customers involved, over five million in the case of The Pension Service, meant that the Department decided to phase in the change to Direct Payment over a two-year period, which started in April 2003. This phased approach was also needed to deliver changes to computer systems to support the greater frequency and increased volume of Direct Payments. 7.12 Existing customers are being invited to convert their method of payment from order book to Direct Payment and invitations are being issued to customers on a rolling basis. Customers can, on their own initiative, contact The Pension Service if they wish to change to Direct Payment. The contact process normally consists of one or more letters sent directly to the customer, followed up by a phone call if there is no response to the letter(s). 7.13 Where special needs are identified, or a customer requires particular support or requests a more in- depth discussion, The Pension Service Local Service teams visit the customer. Addressing and resolving their concerns in this way generally leads to customers opting to move to Direct Payment. 7.14 It has always been recognised that there will be a small number of people for whom Direct Payment is not suitable. The alternative of cheques issued on a weekly basis to home addresses, which are cashable at Post OYce branches as well as being payable into bank accounts will be available from October 2004 for those customers who genuinely cannot use Direct Payment. They also oVer flexibility for those customers who have a series of diVerent people collecting their money for them. 7.15 Almost all pensioners have now been contacted. The Department is now contacting customers who have not responded. They will be sent a further letter, pointing out that order books are coming to an end, and asking them to inform The Pension Service how they would like their money to be paid in future. 7.16 The emphasis of the Direct Payment conversion approach is to ensure that each customer has the best account for his or her circumstances, with customers choosing the account they want. 7.17 Early customer feedback suggested that two principal areas of concern were the ability to access money at Post OYces, and frequency of payment. Many standard bank and building society accounts, and basic bank accounts from the major banks and the Nationwide Building Society as well as Post OYce(r) Card Accounts, can be accessed at Post OYces. Customers can also now choose to have their money paid weekly by Direct Payment, if they choose whereas previously, the option was four-weekly. 7.18 When the programme started in April 2003 the number of pensioners choosing Direct Payment was 55%. Figures from July 2004 show this is now 84%. DWP September 2004

Further information from DWP (PC 01A)

A. When will the number of Pension Centres be reduced to 19? Exactly how many more reductions are planned and what is the schedule for these?

When will the number of pension centres be reduced to 19?

The transfer of the six pension centres to Jobcentre Plus, (Derby, Norwich, Nottingham, Stockton, Wolverhampton and Wrexham) is planned to be complete by the end of 2006. Derby will be the first site to complete the transfer to Jobcentre Plus which is planned to be by April 2005. Our current planning assumption is that Burnley Pension Centre will transfer to The Appeals Service by the end of 2005–06. The transfer of Plymouth Pension Centre to the Child Support Agency is progressing well and is planned to be complete by April 2005. The two remaining pension centres, that formed part of the DWP announcement on eYciencies in June, York and Liverpool, will close during 2005–06 unless we can find an alternative use for them. Work and Pensions Committee: Evidence Ev 107

How many more reductions are planned? A strategy is in place for modernising The Pension Service so that it delivers a much more eVective, holistic customer service, provides more satisfying jobs for our staV and significantly reduces our costs to the taxpayer. The eVect of implementing this strategy will create surplus capacity, (in terms of estate, staV and service capability) which The Pension Service will not need. The precise level of surplus capacity created will depend on how much of our current business we can modernise and this is dependent upon how much investment money is available to us over the next spending review period.

B. The Public and Commercial Services Union have told us that some people have already lost their jobs as part of re-clustering in the Local Service. Could the Department provide the Committee with details of the positions being cut and the Local Services being merged? As part of the modernisation programme, there have been a series of boundary changes to the existing clusters in Local Service in order to better align us with local authority boundaries throughout the country and achieve a better distribution of work. The aim of this was to facilitate referrals and partnership working and enable us to deliver a more eYcient service to older people. The existing Local Service network of 165 clusters was re-organised into 133 clusters, with the new structure determined through analysis of a mixture of factors eg pensioner population and the number of local authority relationships a cluster has. No one factor was given more weighting than another and the new clusters were designed to ensure an even distribution of workload. There is a commitment for The Pension Service to reduce headcount as part of the overall Department for Work and Pensions EYciency Challenge announced by the Chancellor in February 2004. As a contribution to this commitment, Local Service is currently reducing staYng levels through staV transfers and normal wastage. All management posts in the new Local Service structure were advertised to the existing 188 Local Service Delivery Managers. Thirty three chose not to apply and seek employment elsewhere in the Department. A further 22 were unsuccessful in their application for the Local Service Delivery Manager posts and were also made available for redeployment elsewhere within the Department. There are defined procedures for managing sensitively those people who became available for redeployment, and these procedures have been subject to Trade Union consultation. Eleven of the Local Service Delivery Managers available for redeployment have now found alternative employment. Graham Carter, National Local Service & Partnership Director wrote to partners to inform them of the changes—see Annex A.

C. What adjustments would the Department have to make to its planned eYciencies if it were to increase its target for take-up—for example, aiming for 3.825 million households to be claiming Pension Credit in 2008? Current plans are based on achieving a demanding PSA target of 3.2 milion households in receipt of Pension Credit by 2008. If this target were raised to such a significant extent, the implications for the Department’s Spending Review settlement would need careful assessment, supported by further detailed analysis. However, it can be anticipated that the increase in the marginal eVort required to identify and successfully convert potential new customers to Pension Credit at these high take up levels would be substantial, with a corresponding impact on our resource requirement.

D. Could the Department name the 18 local authorities where joint teams are in operation? There are now 25 Joint teams in operation: 1. Somerset 2. South Gloucestershire (Unitary) 3. Dorset County Council 4. Bournemouth Borough Council 5. Devon County Council 6. Swindon Borough Council (Unitary) 7. North Somerset (Unitary) 8. BANES Council District 9. Wiltshire County Council 10. Gloucestershire County Council (Partial) 11. Richmond (Unitary) 12. Shropshire 13. East Sussex County Council Ev 108 Work and Pensions Committee: Evidence

14. Nottinghamshire County Council 15. Tameside (Unitary) 16. West Lothian (Unitary) 17. Derby City Council (Unitary) 18. Nottingham City Council (Unitary) 19. Reading Borough Council (Unitary) 20. Warrington (Unitary) 21. Wigan (Unitary) 22. Plymouth (Unitary) 23. Harrow (Unitary) 24. Poole Borough Council (Unitary) 25. Portsmouth City Council (Unitary) High level agreement at senior management level has been achieved with well over half of all Primary Tier Local Authorities. Also, positive and constructive conversations have been held with the Welsh Assembly and Scottish Executive.

E. In what percentage of Pension Credit applications are incorrect amounts awarded? What percentage of applicants wait more than six weeks for their application to be dealt with after sending all the necessary documents to the appropriate Pension Centre? What is the average length of these delays? The data requested is not available in respect of Pension Credit. We have a commitment that on average, 96% of Pension Credit applications are paid correctly by 2006. Figures on the proportion of cases checked for oYcial error that were found to be financially correct during the period October 2003 to March 2004 are to be included in the Autumn Performance Report, due to be published at the end of November. These figures have not been subject to independent or Department for Work and Pensions Internal Audit validation. Estimates of the number of incorrect cases at any given time are published annually in National Statistics reports. These figures take account of incorrectness as a result of oYcial error, as well as fraud and customer error. They give an estimate of the number of cases across the country being paid incorrectly at a given time but not how many applications originally awarded the incorrect amounts. The next set of figures in this series is currently scheduled to be published in March 2005 and will cover cases in the period April 2003 to March 2004. We have a commitment to reduce overpayments through fraud and error, with a 20% reduction by 2006 against the 2001–02 Minimum Income Guarantee baseline. Data is not collected on delays in the format requested.

F. In response to a question about take-up of Pension Credit, the Secretary of State said that figures available to the Department on the amounts of Pension Credit being claimed suggest that “we have got 100% of the poorest pensioners.” We would be grateful for details of: the estimated median and mean amounts being unclaimed. It would also be useful to get an idea of how many are not claiming small amounts and how many are not claiming larger amounts. If possible, for example, it would be useful to have details of the number of pensioners, classified by couples, single men and single women if possible, who are not claiming and whose entitlement to the Pension Credit is estimated to be (i) less than £5 a week; (ii) £5 or more but less than £10 a week; (iii) £10 or more but less than £20 a week; (iv) £20 or more but less than £30 a week; (v) £30 or more but less than £40 a week; (vi) £40 or more but less than £50 a week; (vii) £50 a week or more. The Secretary of State’s remarks were made in the context of broad brush assumptions based on comparing numbers of households in receipt of Pension Credit with operational estimates of the numbers likely to be entitled based on the Family Resources Survey 2001–02. Using these assumptions the indications are that the number of households now benefiting by over £50 a week has exceeded initial projections of the numbers who might be entitled to such amounts. More generally, evidence shows that Pension Credit is getting most money to those who now need it. The definitive National Statistics figures on take-up rates will not be available for some time, but amongst all of those whose income is suYciently low that they are entitled to have their income topped up to the guaranteed minimum (currently £105/wk for single pensioners), the best estimate is that take-up rates are running at over 80%. There are further indications that this is so. Estimates of Pension Credit expenditure on the very poorest recipients is already set to outstrip Spending Review projections by around £40 million. The caseload amongst this group of recipients, principally those on incomes at or below the basic State Pension, is now 25,000 households up on projections at that time. Due to technical diYculties definitive figures of the type requested by the committee are not available. However National Statistics publications do provide some indicative analysis of the type requested. The most recent publication covers the period 2001–02 and can be found at http://www.dwp.gov.uk/asd/irb.asp. Work and Pensions Committee: Evidence Ev 109

G. The Committee recognises that some eligible non-recipients of Pension Credit may be claiming Housing Benefit or Council Tax Benefit. Has the Department made an estimate of the number of cases in which this happens and the extent to which the financial loss from unclaimed Pension Credit is oVset by higher Housing Benefit or Council Tax Benefit entitlement? If possible, for example, it would be useful to have details of the number of pensioners (again distinguishing couples, single men and single women) who are not claiming and whose overall entitlement to all means-tested benefits is estimated to be (i) less than £5 a week; (ii) £5 or more but less than £10 a week; (iii) £10 or more but less than £20 a week; (iv) £20 or more but less than £30 a week; (v) £30 or more but less than £40 a week; (vi) £40 or more but less than £50 a week; (vii) £50 a week or more. Pensioners claiming the guarantee component of Pension Credit are passported to full Housing Benefit and Council Tax Benefit. Pensioners entitled to, but not claiming the guarantee component of Pension Credit should also receive full Housing Benefit and Council Tax Benefit. Any financial loss incurred by non- take-up of the guarantee component will not be oVset by higher housing or Council Tax Benefit. Pensioners receiving the savings component only of Pension Credit have this amount taken into account as income in Housing Benefit and Council Tax Benefit. This means that any financial loss incurred as a result of non take-up will be partially oVset by higher Housing Benefit and Council Tax Benefit. It is not possible to accurately estimate how many people are aVected in this way. It should be noted that customers in receipt of HB/CTB who are entitled to Pension Credit will be better oV overall claiming all benefits to which they are entitled.

H. What is the estimated cost of removing the upper capital limit of £16,000 in Housing Benefit/Council Tax Benefit for those on savings credit only? The cost of removing the upper capital limit in Housing Benefit and Council Tax Benefit for those receiving savings credit only is estimated to be £90 million. There would be an estimated 30,000 beneficiaries. Notes: 1. Costs are rounded to the nearest £5 million and beneficiaries to the nearest ten thousand. Each beneficiary represents a benefit unit, which can be a single claimant or a couple. 2. All beneficiaries are “floaters on”—in other words they are newly entitled to HB or CTB.

I. The Department’s memorandum (paras 5.12-13) to the inquiry refers to evaluation of the hard-to-reach pilots. If possible, it would be useful to see these. The evaluation referred to in paras 5.12–5.13 of the Memorandum is based on a series of pilot events held in conjunction with partner organisations in nine regions. The resulting information collected was collated into a number of key areas. These are target groups, diVerent types of approach, partnership arrangements and barriers to take-up. This work resulted in best practice advice being issued across The Pension Service. Summaries of the activity, targeting and the advice are provided at Annex B.

J. How is the Partnership Fund Developing? The Pension Service Partnership Fund was set up using allocations from the Spending Review 2002 bid and oVers short-term (maximum of two years) funding to local and national partner organisations to: — Improve the take-up of older people’s benefits ( eg Pension Credit, Attendance Allowance, Disability Living Allowance, Carers Allowance, Housing Benefit and Council Tax Benefit ) particularly by “hard to reach” groups; — Promote the independence of older people; — Integrate joint working between partners; — Improve access to services; and — Gain a better understanding of older people’s needs in a specific community, region or country setting including the needs of ethnic minority elders. The above aims were developed in consultation with members of the Partnerships Against Poverty (PAP) group, a joint forum which includes national representatives from organisations such as Help the Aged, Age Concern and the Local Government Association. The fund was launched on 1 March 2004 and the closing date for bids was 30 June 2004. 740 applications were received by the closing date; the majority were from local organisations but a small number were to support national initiatives. All of these bids were graded by a team of independent assessors against the aims of The Partnership Fund. High quality applications with timescales and plans were clearly and concisely written with a direct link to benefit take up and particular emphasis on hard to reach groups. Assessors looked for clear examples of activities that would take place following a successful contract award and quality scores were not given Ev 110 Work and Pensions Committee: Evidence

to general statements that lacked detail, particularly applications which simply focussed on general mailshots and publicity campaigns. Examples of partnership working and innovation attracted extra points in the scoring process. A shortlist was then drawn up, organised by region, and presented to the decision panel. Following the meetings of the Decision Panel in October 2004, letters have now been sent to applicants. Final decisions were based on the following: — Quality of the proposal; — Value for money; — Ensuring a reasonable geographic distribution of activities across Great Britain; — Involving a range of partners both large and small; and — Using a variety of approaches to older people. Priority was given to those proposals with high quality scores and good value for money. Inevitably, the large number of applications and the need to take the above considerations into account meant that some applications of high quality were not successful. Written into each contract there will be a minimum level of statistical data that The Pension Partnership Fund requires organisations to record. Contractors must also provide regular updates on the progress of the initiative. Quantitative and qualitative data will be used to evaluate progress toward expected outcomes. If it is evident at the end of the first year that an initiative is not viable, the second year funding may be withdrawn. Contracts will be sent out over the next few weeks and the first payments will be made in early 2005. The initiatives funded should start by next spring. A full list of contracts awarded by The Pension Service Partnership Fund will be made publicly available in due course.

Annex A

RESTRICTED—POLICY On 29 June 2004, you received information about the modernisation programme for the Department for Work and Pensions and we promised to keep you informed of any further developments. As part of the modernisation, we are carrying out a series of boundary changes to our existing clusters in Local Service. This is an internal management change to achieve a better distribution of work and provide better alignment with local authority boundaries. The new structure will facilitate referrals and partnership working and enable us to deliver a more eYcient service to older people. Re-clustering will not in any way impact on our commitment to Joint Teams that remain our long-term aim for service delivery. In the longer-term, there may be a possible change in the names of Local Service contacts that you work with at a local level but in the meantime, these will remain the same. We shall keep you informed throughout and we will let you know when any changes occur. For customers, re-clustering will be an invisible process. They will continue to contact the pension centres in the usual way and referrals will take place as normal. This process will take place over the next few months and we expect the final structure to be in place from October 2004. I would like to reassure you that The Pension Service remains fully committed to working in partnership with [DN—insert name of local authority] in the service of our joint current and future customers.

Annex B

PENSION CREDIT PROJECT

Pensioner Groups Targeted and Approaches Used in Pension Credit Hard to Reach Pilots

Region/Cluster Pensioner 3 Approach Used groups targeted

N West Poorer Elderly Used IT Systems and obtained scan to identify pensioners on low (Wigan & rates of RP. 2 phased approach, invite all on scan to surgeries and Leigh) visit over 85s. Invitation highlighted partnership with Age Concern, free tea and biscuits, transport. N East Customers Used Geographical Information System (mapping) tool to assist in (Hexham) receiving care identifying area and relevant customers. This enabled us to obtain customers NINO and as a result home visits were carried out. Work and Pensions Committee: Evidence Ev 111

Region/Cluster Pensioner 3 Approach Used groups targeted

Yorks & Rural Had events at village hall to coincide with BBC Discovery Bus, Humber Isolation x2 followed up by home visits. Also had informal coVee morning at (Hambleton, village hall and attended Country Show. Ryedale and Scarborough) Yorks & People with Mixed approach—60% Presentations, 35% surgery, 4% home visit Humber serious sight and 1% telephone call. (Hull, East loss Riding) E Midlands Elderly carers Scan obtained showing couples in receipt of RP and at least one in (Derby & receipt of AA/DLA. Developed letter, inviting customers to call a Ilkeston) specific number (where no response was received, follow-up calls were made) which resulted in home visits being conducted. E Midlands Elderly Worked with Chinese Welfare Association and held awareness (Derby & Chinese presentation at Chinese Community Centre. Had Chinese Interpreter Ilkeston) community who interpreted throughout the presentation. Appointments arranged after presentation and interviews conducted separately with assistance of interpreter. E Midlands Elderly Identified local organisations who provide services/support for (Derby & homeless homeless clients. Contacted a Day Centre and made arrangements to Ilkeston) attend at lunch time when homeless visitors most likely to attend the centre. West Rural One day “drop in” event following delivery of a flier. Midlands community (Nuneaton N Warks) West Mids Rural Invitation letter given to Welfare Rights, who posted to customers (Leamington community who had previously taken part in benefit take up campaign. Spa S Warks) Customers contacted local service and appointments booked for a private interview. South East Housebound Would write a letter about our organisation which would be (Portsmouth, pensioner presented to the Bishop along with a letter for his signature, which Havant & group would be sent to all of the clergy within our area and the diocese. East Mailing list would be sent to us so that follow up calls could be Hampshire) conducted and then we can deal with each parish. South West Deaf All local service staV received deaf awareness training provided by (South (especially partner. Monthly surgery held at partners premises using partner as Gloucester) profoundly interpreter. deaf, sign language users) Scotland Remote rural Presentations to partner organisations, contact with community (Highlands & networks who were able to provide publicity. Input to a partner Islands, marketing event. Gaelic) Scotland Homeless Main aim to identify where our customers were and who was already (Glasgow) supporting them. Will be providing awareness sessions to all partners and when MIG non-recipients are identified will get more directly involved. Scotland Minority Awareness sessions to partners who give advice to Asian/Chinese (Edinburgh) Ethnic community. Presentations to partners and customers at lunch clubs. Groups (Asian/ Chinese) Wales (North Rural Presentations to groups followed by private interviews with Powys) community individuals followed by home visits. Wales (South Customers Awareness training given to outreach workers to enable them to Powys) receiving care check entitlement during visits to customers. Presentation given to customers with “corner” available for private discussion. Ev 112 Work and Pensions Committee: Evidence

PENSION CREDIT PROJECT

Partner Groups, existing or new involved in pilots

Region/Cluster 3.1 Partner groups involved in the pilots 4 Existing partnership 5 New partnership formed

N West Age Concern No NEast N/A N/A Y&H (H,R&S) Local District Councils, North Yorkshire No County Council/BBC Discovery Bus initiative, Local pensioner groups, eg luncheon clubs Y&H (H,ER) Hull and East Riding Institute for the Blind, Macular Disease Society Local Authorities E Mids (Carers) N/A N/A E Mids (Chinese) Derbyshire Chinese Welfare Association No E Mids (Homeless) No Padley Group (Charity for Homeless and Disadvantaged) W Mids (N Warks) Local Authority No W Mids (S Warks) Stratford District Council, Warwickshire No Welfare Rights S East No Portsmouth Diocese of the Church of England S West South Gloucestershire Deaf Association No (SGDA) Scotland (H&I) Citizens Advice Bureaux, Home Care Community Councils, Community supervisors, Community Nurses, Pensioner Newspaper, Medical Practices, Groups Better Neighbourhood Services Scotland (G) Local Authority, Social Work Homeless Glasgow Association for Mental Person’s Team, Glasgow City Council, Health, NHS (specialist services), Jobcentre Plus Glasgow Council on Alcohol, Voluntary/Charitable Organisations, The Simon Community (street Glasgow Homeless Network work team), The Talbot Association (provides accommodation and support), The Wayside Club (drop in centre) The Salvation Army, The Church of Scotland, The Veterans Agency Scotland (E) MILAN (Asian Senior Welfare Council), Edinburgh Mosques, Edinburgh Chinese Elderly Support Nari Kallyan Shango Association (ECESA), Council of British Pakistanis (Scotland) Wales (NP) Age Concern, No Maes y Wennol Day Centre, Powys County Council Wales (SP) Rhayader Home Support Scheme (part of No Powys Social Care Service)

Best Practice/Lessons Learnt from Hard to Reach Pilots — A good working relationship with partner needs to be built over a period of time. — Allow time to research, plan and run a professional take-up event, which would reflect well on The Pension Service. — Any planned events need to be eVectively resourced and the linked pension centre needs to be in a position to process the extra work. — Consider a variety of approaches depending on the target audience and the cost/resource implications of those approaches. — Consider a personalised approach (face-to-face contact, personalised letters or telephone calls). — Hold events in an environment that customer feels safe and comfortable (locally). Work and Pensions Committee: Evidence Ev 113

— Provide a high quality customer service in line with the recognised standard. — Make use of partnership working (existing/new) ie Local Authorities and Welfare Rights agencies who have extensive experience etc. — Provide accurate advice and information (eligibility criteria of entitlements) that is easy to understand. — Publicity material should be positive, written in plain language, of a high quality design and appropriate to the target audience. — Have staV awareness training before conducting events. — Consider conducting a data matching exercise to pinpoint specific groups (Data Protection Act requirements should be adhered to). — Have private room facilities eg to discuss personal details.

Further information from DWP (PC 01B) “It would be useful to have details of IT developments in relation to the Pension Service. In particular, we are interested in the new IT functionality that was delivered to existing DWP systems when Pension Credit was introduced and in the Pensions Transformation Programme. I see also that the Public Accounts Committee’s 12th report of 2002–03 and the recent Link-Age document refer to IT developments. If possible, it would be useful to have details of these projects (eg the stage they are at and any review process they have gone through) and of any business case conducted in relation to them.”

Response

Pension Credit The functionality to support Pension Credit application processing and payment was added to an existing DWP IT system in two phases during April and October 2003. The whole of the Department’s IT estate was aVected, to a greater or lesser extent, by the introduction of Pension Credit. The benefit of using the existing system for payments was that the system performed assessments similar to Pension Credit requirements and had suYcient capacity. A separate IT system (known as the Pension Credit Front End) was developed to cover the initial telephone application process for Pension Credit. The system enables staV to take all the necessary details from a customer when they telephone to apply for Pension Credit by prompting agents to ask the right questions through the use of “intelligent scripting”. The application line provides guidance to staV, excellent customer service (measured through waiting times, length of calls and seamless service) and is flexible enough to respond to peaks of call activity. The development of this application won the “Best Customer Relationship Management Project in the Public Sector” award at the 2004 CRM Industry Awards.

The Pensions Transformation Programme (PTP) The Pension Service has embarked on a strategic business transformation programme, which will fundamentally improve the way services are delivered to customers. The IT developments to support this change will allow customers to transact more of their business at a single point of contact, including over the telephone, thereby eliminating the need for customers to provide the same information more than once. These IT developments will provide a more user friendly, joined up interface with existing benefits processing systems, and are being introduced into the business in a series of staged waves beginning in August 2005. These changes will be complemented by the introduction of a new Computer Information System which will act as a central Departmental repository for customers’ personal data. This will provide staV with access to a customer’s up to date personal data, eliminating the need for the customer to repeat previously provided information. The Customer Information System will also reduce the need for so much data capture in other businesses by sharing the most up to date details held by the Department.

Public Accounts Committee 12th Report This report deals with a number of generalised IT issues. It is possible to make some Pensions-specific comments: — Modernisation process and use of Windows—The programme to roll out Windows-based PCs across the Department, including The Pension Service, is complete. Both the Pension Credit Front End and Pensions Transformation Programme IT system utilise Windows. Ev 114 Work and Pensions Committee: Evidence

— IT systems that talk to each other across benefits—The Pensions Transformation Programme will provide a “customer view” of the data, thus integrating Retirement Pension and Pension Credit at the customer level. — Get better information through to Housing Benefit sections by providing Remote Access Terminals—Local Authorities administer Housing Benefit/Council Tax Benefit and require access to certain key items of Pension Service data to enable them to process these benefits eYciently. The transfer of information between The Pension Service and local authorities is therefore of vital importance to the administration of Housing Benefit and Council Tax Benefit. Currently there are approximately 730 local authority Remote Access Terminals supporting 4,000 users in 408 diVerent local authorities. The local authority Remote Access Terminal system allows local authority users to access specific, controlled Department for Work and Pensions Legacy System Dialogues that provide information relevant to Housing Benefit and Council Tax Benefit. With the introduction of Pension Credit, The Pension Service now provides local authorities with an electronic transfer of data facility. When a customer who is applying for Pension Credit or reporting a change in circumstances has entitlement, or potential entitlement, to Housing Benefit or Council Tax Benefit information is transferred electronically, via the Remote Access Terminal, to local authorities. This information is transferred within 48 hours of The Pension Service processing the application or the change.

Link-Age The Link-Age document is a consultation document and the consultation period ends on 26 November 2004. The responses will subsequently be analysed in detail and will be used to inform the forthcoming Older People’s Strategy document that is expected to be published around the turn of the year. We will continue to explore the potential for IT improvements and data sharing between central and local government, ensuring consistency of approach between the Link-Age and Pension Transformation projects. November 2004

Further information from DWP (PC 01C) “PCS have told us that they know that Partner Liaison Manager posts are going to be cut by two-thirds. I would be most grateful if you could confirm whether this is the case and whether it will be in addition to the staV reductions that have already occurred in the Local Service up to 1 October 2004. Could you please give the Committee the number of staV aVected, DWP’s rationale for the cut, and the total number that will remain in the Local Service afterwards?”

Response In the early days of The Pension Service, Partnership Liaison Managers played an important role in raising the general awareness of The Pension Service in local communities, particularly in reassuring local partners that centralisation of benefits processing work in our pension centre network represented an opportunity to improve the level of service received by older people building on relationships to establish partnerships and ways of working. As The Pension Credit campaign generated momentum, Partnership Liaison Managers also fulfilled a key role in raising the general awareness of Pension Credit at a local level through presentations and workshops with partner organisations. We are now at a point where relationships are in place and the Pension Credit campaign requires a more sophisticated approach to identify potentially eligible Pension Credit non recipients and encourage them to apply. Therefore the emphasis is now on increasing the number of Customer Liaison Managers to have suYcient one-to-one visiting capacity to support increasing demand for this service and to focus on one to one direct contact. As a result of this re-focusing of activity the network of Partnership Liaison Managers will fall by approximately a third nationally to 203. The reduction figure quoted by PCS (ie two-thirds) is not accurate and we are not clear where this originates. The Local Service reorganisation is expected to be completed by the middle of December. Partnership Liaison Managers will be aligned geographically to each Primary Tier local authority. This will ensure the consistency of our service and recognise the key role held by local authorities in driving forward wider partnership agendas. The rebalancing of the numbers of Partnership Liaison Managers and Customer Liaison Managers is part of the overall Local Service restructuring based on 2,675 posts. November 2004 Work and Pensions Committee: Evidence Ev 115

Further information from DWP (PC 01D)

Local Service As part of the modernisation programme, there have been a series of boundary changes to the existing clusters in Local Service in order to better align us with local authority boundaries throughout the country and achieve a better distribution of work. The aim of this was to facilitate referrals and partnership working and enable us to deliver a more eYcient service to older people. The existing Local Service network of 165 clusters was re-organised into 133 clusters, with the new structure determined through analysis of a mixture of factors eg pensioner population and the number of local authority relationships a cluster has. No one factor was given more weighting than another and the new clusters were designed to ensure an even distribution of workload. You will be aware there is a commitment for The Pension Service to reduce headcount as part of the overall Department for Work and Pensions EYciency Challenge announced by the Chancellor In February 2004. As a contribution to this commitment, Local Service has reduced staYng levels from 3,075 at 31 March 2004 to 2,675 in 1 October 2004. All management posts in the new Local Service structure were advertised to the existing 188 Local Service Delivery Managers. Thirty three chose not to apply and seek employment elsewhere in the Department. A further 22 were unsuccessful in their application for the Local Service Delivery Manager posts and were also made available for redeployment elsewhere within the Department. We have defined procedures for managing sensitively those people who became available for redeployment, and these procedures have been subject to Trade Union consultation. Eleven of the Local Service Delivery Managers available for redeployment have now found alternative employment. The Pension Service 1 November 2004

Further information from DWP (PC 01E)

Annex A

Background to the Post Office Card Account

(Transcript question 402 refers) The genesis of the Post OYce card account lies with the Performance and Innovation Unit’s (PIU) “Counter Revolution” report (published in June 2000), on the future of the Post OYce Network. It recommended that the Post OYce and the banks should work together to create a “universal bank” for people without bank accounts. The Government accepted all the PIU’s recommendations. The Post OYce themselves came up with the universal banking proposition which was then implemented from April 2003— that is, all the banks making their basic bank accounts accessible at Post OYces, plus the Post OYce’s own card account. Decisions on the detailed design of the card account were made by the Post OYce themselves. The limited features of the card account—such as no overdraft facility—are attractive to many customers who had previously only ever worked with cash. The Post OYce see the card account as a key element of their banking business, although going forward they recognise that their long term future lies in providing high quality access to mainstream bank accounts. The Post OYce card account has been the most successful IT and service delivery project for a decade. It is already the equivalent of the 6th largest current bank account in the UK. The rate of take-on of new customers (which in recent months has reached 300,000) has never been equalled by any other bank. In November over 8.5 million withdrawals were made from card accounts. The Department worked very closely with Post OYce Limited as they developed the card account to ensure that it met the needs of our joint customers. And the Post OYce and their suppliers have made a number of changes to improve the card account opening process in the light of experience (eg so applications are not rejected if the customer’s signature strays slightly outside the box). Underpinning many of the questions on the Post OYce card account was a suggestion that it is diYcult to open a Post OYce card account. In fact, independent research shows that more than 80% of people found the card account opening process easy, and over 4 million card accounts have now been opened—many by pensioners—against a Government working assumption of 3 million. Ev 116 Work and Pensions Committee: Evidence

The Cheque Exceptions Service

(Transcript question 406 refers)

Estimates taken from modelling work—based upon the Department’s experience in this area and historic Departmental data—indicate that the maximum number of enquiries from pensioners seeking replacement cheques will be in the region of around 2,300 a week from 2005. Arrangements are in place to keep this under review.

The figure includes enquiries about cheques that have been stolen, destroyed or damaged after delivery as well as cheques lost in the post. It is also based on the assumption that around 800,000 cheques are issued each week and therefore represents slightly less than three cheques out of every 1,000 issued.

The Department already has processes and procedures in place for handling these types of enquiry. Where a cheque payment intended for a pensioner does not arrive, the customer will initially contact their pension centre. The action The Pension Service takes to help the customer will vary depending upon their individual circumstances and needs.

Normally, a form is sent to the customer for them to confirm the circumstances of the loss. On return, a further cheque payment may be sent through the post. The length of time this process takes will depend on when the customer returns the form and postal service times.

In circumstances where this is not appropriate, an appointment may be made for customers to meet a member of the Local Service. This may be at their home if convenient. The customer is helped to complete the form so that a replacement cheque may be sent by post. Where necessary a cheque replacement may be arranged on the same day.

In addition, there are limited arrangements, for making Out of Hours Payments. Such payments are usually made in cash as they are made at times when the Post OYce will be closed.

The notification and declaration that the customer signs on all these occasions gives an explanation of what action they need to take if the original cheque later materialises.

Further information submitted by DWP (PC 01F)

Local Service

Your first questions concerned Local Service Information Points. At the start of the operational year (April 2004) there were 2,566 Local Service Information Points in operation across England, Scotland and Wales and as at December 2004 there were 1,598.

As requested Annex A provides details of the Local Service Information Points. Details can also be accessed on The Pension Service website at https://secureonline.dwp.gov.uk/tps-contact/postcode-search/ index.asp. Annex B contains details on the numbers of home visits and Information Points and scan work.

Now that local partnerships are in place, local services are focussed on identifying eligible Pension Credit non-recipients predominantly through direct one to one contact.

In order to target face to face activity most eVectively we use management information scans of our IT systems which allow us to identify potential customers for home visits. We have increased the number of Customer Liaison Managers to undertake more home visits and as a result are visiting more people per month than at this point last year.

In undertaking any refocusing activity Local Service reviews the eVectiveness of each Information Point in consultation with partners and the local community. Where there is a demand for an Information Point and no viable alternatives, Local Service will continue to support them. Work and Pensions Committee: Evidence Ev 117

Efficiencies

The staYng figure of 11,300, agreed as part of the 2002 Spending Review and quoted in your letter has since been revised. Following the announcement of the DWP settlement, as part of the Chancellor’s budget statement on 17 March 2004, detailed planning led to a decision to re-phase the IT investment of the Pensions Transformation Programme and set a March 2005 target of 15,200 and a March 2006 target of 14,605. This reduction is to be achieved in part as a result of a fall in Pension Credit workloads (2,100 staV) and as part of the initial phase of the Pension Transformation Programme where savings of 2,350 staV have been identified as a result of restructuring the organisation and improvements in managing existing business processes. Around 4,000 additional staV were recruited by The Pension Service to assist with the take on of Pension Credit in Local Service, telephony and processing teams. Responsibility for recruiting these staV rested with local managers who were also recruiting people into Pension Centres and Local Services to receive existing pensions work transferring from Social Security OYces. Decisions on the balance between temporary and permanent recruitment were therefore taken at local level and took account of such factors as the size of the local labour market and the skills available, the number of existing skilled staV transferring to The Pension Service from Social Security OYces and historical staV turnover rates. The flexibility of fixed-term contract appointments is restricted by employment law, which gives any member of staV appointed on this basis the same employment rights as a permanent member of staV after they have been in post 12 months. Clearly the use of fixed-term contracts would therefore not be an option for all the people required for a two- to three-year Pension Credit take-on period, although managers have made use of these appointments where appropriate and 600 staV were recruited on fixed-term contracts for the period April 2002 to March 2004. In addition, we contracted for up to 1,000 people from the private sector to provide Pension Credit Application Line services. Of the Civil Service staV, 2,100 were required for the peak period and 1,900 were required to support the higher workload on an ongoing basis for Pension Credit processing work. It was agreed to delay the release of a further 1,100 staV who had remained in Social Security OYces rather than transferring to the Pension Centres, to assist with processing State Pension during the Pension Credit take- on period. The centralisation of State Pension work into pension centres was finally completed in October 2004. As part of the Departmental Spending Review Process, The Pension Service are reviewing the phasing of those elements of the Pensions Transformation Programme which involve IT investment and decisions are awaited on the precise level of investment funding for 2005–06 to 2007–08. The Pensions Transformation Business Case is currently being revised to reflect the outcome of the 2004 Spending Review. This work is due to be completed in February and a copy will be forwarded to the committee when it is finalised. Since April 2004, 2,500 staV have voluntarily left The Pension Service (to end December 2004). The majority of these staV have found other posts elsewhere within the Department or other Government Departments. The headcount at 31 March 2004 was 19,600 against a target of 15,200 by March 2005. We are largely on track to meet the end of year target. The detailed breakdown of staYng figures, by function, up to the end of December is currently being collated and details will be forwarded to the Committee as soon as it is available. The anticipated staV reductions will not impact on the ability of The Pension Service to deliver customer service. The Pension Service has always made it clear that over time staYng levels would fall following the initial rollout of Pension Credit as well as the introduction of radical policies, including a less intrusive income assessment and straightforward application process. The transformation of The Pension Service is part of the overall modernisation of the welfare system. It will deliver a business supported by new technology with changes to processes, IT, job roles and organisational structure.

Take-up

Our analysts are currently producing the next set of statistics on estimated take-up of income-related benefits using the 2002–03 Family Resources Survey. These should be available within the next four weeks. Once the results for 2002–3 are finalised we will supply estimates for pensioner couples, single male pensioners and single female pensioners. These will cover unclaimed MIG, with a percentage distribution by size of entitlement; and, for the three groups of pensioners, overall results for HB and CTB. You also asked about estimates by size of entitlement. All estimates broken down in this way have wider margins of error than overall estimates as they are drawn from smaller sample sizes. You ask also for estimates of MIG non-claimants classified by the size of total entitlement to income- related benefits. We are unable to provide this, but we will be able to provide estimates classified by the size of total unclaimed entitlement. Ev 118 Work and Pensions Committee: Evidence

IT and Data Sharing (Q242) The Department is actively considering with Inland Revenue whether Inland Revenue data could be used to improve take-up of Pension Credit and to help assess entitlement to Pension Credit, as part of further development of the Work and Pensions Longitudinal Study. Using Inland Revenue data in this way raises legal, policy and technical issues that would have to be considered carefully. This will require consideration of legislative, policy and technical issues that would arise from such use of Inland Revenue data. We expect decisions on these issues to be made later in the year. The Inland Revenue does not hold suYcient information on pensioners’ incomes and savings to establish exact entitlements to Pension Credit. For example information held by the Inland Revenue relates to the relevant tax year whereas Pension Credit is calculated on the basis of information on income and savings at the time an application is made.

Staff Performance The current training period for new Pension Credit processing staV is 10 weeks. This is followed by eight to 13 weeks of consolidation, where the member of staV is closely monitored and feedback given to improve performance. The amount of time given for consolidation varies according to the individual’s ability and the area of work he/she is being trained to cover. Training is delivered through a mix of trainer-led and e- learning activity. Further developments in IT and e-learning may enable these training and consolidation periods to be shortened without impairing staV quality. Targets for the Pension Credit Application Line have varied according to the stage of the campaign. Although individual agents do not have conversion targets, the current targets for converting calls into full applications for Pension Credit are 21% for inbound calls and 24% for outbound calls. Agents are frequently reminded that the main driver for the operation is to ensure that all customers are able to submit applications for Pension Credit. Whether this is via the application line or through a referral to the Local Service is not relevant. Ensuring that all customers maximise their potential entitlement is the important thing. I enclose at Annex C as requested examples of scripts used by Pension Credit Application Line staV, both for taking applications and for outbound calls about direct payment. The script for taking Pension Credit applications is provided both in the form of text and in the form of flow charts. Annex C also contains the script used by staV outside the Pension Credit Application Line in their contact with customers about direct payment. Obviously the text format supplied is very diVerent to the interactive version seen by agents in real use. StaV in pension centres do not work from scripts in their day-to-day dealings with customers.

Direct Payment

I wrote to you on 21 December with information on cheque payments and estimated numbers of lost cheques as discussed at the Oral Evidence session of 8 December. On our current plans we estimate that the number of people paid by cheque in steady state will be 1.3 million, including some 650,000 pensioners. However, because some people are in receipt of more than one benefit which are administered separately, the total number of weekly cheque payments that will be issued to pensioners is estimated to be approximately 730,000.1 Estimates taken from modelling work—based upon the Department’s experience in this area and historic Departmental data—indicate that the maximum number of enquiries from people seeking replacement cheques will be approximately 4,000 a week from 2005. The figure includes enquiries about cheques that have been stolen, destroyed or damaged after delivery as well as cheques lost in the post. Within this figure we expect the number of pensioner enquiries to be in the region of 2,300 per week. Finally, I understand that the Committee has accepted Alexis Cleveland’s invitation to see the work of the Pensions Transformation Programme in progress on 31 January. I am sure that you will find the visit most interesting. Please find overleaf tables as follows: — Table A: Total number of home visits conducted and referrals cleared—National and Regional — Table B: Totals numbers of eVective appointments at Information Points—National and Regional — Table C: Total number of cleared scan entries—National

1 This is less than estimated in my letter of 21 December 2004. The estimate is based on forecasting models and has been updated to reflect increased confidence in the assumptions on which the model is based and improved available source data as increasing numbers of actual cases work their way through the system (the cheque payment functionality went live at the end of October 2004). Work and Pensions Committee: Evidence Ev 119

Table A

THE PENSION SERVICE LOCAL SERVICE (NATIONAL)

Month Total no. of home visits Total no. of referrals cleared (England, Scotland and Wales) (England, Scotland and Wales)

April 2003–March 2004 420,237 482,897 April 2004 42,220 52,272 May 2004 42,692 52,540 June 2004 46,014 56,731 July 2004 43,986 56,339 August 2004 41,586 55,041 September 2004 43,543 57,227 October 2004 42,729 55,318 November 2004 48,720 68,448 Total 351,490 453,916

Source: The Pension Service LSS December 2004.

THE PENSION SERVICE LOCAL SERVICE (LONDON)

Month Total no. of home visits Total no. of referrals cleared

April 2003–March 2004 41,548 40,792 April 2004 3,149 3,799 May 2004 4,022 4,933 June 2004 4,409 5,443 July 2004 4,366 5,467 August 2004 4,252 5,287 September 2004 4,805 6,013 October 2004 4,485 5,692 November 2004 5,278 6,776 Total 34,766 43,410

Source: The Pension Service LSS December 2004.

THE PENSION SERVICE LOCAL SERVICE (EAST MIDLANDS EAST OF ENGLAND)

Month Total no. of home visits Total no. of referrals cleared

April 2003–March 2004 58,688 76,554 April 2004 6,213 8,131 May 2004 6,001 7,541 June 2004 6,661 8,365 July 2004 6,187 8,700 August 2004 5,855 8,200 September 2004 5,910 8,403 October 2004 6,426 8,448 November 2004 7,430 10,816 Total 50,683 68,604

Source: The Pension Service LSS December 2004. Ev 120 Work and Pensions Committee: Evidence

THE PENSION SERVICE LOCAL SERVICE (NE, YORKS AND HUMBERSIDE)

Month Total no. of home visits Total no. of referrals cleared

April 2003–March 2004 64,793 74,466 April 2004 6,427 7,637 May 2004 6,394 7,468 June 2004 7,362 8,361 July 2004 6,959 8,180 August 2004 6,513 7,776 September 2004 7,122 8,088 October 2004 6,648 7,457 November 2004 7,588 8,833 Total 55,013 63,800

Source: The Pension Service LSS December 2004.

THE PENSION SERVICE LOCAL SERVICE (NORTH WEST)

Month Total no. of home visits Total no. of referrals cleared

April 2003–March 2004 57,360 63,065 April 2004 5,007 6,186 May 2004 5,458 6,437 June 2004 5,866 6,978 July 2004 5,548 6,942 August 2004 5,528 7,086 September 2004 5,826 7,428 October 2004 5,701 7,211 November 2004 5,951 8,371 Total 44,885 56,639

Source: The Pension Service LSS December 2004.

THE PENSION SERVICE LOCAL SERVICE (SCOTLAND)

Month Total no. of home visits Total no. of referrals cleared

April 2003–March 2004 44,706 49,764 April 2004 4,821 5,675 May 2004 4,703 5,600 June 2004 4,961 6,327 July 2004 4,318 5,504 August 2004 4,108 5,309 September 2004 4,236 5,596 October 2004 3,694 4,666 November 2004 4,251 6,069 Total 35,092 44,746

Source: The Pension Service LSS December 2004.

THE PENSION SERVICE LOCAL SERVICE (SOUTH EAST)

Month Total no. of home visits Total no. of referrals cleared

April 2003–March 2004 35,172 50,365 April 2004 4,225 5,755 May 2004 4,167 5,677 June 2004 3,970 5,585 July 2004 3,779 5,367 August 2004 3,703 5,668 September 2004 3,720 5,798 October 2004 3,797 5,959 November 2004 4,209 7,039 Total 31,570 46,848

Source: The Pension Service LSS December 2004. Work and Pensions Committee: Evidence Ev 121

THE PENSION SERVICE LOCAL SERVICE (SOUTH WEST)

Month Total no. of home visits Total no. of referrals cleared

April 2003–March 2004 48,311 51,512 April 2004 4,919 5,780 May 2004 4,775 5,763 June 2004 5,339 6,205 July 2004 5,179 5,933 August 2004 4,841 6,103 September 2004 5,014 5,936 October 2004 4,763 5,958 November 2004 5,218 7,204 Total 40,048 48,882

Source: The Pension Service LSS December 2004.

THE PENSION SERVICE LOCAL SERVICE (WALES)

Month Total no. of home visits Total no. of referrals cleared

April 2003–March 2004 29,339 31,950 April 2004 3,166 3,326 May 2004 2,849 3,114 June 2004 2,816 3,158 July 2004 2,948 3,342 August 2004 2,575 3,181 September 2004 2,833 3,483 October 2004 2,955 3,558 November 2004 3,771 5,136 Total 23,913 28,298

Source: The Pension Service LSS December 2004.

THE PENSION SERVICE LOCAL SERVICE (WEST MIDLANDS)

Month Total no. of home visits Total no. of referrals cleared

April 2003–March 2004 40,340 44,429 April 2004 4,293 5,983 May 2004 4,323 6,007 June 2004 4,630 6,309 July 2004 4,702 6,92004 August 2004 4,211 6,431 September 2004 4,077 6,482 October 2004 4,260 6,369 November 2004 5,024 8,22004 Total 35,520 52,689

Source: The Pension Service LSS December 2004. Ev 122 Work and Pensions Committee: Evidence

Table B

THE PENSION SERVICE LOCAL SERVICE (ENGLAND, SCOTLAND AND WALES)

Month Total no. of eVective Total no. of customers seen at appointments at Local Service drop in Local Service Information Points Information Points

April 2003–March 2004 41,659 259,403 April 2004 4,589 25,881 May 2004 4,993 23,304 June 2004 5,971 25,346 July 2004 6,099 23,750 August 2004 6,280 20,935 September 2004 6,323 20,239 October 2004 5,074 17,843 November 2004 4,836 15,802 Total April 2004–November 2004 44,165 173,100

Source: The Pension Service LSS December 2004.

THE PENSION SERVICE LOCAL SERVICE (LONDON)

Month Total no. of eVective Total no. of customers seen at appointments at Local Service drop in Local Service Information Points Information Points

April 2003–March 2004 2,098 16,071 April 2004 157 2,090 May 2004 374 2,172 June 2004 439 2,548 July 2004 542 2,531 August 2004 542 2,139 September 2004 589 2,107 October 2004 556 1,958 November 2004 536 1,688 Total April 2004–November 2004 3,735 17,228

Source: The Pension Service LSS December 2004.

THE PENSION SERVICE LOCAL SERVICE (EAST MIDLANDS AND EAST OF MIDLAND)

Month Total no. of eVective Total no. of customers seen at appointments at Local Service drop in Local Service Information Points Information Points

April 2003–March 2004 8,726 20,964 April 2004 875 2,134 May 2004 803 2,471 June 2004 1,048 2,060 July 2004 846 1,861 August 2004 742 1,722 September 2004 743 1,963 October 2004 643 1,441 November 2004 489 1,337 Total April 2004–November 2004 6,189 14,989

Source: The Pension Service LSS December 2004. Work and Pensions Committee: Evidence Ev 123

THE PENSION SERVICE LOCAL SERVICE (NE YORKS AND HUMBERSIDE)

Month Total no. of eVective Total no. of customers seen at appointments at Local Service drop in Local Service Information Points Information Points

April 2003–March 2004 7,633 22,069 April 2004 772 2,044 May 2004 723 1,825 June 2004 796 2,422 July 2004 879 2,232 August 2004 886 2,155 September 2004 816 1,707 October 2004 500 1,680 November 2004 470 1,301 Total April 2004–November 2004 5,842 15,366

Source: The Pension Service LSS December 2004.

THE PENSION SERVICE LOCAL SERVICE (NORTH WEST)

Month Total no. of eVective Total no. of customers seen at appointments at Local Service drop in Local Service Information Points Information Points

April 2003–March 2004 6,302 53,501 April 2004 665 4,895 May 2004 676 3,465 June 2004 749 3,739 July 2004 832 3,299 August 2004 962 2,642 September 2004 1,173 2,078 October 2004 1,092 1,660 November 2004 1,122 1,568 Total April 2004–November 2004 7,271 23,346

Source: The Pension Service LSS December 2004.

THE PENSION SERVICE LOCAL SERVICE (SCOTLAND)

Month Total no. of eVective Total no. of customers seen at appointments at Local Service drop in Local Service Information Points Information Points

April 2003–March 2004 3,439 18,018 April 2004 378 1,705 May 2004 451 1,472 June 2004 434 1,561 July 2004 545 1,326 August 2004 606 1,314 September 2004 553 1,222 October 2004 448 1,068 November 2004 427 908 Total April 2004–November 2004 3,842 10,576

Source: The Pension Service LSS December 2004. Ev 124 Work and Pensions Committee: Evidence

THE PENSION SERVICE LOCAL SERVICE (SOUTH EAST)

Month Total no. of eVective Total no. of customers seen at appointments at Local Service drop in Local Service Information Points Information Points

April 2003–March 2004 5,128 36,900 April 2004 579 3,991 May 2004 652 3,865 June 2004 771 4,373 July 2004 706 3,807 August 2004 623 3,277 September 2004 603 3,152 October 2004 481 2,760 November 2004 482 2,222 Total April 2004–November 2004 4,897 27,447

Source: The Pension Service LSS December 2004.

THE PENSION SERVICE LOCAL SERVICE (SOUTH WEST)

Month Total no. of eVective Total no. of customers seen at appointments at Local Service drop in Local Service Information Points Information Points

April 2003–March 2004 2,388 17,612 April 2004 92 2,285 May 2004 228 1,435 June 2004 343 1,743 July 2004 251 1,549 August 2004 338 1,443 September 2004 305 1,470 October 2004 272 1,434 November 2004 175 1,690 Total April 2004–November 2004 2,004 13,049

Source: The Pension Service LSS December 2004.

THE PENSION SERVICE LOCAL SERVICE (WALES)

Month Total no. of eVective Total no. of customers seen at appointments at Local Service drop in Local Service Information Points Information Points

April 2003–March 2004 848 29,093 April 2004 93 2,591 May 2004 133 2,615 June 2004 204 3,138 July 2004 177 3,062 August 2004 365 2,981 September 2004 268 2,941 October 2004 167 2,830 November 2004 187 2,450 Total April 2004–November 2004 1,594 22,608

Source: The Pension Service LSS December 2004. Work and Pensions Committee: Evidence Ev 125

THE PENSION SERVICE LOCAL SERVICE (WEST MIDLANDS)

Month Total no. of eVective Total no. of customers seen at appointments at Local Service drop in Local Service Information Points Information Points

April 2003–March 2004 5,097 45,175 April 2004 978 4,146 May 2004 953 3,984 June 2004 1,187 3,767 July 2004 1,321 4,083 August 2004 1,216 3,262 September 2004 1,273 3,599 October 2004 915 3,012 November 2004 948 2,638 Total April 2004–November 2004 8,791 28,491

Source: The Pension Service LSS December 2004.

Table C

THE PENSION SERVICE LOCAL SERVICE (ENGLAND, SCOTLAND AND WALES)

Month Total no. of cleared MI scan Total no. of Pension Credit entries Marketing activity events

April 2004 N/A 1,145 May 2004 N/A 1,076 June 2004 N/A 1,156 July 2004 16,181 821 August 2004 25,151 651 September 2004 45,921 984 October 2004 53,700 768 November 2004 120,031 491 Total 260,984 3,715

Source: The Pension Service LSS December 2004.

Additional memorandum submitted by DWP (PC 01G) Thank for you for your letter of 17 January 2005 asking for additional information about The Pension Service staYng in 2006 and 2008. The staYng plans for The Pension Service for the period 2005–06 to 2007–08 are currently being considered as part of the SR 2004 spending review process. This work is due to be completed in February and a copy will be forwarded to the Committee when it is finalised. These plans will include a breakdown of planned staYng levels within operations, Local Service and support service areas. However more detailed staV plans at a centre by centre level will not be available until later in the spending review period when we have begun to roll out the transformed service and can validate the eYciencies expected. The expected eYciencies will be quantified in the Pensions Transformation Business Case which is also being revised to reflect the outcome of the SR2004 Spending Review and a copy of this will also be forwarded to the Committee when finalised as I mentioned in my response to your letter of 20 December dated 20 January. When we share the staYng plans, we will also confirm the proportion which contributes to the Department’s eYciency challenge. Malcolm Wicks MP 24 January 2005 Ev 126 Work and Pensions Committee: Evidence

Letter from the Department to the Committee Clerk (PC 01H) You wrote on 31 November asking for some additional information in connection with the Work and Pensions Select Committee’s current inquiry into Pension Credit. You asked for information relating to the Department’s IT systems, particularly diYculties reported recently in the press. You also requested sight of guidance for Pension Service staV in relation to the small number of customers for whom Direct Payment is not suitable. You were also interested in some detailed information relating to the take up of Pension Credit, the savings reward and the basic State Pension. I have provided a response to each of your requests—attached at the annex. (The Pensions Group Bulletin 301/04 and the figures for Pension Credit Recipients by Parliamentary Constituency, October 2003 to September 2004 were attached as annexes to this letter and available from the Department.)

Annex A

IT DiYculties You asked for a written statement as to the impact on customers and staV of the IT problems reported in the press on Friday 26 November. On Monday 22 November, a routine security upgrade to desktop configurations caused disruption to 40,000 desktop PCs (out of 130,000) throughout DWP. The disruption was resolved in less than three days and was blown out of all proportion in the media. All DWP business areas report a return to normal working. The Department’s large mainframe computers, which handle payments to existing customers, were not aVected and customers who usually receive regular pension and benefit payments continued to receive their money. Although there were some delays in dealing with new or amended claims, it is important to remember that a delay in processing a claim does not usually mean a delay in payment and the actual impact on our customers was minimal. The Pension Credit Application Line remained open. Approximately 80% of our staV who deliver our services experienced some sort of problem but business continuity procedures came in to operation eVectively to minimise the disruption. We have commissioned an inquiry from our suppliers. This report should be available before Christmas and we will share findings with the Committee when they are available.

Direct Payment You asked for sight of the guidance for Pension Service staV relating to decisions on the appropriate method of payment for customers. Existing guidance on cheque payments is contained in Pensions Group bulletin number 301/04 for Pension Credit staV and in Pensions Group Bulletin 321/04 for State Pension staV. Following the review mentioned, these bulletins were supplemented by Pensions Group Bulletin 374/04. Copies of these bulletins are attached (at annex B). The bulletins will in due course be consolidated in the Pension Credit Procedures Guide and the Pensions Procedures Guide as appropriate.

Take Up On the subject of take up of Pension Credit, you wanted to know the percentage increase of households in each parliamentary constituency in Great Britain from 17 October 2003 until the most recent available data. A table showing Pension Credit recipients by parliamentary constituency at October 2003 and October 2004 is attached separately (at annex C). The table also includes Pension Credit take up figures relating to the beginning of April 2003 and October 2003. You also asked what information the Department holds in relation to the categories of pensioners who have not taken up their entitlement to Pension Credit. Robust statistics on non-claimants require detailed investigation and validation of survey data. Drawing on the Family Resources Survey, DWP statisticians aim to publish estimates of numbers, and characteristics, of pensioners not taking up Pension Credit in its first six months, by the autumn of 2005. OYcial Pension Credit take-up statistics covering the first full financial year since its introduction (2004–05) are scheduled to be produced and published in the following year. When Family Resources Survey data becomes available, statisticians involved in the construction of estimates will consider whether statistics by component parts of Pension Credit will be suYciently robust to release. We are of course using a range of data to inform the take up campaign. In designing the marketing campaign we used the data we hold within Departmental systems about our customers and that available from outside to identify people most likely to be eligible for Pension Credit and their key characteristics. Work and Pensions Committee: Evidence Ev 127

We then grouped them according to likely eligibility, likely barriers and communications preferences and developed communications tailored to our understanding of their circumstances. This has enabled us to target specific groups of pensioners with diVerentiated messages—for example, we have strongly encouraged those who are very likely to be eligible to apply, whereas we have encouraged those less likely to be eligible to consider additional information and eligibility conditions before making an application. During the current phase of the campaign we targeted our direct contact appropriately we re-examined our customer database and re-scored their Pension Credit eligibility against a number of detailed factors to identify pensioner households likely to be eligible for Pension Credit. This refined customer segmentation focuses on type and amount of award and splits customers into groups with high or medium eligibility. Other factors such as age, disability and customer type have been fed into the profile. Segmentation has been used primarily to target direct mail activity and govern the number and sequence of contacts, which include outbound calling by the application line and Local Service visits. The segmentation splits the most eligible pensioner households into six groups, according to factors such as: —Age — Gender — Single or part of a couple — Likelihood of being eligible for guarantee element or savings element or both — Receipt of Disability Living Allowance or Attendance Allowance, Council — Receipt of Council Tax Benefit or Housing Benefit In addition, as part of the 2003–04 Social Research Programme we will continue and develop the tracking survey that has already been running. The objectives of this research are: — To continue monitoring awareness of Pension Credit and eligibility rules — To gauge older people’s attitudes to Pension Credit — To assess why some people are not taking up Pension Credit and what might encourage them to do so. Responses will be analysed by age, socio-economic group and gender to pinpoint diVerences between groups. For example, we will examine the responses of those who have not applied who appear to be entitled to a small amount. This analysis will assist the campaign and delivery staV in their eVorts to encourage people to apply. Findings from previous data collected by the tracking survey have been deposited in the House of Commons library. The report from the proposed new wave will be published on the internet and be accompanied by a press release.

Rewarding Savings In its first report on Pension Credit the Committee recommended that the “Government should inquire into the immediate and long-term costs, benefits and aVordability of extending the Pension Credit in this way [rewarding people with deficient NI records] and make public the results.” In response the Government said that removing the savings credit threshold altogether would cost around £8 billion on top of the existing Pension Credit package. You suggested in your letter (31 November) that alternatives to removing the Savings Credit threshold altogether would be to: (i) reward all savings in excess of the Basic State Pension in payment (excluding any increments for deferment); or (ii) for single people, reward all savings in excess of the Basic State Pension in payment (excluding any increments for deferment); and, for couples, reward all savings in excess of either the Basic State Pension in payment (excluding any increments for deferment), or the full married couples rate of the Basic State Pension, if that is lower. You asked for an estimate of the cost of this. If possible, it would be useful to have an estimate of the current cost and for 50 years in the future. The estimated costs are as follows: (i) reward all savings in excess of the Basic State Pension in payment (excluding any increments for deferment) 2004–05 2050 2004–05 prices £0.5 billion "£2 billion Cash Terms £0.5 billion "£8 billion Ev 128 Work and Pensions Committee: Evidence

(ii) for single people, reward all savings in excess of the Basic State Pension in payment (excluding any increments for deferment); and, for couples, reward all savings in excess of either the Basic State Pension in payment (excluding any increments for deferment), or the full married couples rate of the Basic State Pension, if that is lower. 2004–05 2050 2004–05 prices £0.5 billion £0 billion Cash Terms £0.5 billion £0 billion In both cases we have assumed for the 2050 costing that all individuals in 2050 will have full individual contribution records and therefore full BSP. This is to account for the anticipated improvement in contribution records over time, particularly amongst women. All costs are rounded to the nearest half a billion and are given in 2004–05 prices and also cash terms.

Basic State Pension In connection with protecting entitlement to basic State Pension, you ask: (i) Whether it is possible to extend existing credits for periods prior to 1978; (ii) Whether it is possible to credit other activities for periods post 1978; or (iii) Whether any new credit regime could only apply going forwards. Home Responsibilities Protection was introduced in April 1978. It protects the basic State Pension of men and women whose working patterns do not enable them to establish suYcient qualifying years for pension purposes because of caring responsibilities. It protects the basic State Pension position of those who don’t work at all, or don’t earn enough in a tax year (and don’t have suYcient credits) for that year to count as a qualifying year for State Pension purposes and — Care for a child under the age of 16, or — Care for a sick or disabled person (and do not receive Carer’s Allowance for the same period), or — Are a registered foster carer. In order to qualify for a full (100%) basic State Pension, a person must normally have qualifying years for about 90% of the years in their working life (currently working life for men is normally 49 years and for women it is 44 years). Therefore, to qualify for a full State Pension a man requires 44 qualifying years and a woman requires 39 qualifying years. HRP works by reducing the number of qualifying years needed for a full State Pension—so when calculating a person’s basic State Pension entitlement, the number of years in which they are entitled to HRP is taken away from the number of qualifying years required for a full State Pension. However, HRP cannot reduce the number of qualifying years required below 20 (22 for men from 2010 and gradually rising to 22 for women by 2020 when State Pension age for men and women is equalised at 65 years). The vast majority of people acquire HRP automatically through receiving Child Benefit for a child under 16. (Most carers for the disabled receive Carers Allowance which entitles them to be credited with National Insurance contributions each week.) It would not be possible to extend HRP to periods prior to 1978, since there was no system in place to recognise those potentially eligible for HRP before this time. The current arrangement requires Child Benefit OYce to notify the National Insurance Recording System that someone is the payee for Child Benefit for a child under 16 and a marker is put on their account so that they can be awarded HRP, if needed. The Child Benefit system was not fully computerised until the end of 1978 and, indeed, Child Benefit was not payable for first or only children before 1977. There would therefore be no practical way of identifying eligibility. With regard to the issue of extending the range of pension protection which is available, I should point out that the position of female pensioners today is largely a legacy of the past. A look at the position of people of working age now indicates very little diVerence between the proportions of men and women accruing state pension rights. The reasons for this are twofold. First, a far higher proportion of women now work outside the home and therefore pay, or are treated as paying, National Insurance contributions. Secondly, because measures such as HRP and, more recently, State Second Pension have been introduced to protect the pension of people with caring responsibilities. Furthermore, people who work for low wages and receive Working Tax Credit are also credited with National Insurance contributions if their earnings are too low to pay these. However, for today’s pensioners there was a legacy of injustice to deal with in 1997. Hence the introduction of Pension Credit—and before it Minimum Income Guarantee—to improve the situation of the poorest pensioners—many of whom are women. Work and Pensions Committee: Evidence Ev 129

We are looking at a number of options which could help those with incomplete National Insurance records. In examining options, we would need to take account of aVordability and complexity and any impacts on other aspects of social security benefits and the wider economy. We intend to produce a report on women and pensions which will be published by the end of next year. We are committed to a pensions system which has the basic State Pension at its core, gives special help to the poorest and provides incentives for hard-working families to save whatever their wealth or income.

Residency Information You asked what residency information the Department holds, particularly information needed to establish entitlement to a Category D retirement pension. A Category D State Pension is non-contributory. It is payable when a person: — reaches age 80; and — satisfies certain residence conditions; and — is not entitled to another category of State Pension, or is entitled to one at a lower rate than the Category D rate (in 2004–05 this is £47.65 a week). To get a Category D State Pension a person must meet all the following conditions: — be aged 80 or over; and — at the time of claiming, be ordinarily resident in Great Britain; and — have lived in Great Britain for a total of 10 years or more in any continuous period of 20 years after their 60th birthday. Periods of residence in another member state of the European Economic Area, or in Switzerland, may, depending on the person’s status under EU law, count towards the satisfaction of these conditions.

Information Relating to Residency The information required to establish the residency conditions that need to be met to establish entitlement to a Category D State Pension is collected on claim forms. The claim form that is normally used by a person when they wish to claim their State Pension is the BR1. In the majority of cases this will be completed to ensure payment at State Pension age, although it will also be used in cases where people defer their State Pension to earn increments. There is a form specifically for claiming Category D State Pensions—the BR2488. This form asks the applicant whether they normally live in Great Britain and about countries they have lived in abroad. Regulation 3 of the Social Security (Claims and Payments) Regulations 1987 (SI 1987/1968) provides for certain exceptions to the requirement to make a claim. Regulation 3(b) relates to Category D State Pensions: “Claims not required for entitlement to benefit in certain cases 3. It shall not be a condition of entitlement to benefit that a claim be made for it in the following cases: (b) in the case of a Category D retirement pension where the beneficiary: (i) was ordinarily resident in Great Britain on the day on which he attained 80 years of age; and (ii) is in receipt of another retirement pension under the Social Security Act 1975” A Category D State Pension claim made on a BR1 form could be accepted by the Secretary of State as a claim made in a suYcient manner, as long as the supplementary information about residence was provided in enough time to ensure that the claim was not ruled defective. In cases where a person under the age of 80 has claimed and is entitled to a State Pension at less than the Category D rate, when the person reaches the age of 80, the Department can ascertain whether or not the person has reported a change of address, particularly a move overseas, that may impact on their entitlement to a Category D State Pension.

Memorandum submitted by Local Government Association (LGA) (PC 02)

PENSION CREDIT The Local Government Association (LGA) welcomed the creation of Pension Credit as one of the ways to help eradicate pensioner poverty as detailed in the LGA Older Peoples Shared Priority. Ev 130 Work and Pensions Committee: Evidence

The new Savings Credit element of the benefit has resulted in increased income for some pensioners who previously failed to qualify under the Minimum Income Guarantee criteria. Whilst this increase is welcome, the benefit has done nothing to raise the standard of living for the poorest pensioners in the country and has in fact increased the “gap” between pensioners who have been able to make some provision for their old age and those pensioners who have no savings or occupational pensions. The claims procedure is still complex with a lengthy form requiring extensive verification of all financial data detailed on the form. A great deal of this financial information is already held by central government departments and benefit recipients find the procedures diYcult. The LGA welcome the increased staYng of local Pension Service visiting oYcers to assist pensioners with their Pension Credit claims and the introduction of Joint Teams which has increased data sharing between local and central government. The impact of Pension Credit awards on other benefits such as Housing Benefit and Council Tax has not been helpful with the result that some pensioners have undergone the complex claims procedures to end up with very minimal increases in overall income. The abolition of the capital ceiling has lead to pensioner confusion where capital cut oV rules remain for other benefits and service provision. The LGA welcomed the extensive marketing campaign to publicise and increase awareness of the new benefit. The television and national press adverts were useful. The current targets for Pension Credit take up seem to be low compared with the estimates of prospective benefit recipients and it is important that all new pensioners are made aware and receive correct advice re Pension Credit. Research has shown that take up is still low amongst black and minority ethnic groups and networking with local community groups is vital to provide the links between local and central government. It is clear that there is more work to be done to increase Pension Credit take up and to investigate the overall eVect of the benefit on pensioners incomes overall. The impact of the benefit on future pensioners who are likely to retire with higher occupational pensions will also require further investigation if the Savings Credit element is to be seen as a real incentive and reward for making some provision for retirement.

The Contribution Played by Pension Credit to the Incomes of Current and Future Pensioners 1. Pension Credit has done nothing to increase the incomes for the poorest pensioners in the country. The divide is now greater between those pensioners who have some savings and an occupational pension. 2. The reward element of the benefit has been welcomed by pensioners who have seen their incomes increase as a result of them making some retirement provision. The current scheme is less advantageous to older women as many of them do not receive any occupational pensions and are therefore less likely to qualify for Savings Credit. The fact that there is no capital “cliV edge” has been welcomed and many pensioners who had savings marginally above tariV cut oV levels are better oV. 3. The eVect of the benefit on future pensioners will depend greatly on their level of savings and their secondary pension income. Careful consideration will need to be factored into the rules relating to the Savings Credit if this is to remain an incentive for making provision for pensioners’ retirement.

The Interaction of Pension Credit with Other Benefits and with Local Authority Care Charging Policies 4. The interaction with Housing Benefit and Council Tax has had an adverse eVect on the take up of Pension Credit. Many prospective benefit recipients have not claimed, as their overall gain was very small after adjustments are made to their Housing Benefit and Council Tax. Many pensioners felt that they could not cope with a second set of forms to complete for notifying the Housing Department. The fact that there is still a tariV ceiling on Housing Benefit and Council Tax entitlement has caused some confusion for pensioners as well as increasing the complexity of training for advisors. 5. The eVect of the additional Savings Credit has had a minimal eVect on the service charge provision but barriers re data sharing have caused some problems with some pensioners having to supply information to several diVerent departments. 6. The complexities of the Severe Disability Premium and the link with Attendance Allowance continues to cause major problems where customers are misadvised by Pension Centres resulting in the loss of large amounts of benefits. Processing staV frequently miss the award of the premium and resolution of these problems is often time consuming.

Take up of Pension Credit 7. There was good publicity within the national papers and via television advertisements that helped raise the awareness of the new benefit. 8. Take up amongst black and minority ethnic groups is low and links need to be established with local communities to increase benefit take up. Much of the DWP’s campaign has been aimed at written communications with leaflets being translated into a variety of languages. Literacy levels amongst many of these groups are low therefore awareness levels of Pension Credit are low. Work and Pensions Committee: Evidence Ev 131

9. Greater use of existing data could be used to better eVect maximising limited resources. Data exchange between Joint Local Authority and DWP teams has helped to target ‘hard to reach’ customers. It is clear that if data from the Inland Revenue re capital and other income could be used that better targeting of prospective benefit recipients would occur.

Consequences of the Department’s Plans to Reduce its Workforce and Number of Pensions Centres 10. Local Authorities are concerned about the DWP announced eYciencies with reductions in staYng levels and the planned closures of some DWP outlets. Many Local Authority staV have invested a lot of time and eVort in establishing good local links with the local Pension Service especially in the establishment of Joint Teams and partnership working. Some of the closures will result in the relocation of some recently established Joint Teams causing further disruption and expense. 11. The closure and relocation of Pension Credit processing centres is likely to adversely aVect processing speed and accuracy until new staV gain experience and will also mean having to establish new working protocols and networks.

Delivery of a Telephone Based Service to Pensioners 12. The creation of a telephone-based service has been a useful service for many pensioners who wish to conduct their business by telephone in the comfort of their own homes. 13. The service is not appropriate for all users and customers with a hearing impairment have major problems trying to claim in this way. 14. The training of the operators has caused some issues such as incorrect advice and problems are still occurring when the customer requires a third party to act on their behalf. 15. Pensioners do not like having to send their valuable documents through the post to validate their telephone claims and some customers do not pursue their claims due to this reason. There have been numerous customers whose documents have been lost or that they have had to send them in several times.

Development of Locally Based Services 16. Local Authorities feel that services need to reflect their local community and that it is vital that this freedom to deliver services in the best possible way is decided by local users. 17. Central government needs to work with local government to maximise eYciencies delivering services in an appropriate manner with appropriate data sharing. 18. The various service models need to be evaluated with good practices being shared appropriately within forums such as the LGA Action Learning Sets.

Experience of Claiming Pension Credit 19. Some pensioners refuse to claim any benefit that is means tested for a variety of reasons and may lose out on Pension Credit and associated benefits continuing to live in poverty. 20. The advertising campaign has raised the expectations of pensioners that there will be a ‘reward’ for making provision for their old age. Clearly this applies to only certain pensioners and some applicants with higher levels of capital and superannuation have been disappointed. 21. Many customers enjoy a face-to-face interview at a prearranged date and time in the privacy of their homes. This allows them to have a third party present to give them appropriate support. 22. The claim forms are very long and include questions on benefits that are already being paid by the DWP. 23. New pensioners do not automatically receive a claim form and there is no additional section within the Retirement Pension claim form such as there is in the Job Seekers Allowance claim pack. 24. Problems have occurred in tracking claims when processing work is moved around the country at times of pension centres pressures.

Experience of Direct Payments 25. The DWP have worked with the LGA to try and minimise problems. Special arrangements have been made for corporate account holders to make the transition as easily as possible. 26. The problem of identifying the customer’s benefits is an issue with some bank statements. 27. There are concerns regarding the eVectiveness for replacing missing payments and national guidance. Ev 132 Work and Pensions Committee: Evidence

28. Many customers value the role that their local Post OYce plays within their local community and have real concerns about a growing number of closures resulting in lengthy journeys to obtain cash and growing social exclusion. Carol Habberfield 2004

Memorandum submitted by Standard Life Assurance Company (PC 03)

Summary — The current state pension settlement is too complex for most people to understand. — The Government should open consultation on a simple single replacement for the current system. 1. The current state pension settlement consists of a three-part structure. These layers become progressively complex, culminating in the State Pension Credit, which is almost impenetrable. With this level of complexity, there is little chance of engaging people. This is demonstrable from the low take-up rate of less than 70% for the State Pension Credit. 2. If the Government is to encourage people to save for their retirement then the benefit of doing so must be clear. People need to know what they will get from the state at retirement, in today’s money terms, in order to judge whether it will be suYcient on its own or whether they should save privately. 3. As a country, we need to save more for our future yet the current retirement benefits system has the perverse eVect of discouraging saving for many. Despite Government insistence that the Pension Credit is a reward for saving, the eVective tax rate on savings is 100% on total income below the maximum Basic State Pension and 40% above it. People understand this and are choosing not to save. Advisers are advising people not to save because it is not in their financial interests to do so. 4. The Pension Credit has successfully lifted large numbers of people out of poverty, which was one of its key aims. But, it may create unnecessary poverty in the future, which will increase future claims on means- tested benefits. 5. None of this should come as a surprise to the Committee. There has been a constant stream of proposals suggesting reform of state pensions over the last three years. These come from a wide and diverse group of bodies: left-wing think tanks, right-wing think tanks, independent think tanks, employers groups, unions, politicians and representatives of private pension providers. 6. All of these groups say similar things—that we should have one simple state pension. There are subtle diVerences between each of these proposals; for example, some are based on qualifying contributions, others on citizenship. Regardless of these minor disagreements, this level of consensus is unprecedented. 7. Consensus is necessary if state pensions are to be reformed. That consensus is here now and the time is right for Government to consult on reforming state pensions. 1 October 2004

Memorandum submitted by National Pensioners Convention (NPC) (PC 04)

Summary 1. Pension Credit has so far failed in its attempt to get money to a large number of pensioners living below the poverty level, and encourage younger people to save for their retirement. A serious barrier to the success of the Pension Credit has been its unnecessary complexity. 2. Means-testing has a number of inherent drawbacks which are a barrier to claiming and a disincentive to saving. Even new take-up targets do not match the expected increase in eligible households, which by 2008 will still leave well over a million pensioners without their entitlement. 3. The legislation surrounding the introduction and application of the Pension Credit has created a number of anomalies which have undermined the credibility and eVectiveness of the benefit. Despite powerful evidence, the Government seems unwilling to address these problems. 4. Under the present rules governing the up-rating of the Pension Credit, by 2050 it is estimated that 71% of the pensioner population will be eligible. On these figures, Pension Credit is neither administratively sustainable nor politically desirable. 5. People of working age will seriously consider whether or not they will be able to build up a substantial pension fund (£75,000 at today’s prices) to avoid means-testing in retirement. Many young people may conclude that it is better to spend their money than to save it for an uncertain future. Work and Pensions Committee: Evidence Ev 133

6. The Pension Credit should be replaced with a basic state pension paid to all men and women of pensionable age, set at least at the level of the existing Guarantee Credit and linked to average earnings. This would make the Pension Credit and its associated bureaucracy and confusion redundant.

1. Introduction 1.1 The Pension Credit was introduced on 6 October 2003 amid nationwide protests from pensioner organisations claiming that it would fail to tackle the immediate hardship felt by many of today’s older people, as well as undermining the principle of state pension provision for future generations. We believe that evidence now exists to support this view. 1.2 In addition, most commentators accept that the Pension Credit also represents some of the most complicated and confusing legislation ever introduced on the subject of pensions. This, in part, is one of the main reasons for a lower level of take-up than the Government had originally anticipated. 1.3 The complex and at times convoluted regulations governing the application of the Pension Credit have also given rise to a number of serious anomalies surrounding the areas of entitlement and level of payment. In particular, there have been criticisms of denying the savings credit to those single pensioners aged between 60 and 64, the application of savings credit to income only above the level of the full basic state pension, the anomalies surrounding the payment of Pension Credit to those in residential care, the rules calculating the rate of interest given to savings, and the sometimes detrimental eVect that receiving Pension Credit can have on the entitlement to other benefits. 1.4 In this submission, we will therefore address all the major criticisms of the Pension Credit, alongside some examples of failure. Furthermore, we will conclude with a series of recommendations on the future of state pension provision in this country.

2. Background 2.1 The November 2001 White Paper, The Pension Credit: The Government’s proposals, presented the Pension Credit as the third stage of the Government’s pension reforms, the first two stages being (1) the Minimum Income Guarantee (MIG) and other measures to provide more money mainly for the poorest pensioners and (2) “long term reforms that will help prevent poverty from arising in the future”, including the State Second Pension (S2P) and stakeholder pensions. 2.2 However, whilst the aim of the Pension Credit was to target additional financial support at the poorest pensioners, its failure to do so successfully has largely been because of its reliance on widespread means- testing. 2.3 The attraction of means-testing for the Government is that, even when the high costs of administration are taken into account—estimated at £4 per claim each week compared to just 60p for the administration of the basic state pension—it is much cheaper than across-the-board increases in benefits. But means-tests, especially when applied to pensioners, have a number of inherent drawbacks: — A large proportion of the population find both the process and the idea of means-testing demeaning, intrusive and impersonal. — No Government has found an eVective long-term solution to the problem of low take-up. — They discourage people from making their own provision for retirement as the more you save, the less you get from the state. — People who do save for their retirement resent the fact that they are little better oV than those who do not. 2.4 In its first year, the Pension Credit has suVered from all these drawbacks and will continue to be an impractical, undesirable and unpopular substitute for a proper pensions’ policy.

3. The Pension Credit Experience

Making a claim and take-up levels 3.1 Even before the Pension Credit was introduced, the Government recognised that it would be impossible to reach every pensioner who was eligible to receive either the Guarantee or Savings Credit element of the Pension Credit. Ministers were widely reported as hoping for a target figure of 73% take-up by 2006. 3.2 However, the experience of claiming for some individuals, no doubt explains the Government’s modest assessment of likely take-up success: Pensioner A from Hampshire first applied for the Pension Credit in October 2003. She rang the claim line for an application form, but nothing arrived. After one month she rang again and was told she could complete an application over the phone. Following this she was told she would receive a decision Ev 134 Work and Pensions Committee: Evidence

within two weeks. This did not happen. She rang again only to be told that there was no record of her application and she would have to make yet another claim. Finally, she was awarded a Savings Credit of 71p a week. 3.3 It is estimated that about 3,750,000 households are eligible for Pension Credit in 2004–05. About 200,000 are in care homes and of the remaining 3,550,000, about 2,350,000 are “guarantee households” with incomes, before Pension Credit, of less than the guaranteed minimum (£105.45 a week for an individual and £160.95 for a couple). The remaining 1,200,000 are therefore only entitled to the Savings Credit. 3.4 When the take-up campaign started in April 2003, there were already 1,750,000 pensioner households in receipt of the then Minimum Income Guarantee. The ability to get the remaining 2,000,000 eligible households onto Pension Credit is therefore the criteria against which the eVectiveness of the benefit can best be judged. To date, with well over a million eligible households still yet to make a claim, the signs are not promising. 3.5 Nevertheless, despite the obvious problems with the current actual take-up level, the July 2004 Spending Review set an even higher target, stating there was: “a commitment to increase the number of pensioner households receiving Pension Credit to at least 3.2 million by 2008.” Yet despite this commitment on paper, this new target would not even match the expected increase in the number of eligible households which by 2008–09 is expected to be 4,050,000. On current assumptions, even if the new target is reached, there will still be around a million pensioners who are not receiving their entitlement in 2008. 3.6 In addition, an inescapable problem with means-tested benefits is also the large number of unsuccessful claims. Since the Pension Credit campaign started, about 300,000 applications have been turned down. The administrative costs involved in dealing with unsuccessful claims are substantial. From the claimants’ point of view, the experience of having a claim refused is demoralising and the eVect on take- up is bound to be negative because when one person’s claim fails, several others may also be discouraged from claiming. In view of the complexity of the Pension Credit, the continuing high failure rate is not surprising, but it remains a serious weakness of the Government’s strategy of mass means-testing. 3.7 To undermine the present arrangements even further, a significant number of pensioners are receiving a very limited benefit from the Pension Credit, compared to the costs involved with administration. Nearly 1 million pensioners in receipt of Pension Credit are getting less than £5 a week; 13,000 of which are getting less than 10p a week.

Publicising the Pension Credit 3.8 The Government’s ability to reach all eligible households has also been aVected by the scale of their advertising campaign. Between £12–£17 million has been spent on the marketing campaign for the Pension Credit since October 2003, but one of the lessons of previous take-up campaigns for means-tested benefits is that, while the short-term results may be impressive, take-up rates gradually fall once the publicity campaign has ended. 3.9 Continuing eVorts will therefore be needed to inform those reaching pension age each year of their entitlement and to encourage them to claim. In the case of women, they will also need to be told when they qualify for Savings Credit at age 65. 3.10 In addition, because of the Government’s up-rating policy (see below), large numbers of people who do not currently qualify at pension age are likely to become entitled subsequently. In order to reach these people, the Government will have to commit itself to an ongoing advertising programme for as long as the Pension Credit exists.

Complexity 3.11 An important barrier to the successful take-up of the benefit is that it is extremely diYcult for most pensioners to understand how it works, why it works in the way it does and how much money they might be eligible for. For example, the Pension Service booklet: “Pick it up. It’s yours”, sent to millions of pensioners, does not even attempt to explain how the Savings Credit element of the Pension Credit is calculated, but merely indicates the levels of income at which individuals with specified amounts of savings are more or less likely to be entitled. 3.12 The Department for Work and Pensions has admitted that the formula for applying the Savings Credit is flawed, stating: “The current legislation . . . produces some unexpected results for those pensioners with a range of income levels who have some non-qualifying income. Some pensioners receive a reward of £1.20 for every extra pound of qualifying income instead of being rewarded by £0.60 for every extra pound of qualifying income.” The cases where this occurs are those in which the claimant’s total income is above the limit for Guarantee Credit and includes some non-qualifying income (eg maintenance payments from an ex-spouse). Work and Pensions Committee: Evidence Ev 135

The eVect of Pension Credit on other benefits 3.13 One of the most adverse eVects caused by the complexity of the Pension Credit has been the impact it has had on reducing the income of some individuals. Despite the Government’s intention in this regard, the credibility and eVectiveness of the benefit have been seriously undermined by such experiences: Pensioner B from Sussex asked her daughter to complete an application form for Pension Credit on her behalf and in August 2004 was informed that she would be entitled to an additional £5.73 a week/£22.92 a month Savings Credit. Less than a month later, her district council informed her that as a result of this award her Housing Benefit and Council Tax Benefit would be reduced by £4.60 and £2.28 a week respectively. As a result of qualifying for the Pension Credit she is now £1.15 a week/£4.60 a month worse oV. 3.14 Anomalies such as these clearly highlight the fact that the declared objective of the Pension Credit remains fundamentally flawed.

Women and the Pension Credit 3.15 Ministers have repeatedly stressed that one of the advantages of the Pension Credit is its benefit to women, who tend to have smaller occupational pensions than men and are at greater risk from the relative decline in their pension income over their retirement because of their greater lifespan. Two-thirds of those entitled to the Pension Credit are women and half of these women are aged 75 and over. 3.16 However, whilst it is certainly true that most poor pensioners are women, many of the poorest women pensioners have gained little from the Pension Credit. For example, the fact that they tend to have smaller occupational pensions means that the Savings Credit has been of less value to them. Moreover, the relative decline in their pension income (including the basic state pension) as they get older will also result in a similar relative decline in the value of their Savings Credit. 3.17 Another glaring gap in the Pension Credit, so far as women are concerned, is the fact that, although the state pension age for women is still 60 and will remain so until 2010, rising to 65 by 2020, the Savings Credit is not available to those aged 60–64. This has meant that a woman claiming her state pension and Pension Credit at 60 has to wait five years to receive the promised reward for her savings. Unless this anomaly is removed, the Pension Credit will do nothing to reduce poverty among single women pensioners under 65. 3.18 Evidence suggests that a mere 12% of existing women pensioners receive a full basic state pension in their own right based on a complete National Insurance contributions’ record. The vast majority therefore have incomes below the full basic state pension, but because the Savings Credit only applies to income above this level, part of the income from any savings that would normally attract the 60% “reward” is excluded from the calculation of the Savings Credit. Many women pensioners are therefore being denied the full benefit of their savings.

Residential Care and the Pension Credit 3.19 The Pension Credit has also raised anomalies when applied to those in residential/nursing homes compared to older people elsewhere. For example, supported residents whose income is above the maximum Pension Credit threshold are eligible for a flat rate £4.50 Savings Credit. However, self-funded residents whose income is above this maximum threshold are not eligible for the same flat-rate payment. 3.19.1 Furthermore, self-funded and supported residents with an income up to the maximum threshold are also not eligible for more than a flat rate £4.50 Savings Credit regardless of their savings. 3.19.2 The current arrangements have therefore created a situation whereby those who would not otherwise have been entitled to any Savings Credit (supported residents with incomes above the maximum threshold) will receive an extra £4.50 per week, whilst those residents who, if they lived outside of a care home would qualify for more than £4.50 a week Savings Credit based on their income, can only receive a maximum of £4.50. 3.19.3 As the Pension Credit is money awarded nationally to pensioners with modest savings, it is diYcult to understand why it is necessary to introduce, what is eVectively, cross subsidization between one group of care homes residents and another. Fairness dictates that all care home residents should be awarded the full amount of Pension Credit to which they are entitled, in the same way as all other pensioners of qualifying age and income living outside a care home.

Interest Rates and the Pension Credit 3.19.4 Many pensioners who qualify for the Savings Credit element of the Pension Credit have expressed concern that the rate of interest used to calculate the assumed income from savings above the £6,000 limit is 10.4% pa. This is more than double the current high street rates of interest and falsely assumes a higher income from saving than pensioners are actually receiving. Ev 136 Work and Pensions Committee: Evidence

3.19.5 It should be recognised that if the interest rate figure for the Savings Credit was to be more realistic, the number of people eligible for the Pension Credit would increase, along with the cost. This is no doubt the Government’s justification for applying such an arbitrary condition.

4. Pension Credit and the Future

Up-rating policy and the impact on saving and planning for retirement

4.1 In its April 2002 report on Pension Credit, the Work and Pensions committee examined the implications of three hypothetical uprating scenarios set out in the DWP publication, The Pension Credit: Long-term projections, and urged the Government to specify its intentions on this subject “to aid Parliament in its consideration of the Bill and to provide more certainty to those involved in the long-term planning necessary for pension provision.” Recent Government projections of the numbers of pensioners eligible for Pension Credit in future years have been based on the assumption that the Guarantee Credit would be up- rated in line with average earnings and the Savings Credit threshold in line with prices. 4.2 The long-term implications of this up-rating policy are such that as well as increasing the cost of Pension Credit, it would also substantially increase the proportion of pensioners qualifying for it. According to the Institute for Fiscal Studies, 64% of pensioners will be eligible for Pension Credit in 20 years’ time; rising to 71% by 2050. On these figures, the Pension Credit is neither sustainable nor desirable and means- testing on such a wide scale is a prospect that no Government should seriously contemplate. 4.3 Furthermore, without a clear up-rating policy, it is impossible for people of working age to predict whether and to what extent they should take Pension Credit into account in planning for their retirement. For anyone whose retirement income falls within the scope of the Savings Credit, the value of an additional £1 of income from pension or savings will be reduced by at least 40p. Financial advisers need to be aware of this and to advise their clients accordingly; but they cannot be expected to oVer reliable advice if there is no way of knowing between what levels of income the 40% tax will bite or how the Government will up-rate both pensions and means-tested benefits in the future. 4.4 Until now, most people of middle age or younger could assume that, by paying regularly into a good second pension scheme for the rest of their working life, they would stand a good chance of retiring with an income above the level of means-tested income support. In future, with the means test extending further up the income scale, a much bigger pension will be needed to avoid it. According to the actuary Mercer Human Resource Consulting, people retiring today need a pension fund of at least £75,000 to avoid means-testing. 4.5 In addition, because under the Pension Credit the more private income an individual has, the lower the reward from the state, people of working age, deciding how much to save for their retirement, will need to take into account the very real possibility of any additional retirement income being taxed at 40%. Moreover, as we have seen, there is a serious risk of the 40% tax rate being increased as the cost of the pension credit rises; and if that does not happen, the level of income up to which the tax will operate is likely to rise substantially, bringing still more pensioners into its scope.

5. Conclusion

5.1 The Government’s pensions’ strategy relies on means-tested benefits to fill the gaps in state and private pension provision. The Pension Credit has been an attempt to provide additional help to the poorest pensioners and reward those with modest incomes by counteracting the disincentive eVect on saving for retirement. However, existing evidence and future predictions suggest that it has failed in its key objectives. 5.2 Money has not reached the poorest pensioners because they remain among the large number of older people who are entitled to Pension Credit, but have yet to make a claim because of the complexity and opposition to means-testing. 5.3 The rules governing the introduction of the Pension Credit have also produced a large number of serious anomalies in the system, which whilst undermining the credibility and eVectiveness of the benefit, the Government appears incapable or unwilling to address. 5.4 Unless there is a fundamental change of direction in the Government’s pensions’ policy, the scale and cost of means-testing increasing numbers of pensioners will become administratively unsustainable and politically undesirable. 5.5 There are major uncertainties regarding future up-rating of the Pension Credit, which, added to existing uncertainties about the future value of the basic pension, the state second pension and money- purchase pension schemes, will make pension planning extremely hazardous. Many young people may conclude that it is better to spend their money than to save it for such an uncertain future. Work and Pensions Committee: Evidence Ev 137

6. Recommendations 6.1 The basic state pension should be immediately increased to at least the level of the Guarantee Credit for all men and women of pensionable age, currently £105.45 a week. The Pension Credit and its associated bureaucracy and confusion would then become redundant. 6.2 The basic state pension should be up-rated annually in line with average earnings or inflation (Retail Price Index), whichever is the greater, to enable pensioners to share in the growing prosperity of the nation. 6.3 Over the next five years the basic state pension should be incrementally increased to a level of one- third average male earnings and paid to all men and women of pensionable age, by extending National Insurance contribution credits to those who have been unable to build up a full contributions’ record due to low pay, part-time working, caring and other domestic responsibilities. 6.4 The State Second Pension (S2P) should remain earnings-related and based on the SERPS (State Earnings Related Pension Scheme) re-valued earnings formula to ensure a fair deal to those employees, particularly women, whose careers do not conform to traditional work patterns. National Pensioners Convention 1 October 2004

Memorandum submitted by Civil Service Pensioners’ Alliance (CSPA) (PC 05)

Introduction 1. The Civil Service Pensioners’ Alliance has about 70,000 members in the UK, organised in 100 local groups. We represent retired Civil Servants from every grade in every Department and many of our members, especially those widows of Civil Service pensioners, have very modest incomes and therefore are likely to qualify for Pension Credit or be at the borderline. A quarter of all Civil Service pensioners have pensions of less than £2,000 a year, and a third of all the widows of Civil Service pensioners have pensions of less than £1,000 per year.

Experience of members 2. Generally speaking, the experience of our members in claiming Pension Credit has been good. They have either filled in the forms themselves or with the help of a friend or relative, or they have used the call centres. No one has made us aware of any particular problems with the forms, and our members report that dealing with the call centres was straightforward and the staV helpful and friendly. Members have generally reported that they have received a speedy response to their claim.

Pension service speakers 3. Many of our local groups have asked for Pension Service speakers to explain Pension Credit and other pension services to their local meetings. They have all reported a high degree of satisfaction in the Pension Service speakers, especially in the way that they explained Pension Credit and other pension services. Their ready availability and knowledge of the local situation is an important part of the service. 4. We are also aware that the Pension Service sends visiting speakers to a variety of locations where pensioners gather, such as Local Authority retirement centres, drop-in centres, Age Concern centres, and the feedback we have had is that the service is appreciated and helpful.

Pension service visiting oYcers 5. We are also aware that the Pension Service is prepared to visit people in their homes. Our experience of this service is that it is very good. The Pension Service staV were pleasant and helpful, giving advice and assistance about other benefits as well. This resulted in members concerned getting Pension Credit and where appropriate, Council Tax Benefit. As a consequence, their quality of life has improved considerably. We think this is a very valuable service that should be retained and expanded. The knowledge and experience of local Pension Service staV is crucial and is not available from leaflets or call centres.

Proposed staYng cuts 6. Therefore we are extremely concerned about the impact of the staYng cuts in the Pension Service. The loss of 30,000 staV from the Department of Work and Pensions must have a significant impact on the quality of service oVered by the Pension Service. Earlier in our submission we commented on the good quality of service members have reported, and would be very concerned if this was to drop. We believe the Committee Ev 138 Work and Pensions Committee: Evidence

should seek guarantees from the Pension Service that the quality of service should not only remain but improve, especially the facility of locally based Pension Service staV to get out and about to talk to pensioners where they meet and visit them in their homes. 7. The rules are so complex and so diYcult to understand that the expertise of Pension Service staV is vital if this benefit is to be successfully delivered. Lack of common knowledge about this benefit and its relationship to other benefits is one of the reasons for its low take-up.

Confusion about relationship of various benefits 8. Many of our members, and also our local representatives who assist them, report that there is considerable confusion about the relationship between Pension Credit, Housing Benefit and Council Tax Benefit. It is also clear from some of the personal cases we have dealt with, that the Local Authorities are also confused. In fact there have been occasions where following up problems from members, we have got advice from the Pension Service and gone back to the Local Authority, who have then changed their decision. All the publicity regarding Pension Credit does not properly explain the relationship between Pension Credit and Housing Benefit and Council Tax Benefit. Leaflet PC1F briefly refers claimants for Housing Benefit and Council Tax Benefit to the local Council and leaflet PC1N briefly refers claimants to Housing Benefit and Council Tax Benefit to the Department of Work and Pensions. In fact, the only reference to Housing Benefit and Council Tax Benefit in the publicity is that they are not counted as income when assessing Pension Credit (but this only applies when in receipt of Guarantee Credit). The publicity does not point out that they will have to re-assessed if Pension Credit (the Savings Credit element) is granted. Therefore, if the existing rules regarding entitlement to Pension Credit are to continue, there needs to be a much clearer explanation of the consequence of receiving the benefit on other benefits. Many of our members have been disappointed to find entitlement to Pension Credit has reduced their Council Tax or Housing Benefit.

Proposed changes to entitlement 9. We would therefore like to propose that entitlement to both the Guarantee Credit and the Savings Credit elements of Pension Credit do not incur any penalties with Housing Benefit or Council Tax Benefit. Currently only the Guaranteed Credit does not aVect other benefits. It seems contrary to the principles of Pension Credit, which was designed to help those on low incomes and reward those with small occupational pensions, if by becoming entitled, they then lose other benefits. On the one hand we currently have a group of Civil Servants working out an entitlement to Pension Credit, and on the other hand another group of Civil Servants who have to reduce existing benefits already in payment, an unnecessary duplication of eVort. 10. Under the current rules, women between the ages of 60 and 64 are not entitled to the savings credit element of Pension Credit. Women become entitled to the State Retirement Pension at age 60 and usually have had to retire from whatever occupational scheme they were in. This means that the aim of Pension Credit, to help those on low occupational pensions, is not met until they reach age 65. Until the equalisation of the state retirement pension ages, it seems only right that women should be entitled to the savings element of Pension Credit from age 60. The rules perpetuate poverty in an important and disadvantaged sector of the community. 11. Those not in receipt of a full basic state pension will only receive savings credit on savings and other sources of income above the savings credit threshold, set at the level of the full state pension, therefore, they will not receive any benefit on their savings or other income below that threshold. This will adversely aVect all those who do not receive a full State Pension, and have a small occupational pension or savings, the majority of whom are women. The solution would be to calculate the savings element of Pension Credit on the actual amount of savings or occupational pension increase without taking into account the level of state retirement pension.

Care home residents 12. We are also concerned that supported residents living in a care home, only receive a maximum of £4.65 per week in Pension Credit, whereas if they had either been living in the community or self-funding, they might have been entitled to anything up to the maximum. 13. Residents of care homes, whose capital is rapidly decreasing because it is being used to pay for their care, are entitled to have their Pension Credit entitlement reviewed every time their capital reduces by £500. This can occur frequently in view of the high charges of care homes. Also, the Local Authority need to be aware two to three months before capital sinks to the lower limit so that they can start providing support, otherwise Pension Credit claimants could use up capital unnecessarily. Greater publicity needs to be given to these facts, as they are not well known. 14. The entitlement to Severe Disability Allowance and its relationship to Pension Credit is not well known. Publicity about this benefit is diYcult to come by and needs to be improved. 15. It is also not appreciated that there is now no upper capital cut-oV limit. Whilst this can be worked out for care residents and is about £55,000, again more publicity is needed and could improve take-up. Work and Pensions Committee: Evidence Ev 139

16. These are all powerful arguments for increasing the number of local Pension Service staV so that they can visit care homes and explain the complexities of the system to those concerned with the residents’ welfare.

Conclusion 17. We hope the Committee will find our observations and suggestions on the working of Pension Credit helpful. This is a very complex benefit and its relationship with other benefits is not easily understood. If the Government are to persist with this policy as their way of tackling pensioner poverty, the rules need to be simplified and improved as we have suggested. There also needs to be more local Pension Service staV available to visit and assist claimants, not less as the Government seem to be proposing. There is no doubt that many pensioners’ lives have been improved by Pension Credit and as a short-term strategy for tacking pensioner poverty it has worked for some. There remain those who are entitled but have not claimed and this problem needs to be solved. There also remains the longer-term question of having more than half the UK pensioner population dependent on means tested benefits, incurring extensive administrative costs. We believe a decent level of basic state pension for all to be a better solution. Brian Sturtevant Civil Service Pensioners’ Alliance 29 September 2004

Memorandum submitted by Leicestershire County Council (PC 06)

INTRODUCTION OF PENSION CREDIT—SELECT COMMITTEE ENQUIRY Summary The aim of increasing and promoting take-up of Pension Credit is laudable. Government promotion of take-up in this way is long overdue. However, the current administration of the benefit is poor. Decision- making is slow, mistakes are rife, and many pensioners are being overpaid and underpaid as a consequence. Advisors are experiencing diYculties in obtaining improvements from the Pension Service. The Customer experience is poor and this is impacting adversely on take-up. There is an urgent need to improve staV training, to slow down or stop the current process of centralisation and to reduce the target for the number of pensioners who need to have PIN number accounts. The service provided to assessments sections and advisors needs to be improved by provision of Remote Access Terminals to financial assessments section and also by enabling advisors to verify documents to establish identity, capital and income.

Contribution of pension credit to the incomes of current and future pensioners 1. Pension Credit (PC) has a valuable role in improving the income of poorer pensioners but at present there is resistance to the claiming process from many pensioners and in particular to what is regarded as intrusive enquiries into income and capital. Despite the reduction of the volume of this, with any means tested-benefits questioning of this nature is inevitable. 2. In order to overcome some of the claiming barriers and ensure that all pensioners receive an adequate income, there is a need to increase the basic Retirement Pension to the level of the basic Guarantee Credit. If necessary this should be phased in. Although a costly exercise, the expense of this will be met in part by the lower administrative costs associated with the payment of Pension Credit. Pension Credit would then need to be claimed by a smaller proportion of the population whose incomes were below Pension Credit level. In most cases these would be pensioners qualifying for housing costs, or severe disability and carers additional amounts.

Interaction of pension credit with other benefits and with local authority charging policies 3. There are great diYculties in interpreting and applying the partial Savings Credit disregard for residential care assessments as the guidance is incomplete. Savings Credit is disregarded in full for Home Care assessments and people in residential care should be dealt with in the same way. This would be administratively easier and would also form a welcome addition to the very low level of the Personal Expenses Allowance. 4. Social Services Residential Care assessments are annually reviewed, whereas the assessed income period for Pension Credit is generally between five and seven years. This means that a mismatch develops between both assessments as in many cases it becomes apparent that the Pension Credit is no longer correctly Ev 140 Work and Pensions Committee: Evidence

calculated. Where this is to the claimant’s disadvantage Social Services Departments will find themselves having to take on the role of prompting the claimant or appointee to request a review or, accepting that the service user has a possible loss in income. This will lead to increasing administrative problems for local authority assessments section as time passes. 5. The need to disregard all or part of the Savings Credit creates the necessity for Social Services to be able to accurately identify the amount paid to ensure their assessments are accurate. No breakdown is given in order books where these are still available, and this information is not available at all when Direct Payments are in place. This is only notified to claimants with their initial assessments or if the amount paid is reviewed. Claimants are not advised of the importance of retaining these statements. Social Services Assessment OYcers require access to a Remote Access Terminal (RAT) to determine the nature and level of benefits in payment in order to ensure their assessments are accurate. The introduction of the Savings Credit disregard and the Pension Credit Assessed Income Period now makes this a more urgent requirement. RATs are made available to Housing Benefit and Council Tax Benefit Sections. The role of Social Services Department financial assessments staV is similar. 6. The main diYculties with interaction with other benefits are as follows: Increasing delays in getting Attendance Allowance (AA)/Disability Living Allowance (DLA) paid with PC. This has become more serious since the introduction of PC and is causing many advisors to request de- combining of payments as payment form Disability Benefits Unit is faster and more reliable. Despite the enormous simplification of the rules for PC there is still little Department for Work & Pensions (DWP) produced information for claimants to explain the rules for the payment of additional amounts. This contributes to an ongoing problem of under-claiming. Most Local Authorities will not process claims for Housing Benefit (HB) and Council Tax Benefit (CTB) until the PC claim is determined. As delays with PC are increasing this is causing hardship in some cases. Local authorities should be instructed to process all applications for HB/CTB within 14 days.

Take-up of pension credit and other benefits 7. The improved focus on Pension Credit take-up is welcomed although it has to be said that it appears that local Pension Service staV have limited experience of take-up work which impacts adversely on their ability to promote this eVectively. 8. Little has been done by DWP to tackle the associated problems of low take-up of AA, Carers Allowance, HB, CTB and Council Tax discounts and banding reductions. Local Pension Service teams state publicly that they do not assist with these claims although under-claiming of one or other of these benefits is generally the case if PC is also being under-claimed. There is an urgent need to focus more broadly on the issue of pensioners under-claiming.

Reduction of workforce 9. Pension Service administration appears to be overstretched and unable to cope with the claims made and enquiries received. Pension Service staV are inadequately trained particularly on additional amounts and, despite enormous simplification this is leading to the same high level of mistakes as occurred in Minimum Income Guarantee. Reducing staYng levels at this time can only lead to an increase in the current administrative chaos and this needs to be urgently reconsidered until full take-up of Pension Credit is achieved. Failure to do this will impose a barrier to achieving the take-up targets. 10. There is an existing problem of poor service provision to benefit advisors. This is compounded by the Pension Service staV’s lack of training and experience leading to a lack of confidence to discuss decisions. The Pension Service telephone section simply take telephone messages from advisors rather than discussing the matter and advisors experience diYculty in getting a member of staV to take responsibility for resolving an enquiry. Reducing the number of pension centres will only serve to compound the problem. Locally Pension Service staV have already pulled out of liaison meetings with advisors as they felt these meetings were not necessary. After negotiations meetings have now been reinstated but I envisage extreme diYculty in eVective liaison as services become more centralised. This will reduce the ability of advisors to improve working relationships with Pension Service and service delivery standards. This could be assisted by ensuring Pension Service Managers contribute to eVective local liaison arrangements.

Telephone service 11. Pensioners need to have a range of contact options including face to face interviews with decision making staV (not just local service). The lack of this has placed considerable pressures on local service to continue to provide this at their local surgeries. Many pensioners have no confidence in using the phone to discuss their case. The decision to phase out caller oYces was a mistake and is greatly missed by many pensioners who have become more reliant on advisors to help them communicate with Pension Service as a result. Work and Pensions Committee: Evidence Ev 141

Locally-based services 12. Although well-meaning the local service staV are hampered by their lack of experience in take-up work, the withdrawal of counter services and their inability to provide a holistic service. A broader approach to take-up is the only way to eradicate under-claiming.

Claiming pension credit 13. A major problem is that of verification. Previous agreements with advice workers in Leicestershire to allow us to provide photocopies of savings and occupational pensions etc with a signed statement to say we have seen the originals have been withdrawn. There is an urgent need to accept verification from accredited agencies/advisors to reduce the bureaucracy associated with claiming. 14. There is a high error rate in the decision making and similar misadvice in the telephone based service. People with PC entitlement are repeatedly being told that they have no entitlement because of mistakes within the service. The main problem area is additional amounts. There is an urgent need for more training and more eVective staV supervision. This is a barrier to more claims being made.

Experience of direct payments 15. Pensioners are feeling harassed by the Direct Payments staV into agreeing to change their method of payment. The staV have an inadequate understanding of the diYculties experienced by older people which can include disability, dementia, confusion, visual impairment, poor mobility, poor literacy and language skills, reliance on a Home Care service and isolation from banks and post oYces particularly in rural areas. This has meant that some claimants have been forced into accepting PIN accounts they cannot operate due to these factors leaving advisors with the task of getting the method of payment changed to a more suitable option. There is an urgent need for Direct Payments staV to receive training on interviewing and listening skills and to improve their understanding of the customer experience. 16. I am concerned that many customers of the Pension Service will have diYculty operating their accounts leaving them unable to gain access to their money and with an inflexible Pension Service unable to understand or change their payment method promptly. There is also a problem of PIN numbers being given to carers of potentially other people in order to withdraw cash payments for claimants. This leaves pensioners vulnerable to financial exploitation on a far larger scale than was previously the case as access was restricted to one week’s benefit rather than the full amount in the account. The existing problem of financial abuse is expected to increase due to this change. Janet Gurney Leicestershire County Council 29 September 2004

Supplementary memorandum submitted by Leicestershire County Council (PC 6A) The reduction is surgeries in Leicestershire (covers City County and Rutland) is in line with the overall reductions as quoted by Malcolm Wicks. I have identified one error in the list of surgeries available on the website (1 surgery being run in Market Harborough not listed) and have alerted local service to this. The main point I would take issue with is that there has not been any consultation with ourselves in Social Services or the equivalent welfare rights team in City Social Services about surgery reductions. I am also not aware that any other organisations are being consulted with over cuts in surgeries. As we hold regular meetings with Pension Service attended by a wide range of organisations there is ample opportunity for consultation. I have spoken to the local service and am told that they consult with the organisations in whose premises they operate the surgery. I have to say I consider this is simply inadequate and of course they can hardly not “consult” with the people whose premises they are using. Many other organisations refer customers to the surgeries and particularly in rural areas there is now a real problem with the lack of surgeries as it is a long way to travel to alternative venues. Some people live up to15 miles away from their nearest surgery. Also not all of the main County towns have a surgery and in Leicestershire there is no surgery in Ashby de la Zouch which is a sizeable market town. I also am concerned that some of the remaining rural surgeries are still threatened with closures and am particularly concerned about the future of the Lutterworth surgery (15 miles from the next closest surgery). This is not a question of whether there is demand but whether the demand can compete with that of other surgeries. My experience is that there is demand at all surgeries but that those with the lowest level of demand are being cut. Publicity for local surgeries could be improved. If joint working is meaningful rather than just a convenient phrase then there should be consultation with all partners operating in the locality of an individual surgery before closure is threatened to look at how attendance may be increased. Ev 142 Work and Pensions Committee: Evidence

Advisors are also unhappy with the work approach adopted to replace the surgeries specifically the current focus on cold calling. We do not consider this to be the best approach to promoting take up of benefits. There continue to be problems of poor advice from local pension service staV. Only this week I have been made aware of two elderly sisters living together. The activity of the local Pension Service worker was to try to get the disabled sister (aged 72) to claim DLA mobility component (age limit 65). The non disabled caring sister had a clear entitlement to Pension Credit, although a Carers Allowance claim was needed to trigger entitlement to Carers Premium, but was not oVered any assistance with this at all. There is a need for Pension Service to improve the quality of their advice if they are realistically to achieve their targets of take up work and to be able to advise on the full range of benefits applying to older claimants. Janet Gurney 1. Introduction 1.1 Age Concern England (the National Council on Ageing) brings together Age Concern organisations working at a local level and 100 national bodies, including charities, professional bodies and representational groups with an interest in older people and ageing issues. Through our national information line, which receives 225,000 telephone and postal enquiries a year, and the information services oVered by local Age Concern organisations, we are in day to day contact with older people and their concerns. 1.2 Around the time of the first anniversary of the introduction of Pension Credit it is timely to look at what has been achieved so far and to consider its future. Age Concern gave written and oral evidence to the Committee’s 2002 inquiry into Pension Credit and in preparing this response we have looked back at our views at that time. We have also drawn on: the day to day contact Age Concern locally and nationally has with older people; Age Concern research in April–May 2004 with over 2,600 older people of whom nearly 500 reported receiving Pension Credit;25 other research and statistical information; and the regular contacts we have with the DWP and other organisations at a local and national level.

2. Summary Overview of pension credit 2.1 Age Concern supports the Government’s aims of tackling poverty and rewarding and encouraging saving. While Pension Credit has brought welcome additional income it is not a long term solution. We need an increased basic state pension and better opportunities for saving in order to reduce the need for reliance on means-testing in retirement.

Impact for current and future pensioners 2.2 Our research and the feedback from the older people we are in contact with shows that extra amounts have made a diVerence to the lives of many but others are disappointed. There remains strong support for a higher state pension. 2.3 We believe that the increasing emphasis on means-testing in retirement is likely to have a disincentive eVect on saving for retirement among those with modest life time earnings. 2.4 There are problems due to the ways that Pension Credit interacts with other benefits and charging regimes for older people. There needs to be integrated administrative procedures and closer alignment of rules. People also need good information about the impact of Pension Credit on state and non-state support.

Recommendations for policy changes 2.5 Age Concern welcomes the policy changes that have improved income-related benefits for older people. There are further changes we wish to see, in particular: — an extension of the period of time that Pension Credit can be paid during a temporary stay abroad; — an increase in the earnings disregard; and — the abolition of the £16,000 capital limit for Housing and Council Tax Benefit for all claimants.

Take-up and service delivery 2.6 If Government targets for 2006 are met then take-up will still only be around three-quarters despite proactive eVorts made by the Pension Service and others. 2.7 The telephone service is providing an eVective and eYcient service for many people but is not suitable for everyone. We have some concerns that inaccurate or incomplete information is sometimes given especially in non-standard or more complicated cases. Feedback on the role of the local Pension Service has generally been positive.

25 The impact of Pension Credit on those receiving it. Age Concern, 2004. Work and Pensions Committee: Evidence Ev 143

2.8 It is vital that the progress made by the Pension Service is not lost due to job cuts and further reorganisation and we are monitoring the impact of changes on the service received by older people Direct Payments 2.9 The change to Direct Payments is causing concern and distress for many older people. We are worried that the cheque payment service, aimed at some of the most vulnerable older people, relies on a weekly cheque arriving safely and on time.

3. Overview of the Role of Pension Credit in Retirement Income 3.1 Age Concern strongly supports the Government’s aims: of tackling pensioner poverty; ensuring people are rewarded from having saved; and encouraging saving for retirement. We welcome the increases in income that Pension Credit has brought to many older people. However, while in many ways it is a better and more generous system than Minimum Income Guarantee (MIG) we are concerned at the extension of means-testing which has inherent problems such as incomplete take-up, complicated administration and potential savings disincentives. Age Concern believes that everyone should be able to achieve an adequate income in retirement through a combination of a basic state pension paid at a level to cover basic costs and second pensions and other private provision. We are not arguing for current benefits to be reduced but for an increased state pension and better opportunities for saving so that far fewer people need to rely on means- tested top-ups. Age Concern supports the Government’s aims of tackling poverty and rewarding and encouraging saving. While Pension Credit has brought welcome additional income it is not a long term solution. We need an increased basic state pension and better opportunities for saving in order to reduce the need for reliance on means-testing in retirement.

4. Pension Credit and the Incomes of Current Pensioners 4.1 For current pensioners Pension Credit was introduced to continue the role of the Minimum Income Guarantee in tackling poverty, and to introduce a new element which would reward people for having saved. At the end of August 2004, 2.61 million pensioner households (3.17 million individuals) were receiving Pension Credit26—of these 1.94 million households (2.36 million individuals) were receiving extra as a result of its introduction. At the end of May 2004 the average gain of those whose money had increased was £15.14 per household. 4.2 One of the aims of the Age Concern Pension Credit research referred to above was to find out from older people what impact this had made on their lives. In monetary terms just over a quarter (26%) said they have gained up to £5, a similar proportion said £5–10 a week (27%) or £10–£20 (27%), while just under one in 10 (9%) reported it had increased their income by more than £20 a week. Another tenth (11%) did not know. Although most reported receiving modest additional amounts just over a half (53%) agreed or tended to agree that it had made “a noticeable diVerence to my quality of life”. When asked in what way, the most common response was that people worried less about paying for essential items such as food and bills. However, not everyone reported any positive impact with around a third saying Pension Credit had made no noticeable diVerence. Despite this the vast majority (85%) of Pension Credit recipients said they would definitely recommend that others should apply and a further 11% said that they would possibly recommend it. 4.3 While the research shows many are pleased with the benefit they receive, Age Concern has also been contacted by older people who are unhappy with the system or the amount they have been awarded and complain that it was hardly worth the process of applying. And while the system is more generous than MIG, as with any kind of means-test there will always be those who miss out. “Many like my parents have worked all their lives, never claiming any benefit whatsoever, and managing to save a little money for their old age are now being penalised in this way”. Daughter of a pensioner couple whose income is around £5 over the level for receiving savings credit. A local Age Concern said that many older people they had dealt with felt savings credit in particular was “Much ado about Nothing”—a lot of form filling in for little return. 4.4 Despite the positive feedback from many older people in our study there was strong support for a better state pension with 90% agreeing that people should have an adequate pension and not need to apply for additional income support from income-related benefits. Although just over half (54%) felt that means- testing was a fair way to deliver benefits a higher proportion (57%) said Pension Credit should not be means- tested and nearly three-quarters (73%) said means-testing put people oV. At first sight these findings appear somewhat contradictory but it suggests that while people can rationalise that means-testing seems a fair approach in principle, they do not want to go through the process themselves and believe it to be a deterrent to others.

26 Pension Credit Monthly Progress Report, September 2004. Ev 144 Work and Pensions Committee: Evidence

Our research and the feedback from the older people we are in contact with shows that extra amounts have made a diVerence to the lives of many but others are disappointed. There remains strong support for a higher state pension.

The impact for disadvantaged groups 4.5 As would be expected the majority of Pension Credit claimants are women as they tend to have lower incomes than men. Age Concern has been working to highlight the diYculties that many older women face in trying to build up an adequate retirement income and campaigning for changes to bring about better pension coverage.27 We welcome the increases in income that older women have received but for the reasons explained above we do not believe means-tested benefits are a long-term solution to poverty in retirement. 4.6 Older people from black and minority ethnic (BME) groups are more likely to be in poverty than pensioners in general (nearly a third as opposed to just over a fifth) so it would therefore be expected that percentages claiming Pension Credit are higher. We have not yet seen any national breakdown by ethnicity but our research found a higher percentage of older people from BME groups were in receipt of or had applied for Pension Credit than among the sample as a whole —this is despite the fact that more people from BME groups were unaware of Pension Credit (see more section 6 for more on awareness).

A simpler system? 4.7 One criticism of income-related benefits has always been their complexity and Pension Credit was intended to address some aspects of this. On the other hand any moves to make a means-tested system fairer and more generous can often introduce new layers of complexity. In our view although Pension Credit has in some respects made the system simpler, in other ways it has had the opposite aVect. These areas are summarised below and covered in more detail later on. Claiming: the emphasis on telephone claims has, for those who wish to claim in this way, made the system easier however, this is not suitable for everyone. Calculation: the calculation of savings credit, while ingenious, is extremely hard to explain or understand. Income assessment rules: in contrast to Income Support, income to be taken into account is specified in legislation. Although most forms of income that were previously included are specified there are some diVerences which has made the position simpler—notably voluntary and charitable payments do not aVect Pension Credit. Assessed income periods: While increases in some forms of income and capital do not needed to be reported straightaway making the system less onerous, it may not always be clear to people what must be reported to which Government department. More people included: Making the system more generous brings many more people into entitlement. This then increases the numbers who need to consider the interaction between means-tested benefits and other financial support when making decisions for example about future saving or releasing equity. Links with other forms of financial support: the more generous Pension Credit rules have not necessarily been reflected in other forms of support for older people leading to some confusing discrepancies.

Understanding the system 4.8 Particularly in the early stages of Pension Credit Age Concern received many enquiries from older people wanting more information or to know if they were likely to qualify. People are still often confused and some assume because it is called a “pension” it is part of the state pension and therefore not means- tested. Some older people with partners have been disappointed to learn they cannot qualify based on their individual circumstances. 4.9 The Government has argued that it does not matter that the savings credit calculation is complicated because people do not need to be able to work it out. However, we know that for some people this is precisely want they do want to do. People contact us with their own calculations for checking or to get a second opinion on an award notice received. For these people it is important to know that they are not being under or overpaid benefit. 4.10 Due to the complexity it is diYcult for people to know if they will qualify and if so for how much. Knowing the likely outcome of a claim is important for encouraging take-up. DWP research28 found that 70% of people in the study who were entitled to Minimum Income Guarantee but not claiming said they would only claim if they knew they were entitled. In promoting Pension Credit the DWP and others have to consider whether to provide some headline figures to show levels of entitlement. While figures can give people a useful indication of whether to claim, they can be also be misleading as, for example, people who have higher incomes may still be entitled due to extra additions due to caring or disability. There has also

27 See for example One in Four a joint Age Concern/Fawcett Society report, 2004. 28 Entitled but not claiming? Pensioners, the Minimum Income Guarantee and Pension Credit DWP research report 197. 2003. Work and Pensions Committee: Evidence Ev 145

been debate about which figures to use—the guarantee levels might put oV people who qualify for the savings credit alone, while the upper income figure for savings credit can raise unrealistic expectations as some people assume their income will be topped up to this higher amount.

4.11 Aside from the savings credit calculation there are complex interactions with other parts of the benefit system. Some examples of the kinds of issues which Age Concern and other advisers have to try to explain include: — An older carer receiving a state pension is refused Pension Credit because her income is a little too high. An adviser may need to explain that she should claim a diVerent benefit—Carer’s Allowance. This will not be paid because of her pension but if she reapplies for Pension Credit she may now qualify because of the carer addition. — A disabled person can get an extra amount with their Pension Credit if they are severely disabled but this depends on who they live with and this amount could stop if their carer claims Carer’s Allowance (although not if the Carer’s Allowance cannot be paid because of overlapping benefits rules). — A man contacting Age Concern wanted an explanation as to why, when he applied for Housing Benefit/Council Tax Benefit he and his wife were considered to need around £181 to live on (the level at which he could get full help with housing costs) whereas when he applied for help with dental treatment the system expected him to be able to live on around £160 a week.

5. Pension Credit and Future Pensioners

5.1 In addition to improving the income of current older people the Government stated that Pension Credit would “boost the incentive for future pensioners to save for their retirement”.29 In our 2002 response to the Committee we stated that we were not convinced by the argument that Pension Credit would encourage people to save more for retirement. While Pension Credit means that most (but not all) people will be better oV from having saved, the amounts gained may not be worth forgoing current income. People are unlikely to know the details of Pension Credit but many will have picked up the message that more people are becoming entitled to top-up retirement benefits and this may have a disincentive rather than incentive aVect. There continues to be major concern about the adequacy of saving for retirement and possible future entitlement to benefits will be only one of many factors that will influence people’s decisions. However, we would like to see the DWP carrying out research to explore this matter further. Ideally this would have started before the introduction of Pension Credit to monitor any changes over time.

5.2 The current system makes it diYcult for individuals on low and modest incomes and their advisers to decide whether they should save for retirement. This will apply particular to many women and other groups who may have long periods out of the labour market or in low paid part-time work so will have more limited opportunities to save on a regular basis. A man contacted Age Concern to ask whether someone on a low income should be contributing to a stakeholder pension. He had been told by one IFA that it was a waste of time while another said he was not sure if a stakeholder pension would be paid on top of Pension Credit. We were able to explain the current rules but of course could not advise whether or not he should be contributing to a stakeholder pension.

5.3 In the absence of further evidence we do not believe that Pension Credit is providing an incentive to save—if anything it is likely to deter saving. We continue to believe that a basic state pension paid at an adequate level to cover basic costs would provide a firm foundation on which to build up private income and oVer the best incentive for saving. We note that many organisations and commentators share the view that there should be a higher state pension and less means-testing.

We believe that the increasing emphasis on means-testing in retirement is likely to have a disincentive eVect on saving for retirement among those with low and modest life time earnings.

6. Pension Credit and Other Benefits,Charging Procedures, and Sources of Financial Support

6.1 Pension Credit is one way of a range of sources of financial support for older people. This section looks first at specific issues in relation to the links with Housing Benefit (HB) and Council Tax Benefit (CTB) and then considers how Pension Credit links with other financial sources more generally.

29 The Pension Credit: the Government’s proposals DWP, November 2001. Ev 146 Work and Pensions Committee: Evidence

Pension credit, housing benefit and council tax benefit

6.2 We have had complaints from older people who have been awarded savings credit only to find that most of this is lost through increased rent and council tax. In October 2003 increases to HB and CTB applicable amounts were made to ensure that everyone who claimed Pension Credit before October 2003 received all of any Pension Credit awarded and did not lose any HB/CTB. However, those who claim now and who are already receiving the higher levels of HB/CTB find that if they are awarded savings credit alone each £1 awarded results in a 65 pence reduction in HB paid and a 20 pence reduction in CTB. A woman wrote to Age Concern on behalf of her 79 year old mother who had been “delighted” to receive an extra £10.15 a week. She had been reluctant to claim but was persuaded to do so by her family having been reassured that other benefits would not be aVected because her letter from the Pension Service dated August 2003 stated “Pension Credit will not aVect any benefits you are already receiving, for example Housing Benefit and Council Tax Benefit”. However, when she was awarded savings credit in early 2004 most of this was eaten up by increases in HB and CTB leaving her very disappointed. 6.3 This loss of benefit would not occur if savings credit was disregarded for the purposes of HB/CTB. However, had the Government decided to do this then it presumably would not have increased the HB/CTB applicable amounts—a move that has benefited many older people including those not receiving Pension Credit. In the context of the current system the most important thing that can be done for new claimants is to ensure that Pension Credit, HB and CTB are all assessed at the same time as discussed below. However, we anticipate that we will continue to hear from people already claiming HB/CTB who understandably question why one part of Government awards a benefit and another takes most of it away. 6.4 Some older people have reported that they are worse oV than before and one lady contacting Age Concern said she had written to the Pension Service asking to cancel her Pension Credit. In fact no-one should be worse oV by claiming Pension Credit. In some cases the older person has misunderstood the position however, in other situations administration has been poor. For example we have heard of local authorities wrongly asking people for backdated payments (although Pension Credit can be backdated to 6 October 2003 HB/CTB should only be adjusted from the date the local authority receives notification from the Pension Service). 6.5 We have also heard of other examples of poor administration including people who have been told incorrectly by local authority staV that no-one can receive HB/CTB if they have more than £16,000 savings (there is no capital limit if someone is in receipt of the guarantee credit). A local Age Concern reports that their authority has still been asking for verification even though they should not be doing this because information has already been verified by the Pension Service. These problems emphasise the need to align capital rules and administration as discussed below.

Joining up systems—administration and take-up

6.6 As we discuss below much has been done by the Pension Service to encourage take-up and we welcome the approach that has been taken. While there is an aim of providing a more holistic service covering all benefits and support—for example through the proposed Link-Age Service (previously known as the Third Age Service) and Joint Teams—there is a long way to go. Older people need information and support about the whole range of available services from one source but the administrative systems also need to be much more closely linked. 6.7 Although local authorities must now use data on income and capital verified by the Pension Service we still have a system that is not joined up. For example an older person who has already given a large amount of data about income, savings and other personal details to the local authority for claiming CTB and separately to the Health Benefits Division to get help with health costs such as dental treatment may still need to give virtually the same detailed information to the Pension Service in order to claim Pension Credit. People may not know, or be prepared to give the same information yet again. A man contacted Age Concern to express his concern that, since he had started to draw his pension he and his wife’s income had gone up by only a modest amount but this had taken them above the (then) MIG level so he was having to pay towards rent and council tax and was expected to pay the first £60 of dental treatment. From his details the adviser explained he was likely to qualify for around £10 savings credit although this would reduce housing costs benefits. Because of this, his worry that this would increase further the amount he had to pay for dental treatment, and the reluctance to make another claim, he does not want to apply for the Pension Credit he is entitled to. A disabled pensioner who is very reluctant to have any form of outside help was finally persuaded to ring the Pension Credit claim line by her daughter who is her carer. She found the process easy and the member of staV helpful but decided making one claim was enough and said she did not want to claim CTB. Although she was awarded guarantee credit, so would be likely to receive full CTB, she has yet to be convinced to ask for help again. Work and Pensions Committee: Evidence Ev 147

6.8 Another area where the systems need to be joined up is where people move from one benefit to another. So while when Pension Credit was introduced people were automatically transferred from Income Support to Pension Credit this no longer happens. Once people reach the age of 60 they need to reapply even though Jobcentre Plus may hold all the information required (see also the section on delays later). 6.9 We know that the intention is make the systems more integrated but it is frustrating that little progress seems to have been made towards that goal. It is essential that we move as quickly as possible towards a system where all information provided by an individual for the purpose of claiming benefits or financial support is (with the individual’s permission) automatically used to assess other entitlements with the person contacted for further information if needed. This would cut down administration needed, reduce hassle for individuals, and improve take-up among those already in the system. The Pension Service and other organisations could then concentrate their take-up work on those who may so far have limited contact with Government services.

Joining up systems—the rules

6.10 Major changes have been made to the systems of financial support. While these may have been done for very good reasons it does mean that we now have very diVerent systems of assessment and support— the most striking being diVerences between social security benefits and tax credits leading to complications for those entitled to both (which includes some older people). We also have diVerences in the income-related benefits for people of diVerent ages so for example the rules for Housing Benefit depend on whether someone is aged under 60, 60 to 64, or 65 and over. 6.11 Many, but not all, of the new features of Pension Credit have been reflected in HB and CTB for people aged 60 over. However, other systems of financial support do not necessarily follow the same rules. A further seemingly unnecessary complication is that diVerent terms can be used—why for example are there “applicable amounts” and “premiums” for severe disability and carers in HB/CTB but “appropriate amounts” and “additional amounts” in Pension Credit? 6.12 It is little wonder that older people, and their helpers and advisers, find the systems diYcult. As an example some of the diVerences in just one aspect of assessment—the capital rules—are given below. To avoid even greater complexity we have only included health related limits for England (limits in Scotland and Wales diVer).

CAPITAL RULES IN BENEFITS AND CHARGES FOR PEOPLE AGED 60 AND OVER

Upper limit* Lower limit*

Pension Credit None £6,000 Pension Credit (care home) None £10,000 Local authority (LA) financial £20,000 £12,250 assessment—care homes (England) Local authority financial assessment— £20,000 but can be higher at £12,250 but can be higher home care (England) LAs discretion LAs at discretion HB/CTB if receiving guarantee credit None Passported from PC HB/CTB if not receiving guarantee credit £16,000 £6,000 Income Support, Jobseekers £12,000 £6,000 Allowance** Health benefits if receiving PC guarantee None Passported from PC Health benefits (if not getting PC £12,000 £6,000 guarantee) Health benefits (care home) England if £20,000 £12,250 not receiving PC guarantee Independent Living Fund £18,500 £11,500 Tax credits None—income only assessed * Capital between the upper and lower limit is assumed to produce an income of £1 for every 250 or £1 for every 500 (depending on the type of benefit/assessment) although LAs have the discretion for a more generous system with home charges. ** People aged 60 and over can receive IS/JSA in some circumstances but would normally claim Pension Credit instead.

6.13 We acknowledge that the Government has chosen to take a diVerent approach to in work and out of work financial support and this will inevitably lead to diVerences. However, in terms of benefits for older people we believe that there is much that should be done to try to align systems. A first step would be to remove the HB/CTB capital limit for people not receiving guarantee credit. Ev 148 Work and Pensions Committee: Evidence

Equity release 6.14 In general once people retire from employment, there is little they can do to increase their income or savings so they do not need to consider whether their behaviour will aVect their Pension Credit entitlement. An exception for home owners is the possibility of taking out an equity release plan. Under the previous MIG/CTB rules the system was relatively straightforward—any increase in income or capital had to be reported and was likely to aVect benefit payable. However, the situation is diVerent with the October 2003 rules. Not only have more people been brought into the scope of income-related benefits but the position is more complicated. For example due to the assessed income period (AIP) an increase in income or capital may not aVect Pension Credit straightway although if something happened to end the AIP it would be taken into account. 6.15 From October 2004 the sale of one type of equity release product, lifetime mortgages, will be regulated, but the other type of scheme, home reversions, will not be regulated until a later date. Under the regulated scheme those selling, or advising about schemes, will be required to consider whether taking out a product is the right option for the individual and this will include considering the potential impact on benefits. However, it is a complicated area and financial advisers cannot be expected to be experts in all the details of welfare benefits. There is a danger that people may take out a scheme without being fully aware of the implications for their current or future benefit position or that advisers, concerned at potential mis- selling, may not wish to sell products to those with modest resources as they would not feel confident enough about the benefit position. 6.16 It is essential that older people, and their formal and informal advisers, are very clear about the impact of equity release on current and possible future entitlements. Age Concern has been in discussion with the Council of Mortgage Lenders who are considering how best to that ensure advisers and lenders have appropriate guidance. There is also a need for the DWP to work with the regulator, providers and interested organisations on this issue.

Passporting 6.17 An important reason for receiving, even a small amount of Pension Credit, is that it passports someone to other benefits such as the ability to claim social fund payments. With two elements of Pension Credit it can be either the guarantee credit, or both savings and guarantee credit which can passport people to other sources of help. This can complicate the system especially as our research found nearly three in 10 (29%) did not know which element(s) they were receiving. We welcome the fact that those with slightly higher incomes receiving savings credit only can now apply for help such discretionary social fund payments and Warm Front Plus however, we believe it would be fairer and simpler if the systems were consistent so either element passported people to other sources of support including the maximum help with health costs such as dental treatment.

Pension credit and charging policies 6.18 Age Concern was very disappointed in the way the Department of Health responded to the implementation of Pension Credit. It has created a number of anomalies and, has meant that those getting the savings credit do not always see the full value of it. In our view the changes the Department of Health made in relation to Pension Credit do not reflect the Government’s policy of rewarding those who have saved. 6.19 Our main concern is that for residential care, the amount that residents can keep extra if they have put money into savings is a mere £4.65, a long way short of the maximum amount allowed in the savings credit (of £15.51). In contrast the applicable amounts were altered in Housing Benefit and Council Tax Benefit to make sure that people saw the full value of having saved. People in care homes have thus been disadvantaged. 6.20 For those at home there is a straightforward disregard of whatever the person happens to receive via the savings credit, but this in itself can lead to an anomaly in that a person who may have saved too much to get the full savings credit (or even to get any at all), could by the charging system be left with less money than someone who has saved less. 6.21 Although Pension Credit is not supposed to make anyone worse oV, there has been a group that has been adversely aVected—those people where one of a couple goes into a care home for a temporary period. Income Support rules allow the DWP to base assessment on joint income and capital, but allow each member of the couple a single person’s applicable amount. Pension Credit however, only allows them their usual rate at home as a couple. Therefore unless the local authority applies more generous charging rules older people who are having respite care could be worse oV than they would have been under Income Support. It has been left to local authority discretion how much they leave the partner at home. This does not appear to be advancing the Government policy of giving carers breaks from caring. 6.22 The Department of Health has kept its upper and lower capital limits. It has also kept tariV income at the rate of £1 for every £250. For domiciliary care local authorities have discretion whether to follow the capital limits and tariV income as set for residential care, they can be more generous. From research Work and Pensions Committee: Evidence Ev 149

undertaken for Age Concern the majority of local authorities responding followed the capital limits for residential care and only a very few followed the more generous assumed income for Pension Credit. Thus, because of not changing the tariV income rules to be in line with Pension Credit, some people found that their extra guarantee credit was wiped out by increases in charges. It adds to the administrative complexity. 6.23 In general the Department of Health has decided to continue to follow rules for Income Support where they diVer from those of Pension Credit. This is surprising considering that approximately 80% of people in care homes are older people and so in receipt of Pension Credit rather than Income Support. Reviews of charges are held each year whereas a person may well be in an assessed income period for Pension Credit. This combined with the diVerent levels of tariV income means that it becomes increasingly diYcult for staV to administer and for residents to understand their charging calculations as each year passes. There are problems due to the ways that Pension Credit interacts with other benefits and charging regimes for older people. There needs to be integrated administrative procedures and closer alignment of rules. People also need good information about the impact of Pension Credit on state and non-state support.

7. Pension Credit Policy Issues

7.1 Pension Credit introduced a number of favourable changes and since the original Pension Credit proposals there have been some further policy changes that Age Concern has strongly supported—in particular the rules announced in the March 2003 Budget that people can continue to receive Pension Credit (and state pensions and some other state benefits) for up to one year after admission to hospital and more recently the announcement that Pension Credit will continue to be backdated for up to a year after October 2004. We also welcome the fact that the lump sum that people will be able to receive if they choose to defer their state pension will be disregarded for the purposes of Pension Credit (although the impact on benefits will be only one factor that people need to consider when making a choice so it is important that people have access to good information). However, there are other policy changes that would make the system fairer and more acceptable.

Pension credit during a temporary stay abroad

7.2 Under the current position, Pension Credit normally stops after four weeks abroad. This particularly aVects older people from black and minority ethnic groups with friends and relatives living some distance away who may be able to visit infrequently but when they do will often wish to stay abroad for longer than four weeks. Not only do people face a loss of income for that period, but will need to reapply again on return (even if they had originally been given an assessed income period of five years). Age Concern launched a campaign on this issue and the Government has announced a review of the rules saying “oYcials are currently researching a range of options for potentially extending the period for which Pension Credit can continue to be paid for customers who go abroad for less than 52 weeks”.30 We are very pleased at this and hope for an early announcement that the period of time before Pension Credit is stopped during a temporary stay abroad is increased to at least 13 weeks.

Assessment of capital

7.3 Age Concern welcomed the abolition of the capital limit for Pension Credit which has helped those with low incomes but modest levels of capital. We were also pleased that the previous tariV income of £1 for every £250 over £6,000 was modified. There are arguments for and against a system of assumed income as opposed to assessing actual income but on balance we decided that an assumed income system was probably fairer and easier. However, we argued that: the assumed income should be £1 for every £1,000 over the lower limit; the lower limit should be regularly reviewed and increased; and consideration should be given to a higher limit of £10,000 in line with the limit in care homes. These views still stand as we continue to hear from people who feel the current assessment and assumed rate is unfair. 7.4 The complexities of diVerent capital rules for diVerent benefit/charging regimes were considered above. Retaining a £16,000 HB/CTB capital limit for people not receiving the guarantee credit can also produce unfair outcomes in policy terms. For example a single person with a basic state pension and £18,000 savings would be entitled to a small amount of guarantee credit, savings credit, and get benefit to cover all their rent and council tax. However, if they also had a couple of pounds of state additional pension or occupational pension they would no longer get guarantee credit and would not be entitled to any help with rent and council tax making them considerable worse oV.

30 House of Commons Hansard 13 September 2004, 1394W. Ev 150 Work and Pensions Committee: Evidence

Earnings disregard 7.5 Under Pension Credit in most cases earnings of up to £5 a week for a single person and £10 for a couple are disregarded. In its 2002 report the Committee agreed with evidence presented by Age Concern and others that this disregard was too low and “strongly recommended” that the first £40 of earnings was ignored. We believe that the case for increasing the disregard remains just as strong—if not stronger given the Government’s emphasis on encouraging older people to continue to work if they wish to, and the that fact that the level of disregards has not changed since 1988.

Assessed income period 7.6 Age Concern welcomed the introduction of longer awards and the provisions which mean that people do not need to report increases in savings and certain types of savings. However, we noted that as savings are more likely to go down rather than up in retirement it was important that people were aware that they should report changes that might increase their income. 7.7 We also have some concerns that if someone mistakenly does not report a relevant change this may not be picked up for several years potentially leading to a large overpayment. For example a person receiving Pension Credit savings credit only who inherits money that takes their savings to over £16,000 may be aware that they do not need to tell the Pension Service but not realise that they do still need to tell the local authority who will stop payment of HB/CTB. There can also be uncertainty if someone spends their capital and is not sure whether at a later date they will be assessed as having notional capital because they are judged to have deprived themselves of capital in order to increase benefit. An older couple receiving Pension Credit guarantee with a five year assessed income period won £125,000 on the lottery which they wished to give to their grandchildren. They asked Age Concern if the win needed to be reported to the Pension Service and, if not, in five years time when their benefit was reassessed would their benefit be aVected because they had wanted to help their grandchildren. We could answer the first question but not the second as issues of notional capital are considered in an individual basis. 7.8 It is too early to see if the introduction of AIPs will cause diYculties although we hope that the Pension Service will deal sensitively with cases where people have spent savings and with overpayments that arise when it is clear there was no intention to mislead. We would also like to see evaluation of the impact of AIPs to assess the positive advantages these have brought for individuals and whether there are any disadvantages, such as confusion because the rules can be diVerent for other benefits. Age Concern welcomes the policy changes that have improved income-related benefits for older people. There are further changes we wish to see, in particular: — an extension of the period of time that Pension Credit can be paid during a temporary stay abroad; — an increase in the earnings disregard; and — the abolition of the £16,000 capital limit for Housing and Council Tax Benefit for all claimants.

8. Pension Credit Take-up 8.1 Of the estimated 3.75 million pensioner households currently entitled to Pension Credit, by the end of August 2004, 2.61 million were in receipt of the benefit. Although there have been a large number of claims since its introduction, this means that 30% are still missing out. And even if the DWP meets the Spending Review targets of 3 million households in receipt of Pension Credit by 2006 and 3.2 million by 2008 there will still be around a quarter who will not be receiving the Pension Credit they are entitled to.31 8.2 There is a considerable amount of research and anecdotal evidence around why older people do not claim their full entitlements which point to a number of inter-related factors including: lack of awareness and basic understanding of benefits; people being unclear about their own individual entitlement; diYculties with the process of claiming; and negative attitudes surrounding claiming benefits. 8.3 The Pension Service (and other organisations including Age Concern) has done much to publicise and inform people, and to work proactively to encourage claiming. We note that in designing the benefit and its administration, attempts were made to address some of the barriers. Despite this our research earlier this year found that over one in 10 (11%) pensioners were not aware that Pension Credit existed. The issues of understanding and complexity have already been considered. In addition Pension Credit remains a benefit that depends on an assessment of someone’s income, savings and other circumstances, and as such can never avoid completely the negative factors associated with means-testing (regardless of how it is described or presented). “I am very disappointed with the tone of your letter and the further information you are requesting as I find it overly intrusive and it makes me out to be some sort of benefits/claims cheat . . . My building society statements showing account name and numbers are confidential information between myself

31 DWP estimates of numbers eligible in 2006–07 and 2008–09 are 3.95 million and 4.25 million respectively. Work and Pensions Committee: Evidence Ev 151

and the Building Society . . . It in fact would be easier to pick up that 25 tonne whale that went aground in Scotland than to pick up a few extra pounds per week that I am supposedly entitled to. I do not wish to pursue my claim for the elusive Pension Credit.” Letter sent to the Pension Service and copied to Age Concern from an 84 year old woman who having applied over the phone decided to withdraw her claim rather than supply documents. 8.4 So while we believe that more can be done to encourage further take-up unfortunately we conclude it will never be possible to achieve anything approaching full take-up. It is worth noting that there is a near 100% take-up of the state pension even though this is not paid automatically—it must also be claimed. 8.5 Although the Government focus has generally been on Pension Credit we welcomed the Government’s Council Tax Benefit take-up campaign earlier this year and look forward to an evaluation of this. It is important that take-up initiatives should have an ongoing and holistic approach covering all benefits and services and not be dictated by political factors. The links with other benefits was considered earlier. If Government targets for 2006 are met then take-up will still only be around three-quarters despite proactive eVorts made by the Pension Service and others.

9. Implementation and Service Delivery 9.1 Given the major reorganisation brought about by the introduction of the Pension Service at the time that Pension Credit was being planned and implemented, the Pension Service has overall performed well. While there have inevitably been some problems, those who had predicted major problems on the scale that was experienced when new tax credits were introduced were proved wrong. The transfer from MIG went smoothly and although some people were unsure about what was happening, we did not have cases reported to Age Concern where people were not automatically transferred.

Awareness of pension credit 9.2 The Pension Service has been carrying out a major information and publicity campaign about Pension Credit. This includes writing to all pensioner households, high profile national media coverage, and follow up contact with those who appear entitled but have not claimed. This appears to have been eVective in terms of increasing awareness as the Age Concern research found that among 2,656 older people surveyed nearly nine out of 10 said they had heard of it. However, this still meant just over one in 10 (11%) were not aware of Pension Credit. 9.3 The most commonly mentioned way of hearing about Pension Credit was through media adverts and news items/articles followed by information through the door. This contrasts with an earlier National Audit OYce survey (before Pension Credit) which found that the most common way of finding out about benefits was through friends and family.32 9.4 Our research found little diVerence in awareness by gender, while breaking the findings down by age showed that those aged 65–74 were a little more likely to have heard about Pension Credit than those aged 60–64 or those aged 75 and over. There was also a somewhat lower rate of awareness (17%) among ethnic minority older people interviewed and this group was more likely than the white population to say they had received their information from family and friends showing the particular importance of informal networks.

Working in partnership 9.5 There is now a much greater willingness for the DWP to work in partnership with local authorities and voluntary organisations. Nationally Age Concern is a member of Partnerships against Poverty (PAP) and the PAP Pension Credit sub-group. The latter has met regularly since mid-2002. It has been a very useful forum for information exchange, to comment on campaign materials, and to give an opportunity for partner organisations to feed in their views and, in some cases, to influence the campaign. However, there have been times when we would have like to have had opportunities to influence at earlier stages. The group has also provided a useful contact point for raising specific issues relating to policy, administration or problems raised by individuals and local organisations. Finally it has also given organisations a better understanding of the task that the Pension Service faces in implementing Pension Credit. 9.6 Locally many Age Concerns work closely with the Pension Service and other organisations. Age Concern welcomes the partnership approach—the challenge for us locally and nationally is to ensure that partnership working improves the service for older people without compromising our independence. It is important for all partners to be clear about their diVerent, but complimentary, roles and responsibilities.

32 Tackling pensioner poverty: encouraging take-up of entitlements National Audit OYce, 2002. Ev 152 Work and Pensions Committee: Evidence

9.7 We also need to ensure that developments through Link-Age and Joint Teams bring about positive benefits for all older people. For example we would be concerned if close links with the Fairer Charging sections of Local Authorities resulted in the local Pension Service focussing on local authority clients at the expense of those who need support but are not being assessed for care charges.

Delays

9.8 In general the process appears to work smoothly and eYciently although unsurprisingly, particularly around the introduction of the Pension Credit, we heard from some people who have had experienced delays and other problems for no apparent reason. One area of ongoing concern is when people reach 60–65 and need to move from Income Support/Jobseeker’s Allowance to Pension Credit. When someone claiming Income Support reaches 60 their benefit will stop and they must claim Pension Credit. Jobseeker’s Allowance stops at pension age. Although people are meant to be contacted and invited to claim this does not always happen and we have come across cases where people are left without money. We understand the DWP are looking at this issue but as stated earlier it is an example of where systems need to be more integrated. Another time of transition when delays can occur is after bereavement. We have heard from widows waiting for the state pension to be increased based on their late husband’s record who are applying for Pension Credit for the first time and are experiencing long delays.

The telephone service

9.9 A major feature of the Pension Credit campaign has been to encourage telephone claims and three- quarters of people who have applied have used this method. This approach is also central to the way that the Pension Service works more generally. For many older people this has proved an eVective and easy way of claiming and contacting the Pension Service. Having said that there are many older people who have diYculties dealing with business on the phone, perhaps because they have hearing diYculties; are a little confused; or because English is not the first language.

9.10 In terms of the service oVered there have been times when the lines have been under pressure and we have had some complaints from people who have had diYculty getting through, but our general impression is that most of the time people get through quickly and staV are polite and try hard to help. Age Concern England’s national information line staV report cases of Pension Credit Claim Line staV going out of their way to contact them with concerns about older people not relating to Pension Credit. We are therefore not surprised that the Pension Service’s research on the application process33 found high levels of satisfaction.

9.11 However, feedback from national and local Age Concern Information and Advice staV suggests that staV on the Pension Credit claim line and at Pension Service regional centres are not always suYciently well informed about more complicated issues relating to Pension Credit or linked benefits or when they need to go “oV script”. Our national information staV refer to a “steady stream” of calls relating to lack of knowledge or incorrect information about Pension Credit and related issues. Some examples are: — Particularly in the early days some older people were referred to the national Age Concern Information Line for basic information about Pension Credit. — A local Age Concern worker reports that she has had calls to the Pension Service lasting 45 minutes trying to resolve queries that she would have expected to be dealt with quickly by frontline staV. — Incorrect information about issues relating to claiming on behalf of someone who is mentally incapacitated. — A client contacted Age Concern wanting to know the position regarding payments for mortgage interest if she purchased the other half of her property (currently belonging to a housing association). She was told that the Pension Service could not answer this but Age Concern or Citizens Advice would be able to. — Some confusion around Assessed Income Periods (AIPs)—for example someone being told that because they had an (AIP) the capital from the sale of their home would not be reassessed when they move to a care home.

33 A review of the campaign to May 2004 Pension Service, 2004. 34 House of Commons Hansard, 8 July 2004 col 838. Work and Pensions Committee: Evidence Ev 153

Additions for caring and disability

9.12 It is important to ensure that people receive any additions for severe disability or caring that they are entitled to and we have heard of cases where these additions have been omitted or people have received incorrect or incomplete information from claim line staV. 9.13 Currently 22% of Pension Credit recipients receive the severe disability additional amount and 4% receive the carer’s additional amount.34 Following discussions at the Partnership against Poverty group the Pension Service has taken steps to improve the information for staV around the carer’s addition and Carer’s Allowance and we welcome this. A local Age Concern reported two where Pension Credit had been miscalculated due to premiums being missed. In one case this had led to a short-fall of £24 and in the other nearly £80. When the adviser contacted the Pension Centre the telephone staV appeared not to understand about additional amounts. She had to insist on speaking to a more senior member of staV but once she got through the problem was sorted out very quickly. The errors were only picked up because Age Concern had helped with the application and were following up to make sure awards were correct. As the adviser said “It leads me to wonder how many people who applied over the telephone have been short-changed and don’t realise it.” 9.14 It is important that anyone giving information about, or assisting with a claim for, Pension Credit not only ensures that people receive appropriate additions if they are entitled to Attendance Allowance/ Disability Living Allowance or Carer’s Allowance, but also advises people to make a separate claim for these benefits (or at least refers people to other sources of support) where appropriate. The systems are complicated and most older people cannot be expected to understand the interactions between benefits, so staV need good training on this matter. For example if one member of a couple receives Attendance Allowance we would always expect someone taking a claim to explore whether the other member could claim Carer’s Allowance and increase their income through the carer addition. If both partners are disabled they may be eligible for two severe disability and two carer additions and again we would expect Pension Service staV to pick this up. 9.15 It is diYcult for us to judge how widespread problems are in this area. We also note that even if there are problems in only a minority of cases, this can still represent significant numbers of older people given the large numbers entitled to Pension Credit. We know that the Pension Service does monitor performance and it is important that there is publicly available information on this. We would also like to see mystery shopping exercises to assess the ability of staV to deal with a range of cases and enquiries.

Locally based services

9.16 Age Concern has been supportive of the development of the local Pension Service and there are many good examples of Age Concerns working in partnership. The feedback we have had from our local organisations is generally very positive. Many host Pension Service sessions and work on specific take-up campaigns and in many areas there has been an increase in home visits. They have also found staV helpful in resolving problems and sometimes help in liaising with other parts of the Pension Service. There is of course some variation in service—for example one county Age Concern noted that in the north of their county the Pension Service was having diYculty fulfilling home visits due to limited numbers of staV and the rural nature of the area, whereas the picture is diVerent in the south of the county where the population is denser and there are more local staV. 9.17 However, although we support the work that is being done we have always maintained that there should be a permanent Pension Service high street presence. Older people will not necessarily know where the Pension Service will be based on a particular day and may need urgent help. Some Jobcentre Plus staV are helpful but others are reluctant to deal with older people. 9.18 In terms of Pension Credit take-up we are extremely pleased that the local service is involved in initiatives to encourage claims from disadvantaged groups and those who may have diYculties in accessing the service—for example disabled older people, those from BME groups and people living in isolated rural areas. In some areas this involves proactively visiting older people. It is important to accept that although such work is labour intensive it is a vital way of helping excluded groups. It will be very important to monitor the eVectiveness of diVerent initiatives and to share good practice. We welcome the additional resources for partnership working that have been made available through the Partnership Fund. The telephone service is providing an eVective and eYcient service for many people but is not suitable for everyone. We have some concerns that inaccurate or incomplete information is sometimes given especially in non-standard or more complicated cases. Feedback on the role of the local Pension Service had generally been positive.

34 House of Commons Hansard, 8 July 2004 col 838. Ev 154 Work and Pensions Committee: Evidence

Reduction in workforce 9.19 As the introduction of the Pension Service is starting to bring about real improvements for older people, particularly through the local service, we are very concerned about the potential impact of the planned DWP job cuts and have written to the Secretary of State. After a time of major change for the DWP we had hoped that there would have been a period of stability and consolidation as any change and threat of job security is likely to impact on the service that staV provide. 9.20 We asked the Secretary of State for reassurance that there would be no reduction in the local service and that instead the aim should be to work towards increasing this. The role of the local service is important if Pension Credit targets are to be met and hopefully exceeded. The Government has stated that fewer staV will be needed due to improvements in technology and processes. However, there have been some major problems with the introduction of new technology in the past and we have asked for reassurance that jobs will not go until new procedures have been tried and tested and it is clear that staV levels are higher than needed. 9.21 In response to our letter we have been told that although the local service is required to make some “eYciencies”, targeted take-up campaigns and the roll out of the Joint Service will mean that levels of service will not be adversely aVected. We have also been told that transformation will be gradual and this will allow new technology to be thoroughly tested. 9.22 Despite these assurances we continue to have concerns. For example in terms of the local service one Age Concern noted that while relationships with local managers are “excellent” there is uncertainty about the future. Many of their local contacts are having to decide whether to apply for their existing jobs (with added responsibility but at the same wages) or take redundancy. It is vital that the progress made by the Pension Service is not lost due to job cuts and further reorganisation and we are monitoring the impact of changes on the service received by older people.

10. Direct Payments 10.1 The Work and Pensions Committee is also in interested in the impact of Direct Payments. This is a major issue for many older people who have been perfectly happy with collecting their pension and benefits through an order book and see no reason why they should change. The change, along with the loss of Post OYces, is causing considerable confusion and distress and many people are contacting Age Concern about this. The Government wants the majority of people to receive their money paid directly into: an ordinary bank or building society account; a basic bank account, or the Post OYce card account. It has always accepted that some people will not be able to manage an account and they will be paid through a weekly posted cheque payment. 10.2 Direct Payments is important in relation to the Pension Credit for two reasons. Firstly there is a danger that opposition to, and negative experiences surrounding, Direct Payment will deter older people from further contact with the Pension Service and may prevent people enquiring about or claiming Pension Credit and other benefits. Having said that we welcome the fact that the DWP has, from the start, accepted it is important to separate mailings about Pension Credit from those on Direct Payment and has not tried to link the two changes. 10.3 Secondly if the numbers opting for payment by account are lower than the Government wishes more DWP staV and resources may be directed towards this area of work. This could reduce the numbers available to proactively encourage Pension Credit take-up and provide other services particularly in the context of the major job cuts planned. 10.4 In looking at the issues around Direct Payment it is important to be clear that some problems are around the transition process and we know that some people, once they are used to a new way of receiving their pension, will adapt well to the new system. However, for others the problems will be ongoing. We note that recent DWP research found the majority of people in a sample who had converted to Direct Payment were satisfied. However, among pensioners a minority (15%) felt the system worse than the order book; 8% were dissatisfied with the set up process and 4% were not satisfied with the process of payment into account.35 While those unhappy with the system are a minority it is still an sizeable number of individuals, and diYculties are likely to be higher among those who have not yet been persuaded to covert. Some of our main concerns are summarised below.

Information 10.5 Despite frequent requests from Age Concern and other organisations, information directed at clients about Direct Payment has generally not made it clear that there will be a service for people who are not able to deal with an account. However, we welcome the fact that it appears letters now going out informing people that their next order book will be the last, do refer to cheque payments.

35 Customer Experience of Direct Payment DWP. 2004. Work and Pensions Committee: Evidence Ev 155

10.6 Having said that, although cheque payments will start in October full details of the service are not available. For example a paper produced in May 2004 referred to possible postal strikes saying that there is no question of people not getting their payments and the DWP was “reviewing its continuity arrangements” but at the end of September 2004 we have still received no more information about this. It is diYcult to see how at this stage we can ensure that all our local staV and volunteers can get full information by the time order books start to disappear, let alone promote information to older people.

Pressure to convert

10.7 Some older people have been contacted a number of times including by telephone and feel they have been put under great pressure to change to Direct Payment. In some cases this has resulted in people changing inappropriately. We have heard from people who have moved to the Post OYce account and then found that their informal carer or local authority carer who normally collects the pension is unable or unwilling to be a second card holder so the older person has no way of accessing their money.

Practical issues around the Post OYce card account

10.8 People have experienced diYculties in applying for a card account as the scheme seems unnecessarily complicated (although some modifications have now been made). There are also concerns about using PIN numbers and due to worries about forgetting these we have heard of people telling others their number or writing it down and keeping the number in a prominent place. 10.9 There have also been diYculties with the payment process—most notably in August when the system was shut down for over three hours (after an error had resulted in overpayments). One Age Concern reported that they had been contacted by older people who had been told to come back every half an hour to see if the system was working again.

Improving financial capability

10.10 In some cases one of the bank account options, such as a basic bank account might be more appropriate but particularly for people who have never had an account they may not have the necessary support to go through the process of learning about accounts; deciding which type of account to take out; deciding which bank to choose; and going through the practical procedures of opening an account including providing the necessary identification. We know that the DWP is provided funding for some schemes to help improve financial capability. This is welcome but there remain many people who do not have access to suYcient support.

Third party collections

10.11 One of Age Concern’s major worries has been how the system will work for people who need their moneycollectedbyathirdpartyonatemporaryorpermanentbasis.Whileallbanksandbuildingsocietieswill have arrangements, these vary, making it diYcult to advise people. Cheque payments do allow a convenient way of allowing someone else to collect benefit but we are still unclear on many of the details. For example if someone normally has their money paid into a Post OYce account and they become ill on the day it’s due how will they be able to arrange for someone else to collect their pension just that week?

Cheque service

10.12 Thechequeserviceaimedatsomeofthemostvulnerableolderpeople, andthosewithmultiplecarers, relies on a weekly postal service. Older people contacting us have expressed major concerns about the reliability of the postal service and Age Concern has argued that as a minimum several cheques should be issued together so people know they can get their money on time. There are also concerns about security, especially where people live in shared households, and the loss of the convenient record of payments that the order book provided. The change to Direct Payments is causing concern and distress for many older people. We are worried that the cheque payment service, aimed at some of the most vulnerable older people, relies on a weekly cheque arriving safely and on time. Ev 156 Work and Pensions Committee: Evidence

11. Conclusion 11.1 Age Concern welcomes the increases in income that Pension Credit has brought to many older people. However, despite a very positive and proactive approach to its implementation the problem of take-up remains and like any income-related system there are major complexities, particular around the interaction with other benefits and systems of support. For future older people the increasing reliance on means-testing mayprovide adisincentive tosaving. Thereare improvementsthat can,and shouldbe made,butultimately we need better non-means-tested provision, including a much higher basic state pension. Age Concern September 2004

Memorandum submitted by Lancashire County Council (PC 08)

1. Introduction 1.1 Lancashire County Council Welfare Rights Service is located within the Environment Directorate of the authority. Established by the County Council in 1987, we are a non-statutory service dedicated to providing the 1.13 million residents of Lancashire with information, advice and advocacy to enable them to secure their legal entitlements within the benefits system. Six area teams deliver a casework service to all types of client groups, and we also have a specialist benefit take-up team. 1.2 Improved benefit take up amongst Lancashire’s older population has always been a high priority for the Service, and resources have over the years been specifically allocated to achieve this, for example, via: — targeted postal campaigns, using data supplied by district council Housing Benefit records; — two specialist take up teams in the Accrington and Burnley area, funded through the Neighbourhood Renewal Fund (NRF); and — a special take up project, funded as part of a Public Service Agreement (PSA) with the government to increase the number of over 60s claiming Pension Credit and Attendance Allowance. 1.3 In 2002, 36% of our client group were aged 60 or over. At that stage, we only had one NRF funded project. With the inclusion of an additional NRF funded specialist team and the PSA project, it is anticipated that this year’s customer profile (currently being surveyed) will be significantly higher. 1.4 It is with this extensive background in benefit issues relating to older people that we welcome the opportunity to contribute to this inquiry into the introduction of Pension Credit.

2. The Contribution Played by Pension Credit to the Incomes of Current and Future Pensioners 2.1 There is no doubt, in our experience, that Pension Credit is an extremely worthwhile benefit. It has, overall, been well received and can substantially increase the income of pensioner households. 2.2 The two main advantages are that there is no capital cut oV and most people over 65 will be given an “assessed income period” during which they do not have to report changes to their retirement income or capital. This reduces the administrative burden for both customers and Pension Service staV, by eliminating the need for customers to report every change in income, as well as the completion (and processing) of annual review forms.

3. The Interaction of Pension Credit with Other Benefits and with Local Authority Care Charging Policies 3.1 The main disadvantage of the new benefit is its interaction with Housing and Council Tax Benefits. Not having the capital rules for Housing/Council Tax Benefits aligned with those for Pension Credit, causes confusion for claimants and also for local authorities administering Housing/Council Tax Benefits to the obvious detriment of their customers. This has not been helped by the DWP’s oYcial guidance on Pension Credit for Housing/Council Tax Benefit staV being published separately from their standard guidance manual. We have had experience of staV in district council benefit oYces in Lancashire incorrectly advising claimants that even though they remain entitled to the Guarantee Credit, they are no longer entitled to Housing/Council Tax Benefit because their capital has increased during an “assessed income period” to over £16,000 (eg as a result of selling a property). It is not unknown for our advisers to send these staV copies of their own guidance on this issue. 3.2 Although there would be a cost, we would welcome alignment of the income and capital rules for Housing and Council Tax Benefits (as well as those for local authority charging schemes). The current diVerences complicate the system, leading to a lot of misunderstandings, and mistakes being made by both pensioners and professionals alike. In our experience, complex rules (which inevitably lead to complex processing procedures) are a main reason that older people miss out on the benefits they are entitled to. Work and Pensions Committee: Evidence Ev 157

3.3 People are also put oV claiming Pension Credit because if they miss out on the Guarantee Credit, any extra Pension Credit paid via the Savings Credit may reduce the amount of Housing/Council Tax Benefit they are entitled to. Those getting just the Savings Credit can lose 85% of any extra income in increased rent and Council Tax. If Savings Credit were disregarded as income, there would likely be a further increase in the take up of Pension Credit. We have one example of a customer not wanting to claim Savings Credit, because she currently gets all her rent and Council Tax covered by Housing/Council Tax Benefits. She would rather miss out on this extra weekly income, rather than get involved in having to take responsibility for paying a very small element of her rent and Council Tax direct to the landlord/local authority. “It’s not worth the hassle” she says. 3.4 Another administrative burden results from the interaction of Pension Credit with Severe Disablement Allowance (SDA). Because SDA is not treated as a “qualifying income” for Savings Credit purposes, a significant number of pensioners (particularly women) have to change from SDA to Retirement Pension when they reach 60. This is purely a paper exercise, which in our experience takes weeks to resolve, leaving claimants without an important benefit income in the interim—as well as having no overall increase in their weekly income when it is finally resolved. If SDA were included as a “qualifying income”, there would be no need for Jobcentre Plus and Pension Service staV to go through this process. 3.5 A significant number of pensioners are also likely to be missing out on the Carers Addition of their Pension Credit (worth £25.55 a week) because of the roundabout way of establishing entitlement. Firstly, the pensioner has to make a claim for Carers Allowance, a benefit that, due to overlapping benefit rules, most will not get. They then have to wait to receive a decision letter from the Carers Allowance Unit that tells them, confusingly, that they will not be paid Carers Allowance. They are then obliged to inform Pension Credit of the decision on their Carers Allowance claim in order to finally get the Carers Addition included as part of their Pension Credit entitlement. Apart from the waste of resources involved in paying staV to adjudicate and process claims (for Carers Allowance) for a benefit that most applicants are not going to get, the whole process is confusing and oV putting for carers to follow. Pension Service staV themselves do not understand this. For example, the last two monthly Pension Credit updates sent by the Pension Service to MPs have included case studies where the Carers Addition has been missed oV the Pension Credit case studies. 3.6 There is also a lack of eVective co-ordination between the Pension Service and other DWP oYces (eg Attendance Allowance and Carers Allowance Units). We have, for example, been told on a number of occasions by Pension Service staV that written confirmation of Carers Allowance entitlement is needed— even when this information is available on their ICT system.

4. Take-up of Pension Credit (and Other Benefits)

4.1 There are many pensioners, perhaps even a majority, who can manage their aVairs over the ‘phone, and as a result have made successful claims for benefit using the Pension Credit Application Line. However, there are a significant group of pensioners (likely to be in the hard to reach group) who cannot manage the claim process by ‘phone. 4.2 Extensive experience of benefit take up with older people has shown us that one of the crucial factors in encouraging this hard to reach client group to engage with us is the oVer of a “personal service”—ie one based on personal face-to-face contact, or the allocation of a named caseworker, rather than dependence on a “scripted” telephone or postal based service. Claimants, whatever their age, need to have access to caseworkers that are experienced and knowledgeable enough to address their “whole benefit” situation— eg to be able to identify all the benefits that a household is potentially entitled to, and to be able to oVer support and advice to guide them through the claim process. This is particularly important for our older customers who respond better to having just one adviser dealing with their case (ie one individual taking responsibility for all follow up work), rather than speaking to a diVerent person every time they ring the oYce, as currently happens when claimants contact the Pension Service. It also helps if customers are able to deal with same person about more than one benefit. However, Pension Service do not provide this kind of service. Indeed, we have numerous cases of errors and misinformation on the one benefit they are responsible for. The lack of understanding on how important benefits like Attendance Allowance and Carers Allowance (and their claim processes) impact on Pension Credit is worrying—and is an obvious training issue. StaV who can think “outside the script”, or who know what the “script” means, would help. This will hopefully come with time, but obviously does not help current claimants. 4.3.1 All frontline services are judged on the way they treat their customers, and the skills and experience of frontline staV are in our experience crucial to this. To improve their service, the Pension Service needs to improve the skills and knowledge of their frontline staV. We have been told informally that Pensions Service management consciously avoided employing staV from other parts of DWP with benefits background because they wanted to create a new organisation with a new “culture” untainted by DWP background. The consequence of this for our customers is that they are being dealt with by staV who are inexperienced and lack the level of benefits knowledge required. Ev 158 Work and Pensions Committee: Evidence

4.3.2 In our experience, the reputation of Pension Credit will be influenced by word of mouth recommendation. The Pension Credit claiming process has deterred some of our customers from following up their own claims—we doubt if they will be recommending the current service to their friends and neighbours. 4.4 Like a number of other local authority Welfare Rights Services, we have extensive experience of benefit take up, experience which would benefit all parties involved in such initiatives, including the Pension Service. One of the biggest barriers to progressing our PSA project work has been the diYculty in setting up eVective liaison arrangements and gaining co-operation from Pension Service staV when we enquire on behalf of our customers. All the goodwill and contacts that our Service has built up over many years with local DSS/DWP oYces have been lost. Contacts at the Pension Centres change on a regular basis, and action points from the liaison meetings that do take place are not always followed.

5. The Consequences of the Department’s Plans to Reduce its Workforce and the Number of Pensions Centres 5.1 In our experience, the Pension Centres cannot cope with their current workload. Rather than reducing the number of Pension Centre staV, their re-deployment to processing “problem/more complex” cases would, in our opinion, be of more benefit—even if this were on a short-term basis to allow staV to develop holistic benefit skills, knowledge and experience. The Pension Service might then be able to better manage the examples of poor administrative practice described elsewhere in this submission. 5.2 Resources may also be better deployed to increase local service provision. This would enable the Pension Service to be more proactive regarding benefit take up, allowing them to oVer a genuine “one stop shop” facility for older customers, including the completion of Attendance Allowance forms etc. 5.3 At a recent liaison meeting with our local Pension Centres, we were advised that an estimated 4,000 cheque payments (paid under the Direct Payments “exceptions service”) are expected to go missing each week. Liaison meetings with our Jobcentre Plus oYces provide us with evidence that their oYces are not the place for pensioners to go if there are problems with benefit payments. One of our customers recently had her Income Support stopped when she reached 60. She had not been advised of this (nor the fact that she would now have to claim Pension Credit). However, the response of her local Jobcentre Plus oYce was to refer her to the Pension Credit Helpline. No advice was oVered on what she should live on while her claim to Pension Credit was being processed. If there had been a local Pension Service presence, there would at least have been someone for her to liaise with about prioritising her claim, or facilitating some Crisis Loan provision with the Jobcentre Plus oYce. Where are the expected 4,000 people (many of whom are likely to be older people, and in poor health or otherwise vulnerable) to go each week when their benefit cheque payments fail to arrive? 5.4 Other concerns regarding the reduction in Pension Service staV relate to services for the recently bereaved. Bereavement visits to widows/widowers were previously arranged by local oYce staV. This has not been the case since the introduction of Pension Credit. In our experience, the most vulnerable are being left without money. Widows continue to face delays following their husband’s death before Retirement Pension and Pension Credit are awarded, even when it is obvious that there is underlying entitlement to Pension Credit.

6. The Delivery of a Telephone-Based Service to Pensioners 6.1 As previously stated, frontline services (public or private) are judged on the way they treat their customers, and first impressions of the organisation are crucial to this. The DWP’s dependence on call/ contact centres operated by staV who are inexperienced and lacking technical knowledge has, in our view, led to a diminished level of service. The Pension Service is not alone in this but, given its customer base, the provision of some sort of “personal” service (eg an enhanced local service) should remain a crucial element of its support services. 6.2 There are many people, pensioners included, that can manage their aVairs over the phone. However, there are also many people (likely to be the harder to reach group) who cannot. The current emphasis on a purely telephone service excludes many pensioners from claiming, eg those without access to a phone; people who are deaf or hearing impaired; people not confident with using the phone; and people whose first language is not English. In our experience, many older people have no easy way of initiating a claim for benefit. 6.3 Even people who are confident in using the telephone (including our advisers) have been experiencing diYculties using the Pension Centres phone systems to help progress/query benefit claims: — No one taking personal responsibility for following up on a query, or ensuring that callers are referred to correct extensions etc. — The lack of a case centred approach to decision making. People (including our advisers) get diVerent advice/information/action from diVerent staV, depending on whom they are speaking to at any one moment in time. It is not unknown for some of our advisers to make a follow-up phone Work and Pensions Committee: Evidence Ev 159

call to the Pension Centre with the same query the same day, hoping that a more experienced member of staV will take the call, if they are not satisfied with the initial advice/information they have been given. — The lack of response to letters, particularly from advisers writing on behalf of claimants. There are many situations when it is appropriate to use the phone to report issues/follow up claims. There are also many occasions when it is not: eg when Helpline staV are giving incorrect information; when time does not allow a customer or adviser to stay on the phone to speak to someone who is experienced enough to handle a query; when a complex history is involved; or when an appeal needs to be registered. It is on these occasions we have to write letters (and this no doubt also applies to our customers). However, these letters are rarely replied to—other than by a non- relevant “standard” letter. Acknowledgements (either verbal or written) are also rarely received. — Incorrect information and poor quality advice from Helpline staV. We have also have cases where Pension Credit Application Line (PCAL) staV have incorrectly entered wrong information on claim forms—things that have not always been spotted by the claimant when the form has been returned to them to sign. — There are still instances of delays in getting through on the phone, plus long waits. — The issue of data protection is frequently raised by Pension Service staV who are unwilling to share information with advisers who enquire on behalf of their customers. Even when dealing with a bone fide organisation such as Lancashire County Council, Pension Service staV feel unable to discuss case details. This prevents joint working taking place and puts a restrictive definition of data protection above moving pensioners out of poverty. In our view, this is a fundamentally flawed set of priorities.

7. The Development of Effective Locally Based Services 7.1 On the whole, local service provision in Lancashire is useful for verification purposes in cases where the claimant does not want, or cannot send documents by post (see below). 7.2 However, local service provision is very variable eg some agents fill in Attendance Allowance/Carers Allowance forms; some do not.

8. The Experience of Claiming Pension Credit 8.1 In our experience, and that of a majority of our customers, the experience of claiming Pension Credit is far worse/more diYcult than it was to claim the Minimum Income Guarantee (MIG). 8.2 A high proportion of Pension Credit claims need chasing up and checking to ensure that the customer receives their correct entitlement. Our advisers usually have to make several phone calls on each case. This would rarely be necessary with MIG. 8.3 The following are just a few examples of the problems encountered by our advisers and customers: — Mistakes in payments, and claims wrongly disallowed. We have many cases where the Carer and Severe Disability Additions have been overlooked. Plus cases where the Pension Service know they have got something wrong (eg incorrectly not awarding the Carer Addition, which was brought to their attention by our adviser) and months later this is still not corrected. — Advisers having to send Pension Service staV/decision-makers copies of their own guidance. — Even when the Carer Addition has been correctly awarded, we have had cases where the Addition has continued to be paid beyond the eight-week period following the death of the person being cared for. This should be automatically adjusted. — Remote scanning of paperwork has led to many instances of lost documents, “unlinked” documents, repeated requests for the same information, delays in the processing of the information submitted. In one case, the lost papers included originals of share certificates. Some of the customer’s papers were eventually found, but not the share certificates. The customer has had to write to the Bank of England to get duplicates. All this contributes to claimants being reluctant to send in important documents (eg bank books) by post. — Photocopies of bank statements not being accepted. — Verification of superannuation also required. Claimants often do not have this. With MIG, the DWP accepted bank statement showing payments made by the pension provider. — MIG claims were normally processed within one or two weeks, Pension Credit claims are taking months. — Changes of circumstances taking months to process. People returning their order books for adjustment, because of these changes, and then being left without money for weeks on end. We have cases where our advisers have reported changes of circumstances to the Pension Service on behalf of claimants, and then had to follow up on two to three further occasions before any adjustments are made. Ev 160 Work and Pensions Committee: Evidence

— Letters to customers do not always relate to recent changes of circumstances. Computer generated letters are sent out and often do not make sense. — Jobcentre Plus oYces not issuing Income Support stop notices to customers as they reach 60 and need to swap claims to Pension Credit. One customer only found out that her Income Support had stopped when she went to cash her money. Her Income Support was being paid with her SDA, so both payments ceased. StaV at her local Jobcentre Plus oYce were not at all helpful and referred her to PCAL to make a claim for Pension Credit. — The knock on eVect to other benefits (primarily Housing/Council Tax Benefit) if the Pension Service get it wrong—ie incorrectly stopping someone’s Pension Credit, which has a knock on eVect on their Housing Benefit etc (particularly if they are on the Guarantee Credit), and then not notifying the local authority when benefit is re-instated. — Pension Credit claims where entitlement to benefit is dependant on housing costs being included. Our advisers have been told by local Pension Centre staV that the claim is assessed by one section on “standard” Pension Credit amounts (ie excluding housing costs) and if there is nil entitlement it is forwarded to the “housing costs” section. However, a standard decision letter is being issued to the customer at this stage to say they have no entitlement to Pension Credit. The letter gives no indication that this is only an “interim” decision pending an assessment of housing costs. Apparently a nil decision needs to be issued at this stage “to clear it from the section”. In one case the customer was missing out on £13 a week. Pension Credit. Her case took weeks to resolve, because her file needed to be reconstructed and manual payments organised. — Housing costs are often not included in the assessment of Pension Credit claims, leading to people being incorrectly refused. We regularly come across customers who have Home Improvement Loans that were taken out 20 years ago. Surprisingly, customers do not have receipts. This often takes months to be resolved, if it is paid if at all.

9. The Experience of Direct Payments 9.1 Most of our very elderly and most vulnerable customers are extremely upset at no longer being able to have an order book. Again, the following are examples of the issues and experiences raised by our customers and advisers: — Some customers report being, in their words, “blackmailed” or “bullied” into using a bank or building society account (or opening a Post OYce card account) for payment of benefit even although they do not want to. These customers say they are not being advised of the exceptions service, and are worried they will be left without money if they do not give their account details or open an account. We have even had cases where Pension Service staV have not known about the exceptions service and are unable to advise customers what to do to access it. — Customers having to use a taxi to get to their bank to get money each week instead of being able to walk across the road to the Post OYce. One customer said: “It isn’t just the money although I really can’t aVord it. I miss the company of going into the Post OYce and chatting to the postmistress and neighbours, who go at the same time. I never see anyone now”. — One customer broke down in tears at the Post OYce when she could not remember her PIN number, and had a queue of people grumbling behind her. She was so upset she came out without any money and swore she would not go back. — Another customer forgot the telephone number she was given to ring to activate her Post OYce account, and had to wait until someone could take her back to the Post OYce the following week to get it again. — Instances of payments going into accounts and customers not knowing what they are, what benefit or what period they cover. — Problems getting payment of pension via a Post OYce card account. It has taken nearly eight weeks for a customer in the Carnforth area to get his account sorted although he followed the instructions from the Post OYce to the letter. — We are also concerned that there has been a recent increase in the number of ATMs that charge for withdrawal of money. 8.2 It is now extremely diYcult for advisers to do benefit checks, as customers more often have no idea what benefits they are getting (nor how much is being paid) when they transfer to a bank account etc. It is diYcult, in some cases, to ascertain if Pension Credit, Attendance Allowance etc is in payment, thus increasing the risk of customers putting in duplicate claims. With MIG, advisers could normally tell from the assessment what benefits people were on. It is not possible to do this with Pension Credit. Work and Pensions Committee: Evidence Ev 161

10. Conclusion 10.1 We are of the view that Pension Credit is an extremely worthwhile benefit—substantially increasing the income of pensioner households, but we have concerns regarding it’s administration. 10.2 In November 2003, we prepared an in-house report of our main concerns at that time. These were: — delays in processing; — failure to award the Severe Disability and Carer Additions; — the quality of electronically completed claim forms; — the quality of advice/service provided to customers; and —diYculties in getting Pension service to work jointly on cases, eg the application of data protection. In our experience, little progress has been made in these areas. Lancashire County Council 1 October 2004

Supplementary memorandum by Lancashire County Council Welfare Rights Service (PC 08A) The Pension Service are saying “now that local partnerships are in place” which gives the impression that there are now other places where people can go for advice so that they do not need so many information points. What this means in Lancashire is that premises for surgeries have been drastically cut back without any replacements. For example, replacing five or six a week “local” surgeries by just one central surgery a week. This not only restricts the venues where pensioners can get face to face advice but also makes it more diYcult for pensioners to comply with request for verification of documents such as bank books and birth certificates. We know that the “scans” are an inaccurate way of identifying potential PC claimants, not least because they cannot identify how much savings or private income a person has. But what is worse is that because of the targets set for “scanning work” the local service are cutting back on home visits to people identified by our service as being in the hardest to reach category with genuine claims. Additionally, the local service are no longer prepared to fill in Attendance Allowance and/or Carers Allowance forms on home visit which means that those customers they do visit will not end up with the full amount of PC or will be turned down when their PC claim relies on being awarded the other benefit. They may be doing “more” visits now, I can’t comment on that, but certainly some visits will be to verify savings/income which people would in the past have taken into a “local” surgery but now can’t get into the one central surgery which is left which might be miles away. Also many of the visits from the scan work will have no chance of a successful claim from the start. The Minister does not refer in the extract of the letter we have been copied how many of these scan prompted visits result on an award of PC but Pension service staV speaking oV the record to us say that it is very frustrating work because so few scan visits lead to awards. We also understand that the targets given to Pension Service staV relate only to the number of contacts they are required to make not to the number of awards. James Dickson January 2005

Memorandum submitted by Equal Opportunities Commission (PC 09)

Executive Summary — Women are the majority of pensioners, and their median income in retirement is only 57% of men’s. Only 14% of women have full entitlement to the Basic State Pension in their own right. — Pension Credit has improved retirement incomes for a very large number of women pensioners, who would otherwise be living on below poverty-level incomes. — Pension Credit is not a long-term solution to the problems of low incomes for women pensioners. — Means-testing should not become the norm for the majority of pensioners. — A radical review of the state pension system is required to ensure that women do not continue to pay an unfair price in their retirement for the vital, valid and yet unpaid contribution that they make to society through their caring and parenting commitments. — Increasing the level of the Basic State Pension will be of little or no benefit to the many women without full entitlement. Ev 162 Work and Pensions Committee: Evidence

Recommendations — Methods for increasing women’s entitlements to state pensions are needed. Possible options include: — The introduction of a universal state pension. It would be a radical, but simple, eVective and eYcient way of ensuring everyone has entitlement to an acceptable income in retirement. — Increasing entitlement to the basic and second state pensions could be increased through a series of changes to qualifying criteria for the current system. — Whilst Pension Credit is still in place we recommend: — Methods of automatic calculation of entitlement to Pension Credit should be investigated, to ensure that no one is living in poverty in retirement. — Savings Credit entitlement calculations should be revised to ensure those with less than full entitlement to the Basic State Pension do not suVer 100% withdrawal rate on their savings.

Memorandum of Evidence 1. The Equal Opportunities Commission is the statutory organisation with responsibility for enforcing the Sex Discrimination and Equal Pay Acts and promoting equality between men and women generally in Great Britain. Since it was established in 1975 the EOC has been addressing pensions inequality in both State and occupational provision because of the pensions gap that exists between men and women. We very much welcome this opportunity to submit evidence to the Sub-Committee’s inquiry into Pension Credit. This response is focused around the issue of the contribution played by Pension Credit to the incomes of current and future pensioners.

Women’s lower income in retirement means that they are more likely to be in receipt of pension credit than men 2. Women’s median income in retirement is only 57% that of men’s.36 This is due to much lower entitlement to both state and private or occupational schemes. Only 14% of women are in receipt of a full basic state pension in their own right, compared to over 90% of men. Because of women’s lower income than men in their own right they are more likely to be eligible for Pension Credit, two thirds of the recipients of Pension Credit are women.

Women’s greater longevity means that older women are more likely to be claiming pension credit than younger retired women 3. One half of pension credit claimants are women aged over 70. There are two key reasons for this. The first reason is that older pensioners become progressively drawn into Pension Credit, as the value of their occupational and state pensions falls, relative to Pension Credit which is indexed to earnings. As women on average live longer than men, they are more likely to come within the scope of the Pension Credit system at some stage during their retirement. 4. The second reason is that women are more likely than men to outlive their spouse or partner. Bereavement is currently one of the main trigger points for an individual becoming entitled to Pension Credit. Almost a half of women over 65 are widowed or divorced, rising to two thirds of women aged 80 or over. Because of their lower pension entitlements overall, single women (including widows) are much more likely to be in receipt of Pension Credit than single men. Sixty per cent of Pension Credit recipients are single women, whereas only 18% are single men.

The impact of bereavement may increase for future widows as they may have fewer rights to their late husbands pension than today 5. In 2008, the inheritance of SERPS entitlement will drop to 50%. Before 2000 widows could inherit 100% of their late husband’s entitlement, and this significantly helped to improve widows’ retirement incomes. 6. The move from defined benefit (DB) to defined contribution (DC) occupational schemes, and the increase in personal pensions (also DC) will mean that in future, fewer women will be eligible to receive survivor benefits. Whereas in DB schemes survivor benefits are usually automatically provided, in DC schemes provision of a survivor benefit will depend upon the annuitant choosing to purchase a joint life annuity, accepting a lower income in their own lifetime in order to make provision for their partner. Currently only 19% of married purchasers of annuities choose to purchase a joint life annuity. The EOC is working with the DWP and the insurance industry to address this issue and ensure individuals are aware of the implications of their decision to purchase a single or joint life annuity.

36 Social Trends, 34. Work and Pensions Committee: Evidence Ev 163

7. Increasing rates of cohabitation could also reduce the provision of survivor benefits as many schemes do not recognise cohabitatees, and provide benefits only to married survivors. Ensuring women have the ability and opportunity to build up suYcient entitlement to pensions in their own right is essential to ensure suYcient income throughout their life.

Pension credit has delivered benefits, but only for those that have claimed 8. Pension Credit (and it’s predecessor Minimum Income Guarantee) are a very targeted form of benefit delivery and have done a great deal to alleviate the poverty of some of the poorest pensioners in our society, who are mainly women. However, Pension Credit clearly fails to meet the needs of the 20–30% who do not claim Pension Credit. Despite a great deal of eVort being made to encourage claimant rates the take up rate has not covered all who are eligible. The complexity of the scheme, diYculties in making a claim, lack of knowledge or an aversion to claiming means-tested support may be contributory factors inhibiting take-up. Those who do not claim, for whatever reasons, could find themselves living in poverty in retirement. Methods for moving to automatic calculation of entitlement to Pension Credit should be investigated,for example cross-referencing National Insurance Contribution Records with Income Tax records to evaluate eligibility.

Those without full entitlement to the basic state pension (BSP) suVer 100% withdrawal rates on their savings 9. The Savings Credit element is designed to reward those who have moderate savings, beyond the level of the basic state pension. This is so as to ensure that moderate savings do not serve merely to reduce the amount of means tested benefit that an individual receives, giving them no benefit for having saved. However, the calculations for the Savings Credit are such37 that any individual with less that full BSP is not rewarded for any savings that they have made to bring their income up to the level of the BSP. Only 14% of women are entitled to full BSP in their own right, only rising to around 50% even when inherited rights are taken into account. Any individual who has less than full BSP and who has managed to make moderate private saving eVectively suVers a 100% withdrawal rate for these savings, as they serve only to reduce the amount of guarantee credit that they receive. The Savings Credit element should be revised to take into account savings below the level of the Basic State Pension.

Household assessment does not address household inequalities 10. Assessing Pension Credit on a household basis does not always increase women’s income in their own right. Although couples can choose which partner receives the Pension Credit, in the majority of couple households, it is claimed by men—four times as many men with partners claim pension credit, than women with partners.38 Whilst Pension Credit helps overcome household poverty, it does not address issues of inequality within the household, and may leave women with little independent income in their own right. Women’s retirement income in their own right needs to be increased. 11. Although Pension Credit has alleviated poverty for many retired women it should not be regarded as the long term solution to women’s low retirement incomes. Pension credit treats the symptoms of women’s lower income in retirement, rather than acting to address the issues at source. Although women’s income in retirement is set to improve through the increase in women’s economic activity rates, it should be remembered that under the current systems women will still continue to receive a lower income in retirement primarily due to the greater parenting and caring responsibilities that they undertake. A radical review of the state pension system is required to ensure that women do not continue to pay an unfair price in their retirement for the vital, valid and yet unpaid contribution that they make to society through their caring and parenting commitments.

Means tested benefits in retirement should not become the norm for the majority of women in retirement 12. Women should have the same ability as men to build up suYcient income in their own right, through state or private schemes so that they are able to lift themselves clear of means testing. The state pension system is the only viable route for building up pension entitlement for those not in paid employment. Radical restructuring of the state pension system could alleviate the need for the vast majority of the population to claim means tested benefits in retirement, and better recognise the caring and parenting contributions that many individuals make to society. 13. The current state pension system gives some protection for those absent from paid employment due to caring or parenting reasons to enable them too accrue rights to the basic and the second state pension. However, there are many gaps in this protection, that lead to individuals who have always made a positive contribution to society not receiving even a full basic state pension in their own right.

37 Savings credit pays a tax free benefit of 60p/£ of income in gap between full BSP and the Guarantee Credit level, amount then reduces by 40p/£ of income above guarantee credit level, taken from PPI Paper, State pension reform transition issues. 38 4% of Pension Credit recipients are women with partners vs. 16% women with partners. Ev 164 Work and Pensions Committee: Evidence

Women’s entitlement to state pensions needs to be increased, better rewarding and valuing their caring and paring contributions 14. The best solution for women’s pensions would be to introduce a universal state pension. It would be a radical, but simple, eVective and eYcient way of ensuring everyone has entitlement to an acceptable income in retirement. A universal state pension would be the most eVective way of ensuring that the vital but unpaid contribution that women make raising children or caring for older or disabled people are fully covered by the state pension scheme. The majority of beneficiaries would be women, as it is predominantly women who lack a full basic state pension in their own right. It could be introduced in the near future, providing all eligible pensioners with a basic level of retirement income. Providing it was set at a suYciently high level, it could mean that Pension Credit would no longer be needed for the majority of pensioners, and means-testing would apply to just the small minority of pensioners who did not qualify under residence conditions for the universal state pension. 15. In the absence of a citizen’s pension, the current system needs to be amended to give greater coverage for patents and carers. This could be achieved through a series of possible rule changes: — Lowering the Lower Earnings Limit (LEL). — Abolishing the 25% rule. — Adding together income from multiple jobs for National Insurance (NI) purposes. — Replacing Home Responsibilities Protection (HRP) with a positive weekly credit to NI records. — If HRP is retained, making it available on a weekly basis and lowering the amount of time spent caring that is necessary to qualify for it. Taken together these rule changes would improve women’s coverage under the state pension scheme, however, there would still be the risk of some women not being covered. Additionally it would take a long time to build up rights, so a system such as Pension Credit would still be needed to bring women’s retirement incomes above poverty threshold for the foreseeable future. 16. Models that are currently being proposed by other groups to raise the level of the basic state pension to above the level of the guarantee credit, without increasing entitlement for parents and careers would still leave a disproportional number of women reliant on means tested benefits on retirement as they would not have full entitlement to this increased basic state pension. Any increase in the level of BSP needs to be accompanied by measures to widen eligibility.

Pension credit does not act to encourage individuals to save more 17. The current situation with the interaction between means tested benefits in retirement and private savings means that advisors cannot say unequivocally that it makes sense for every individual to save for their retirement. Those on life long low earnings may be better oV not saving and relying on means tested benefits in retirement. Pension Credit adds another level of complexity and confusion to a system that individuals already struggle to interact with. A system whereby individuals know that the pension they receive from the state would lift them above any means tested threshold would enable the message to individuals to be clear and simple, that it would always pay to save.

Recommendations — Methods for increasing women’s entitlements to state pensions are needed. Possible options include: — The introduction of a universal state pension. It would be a radical, but simple, eVective and eYcient way of ensuring everyone has entitlement to an acceptable income in retirement. — Increasing entitlement to the basic and second state pensions could be increased through a series of changes to qualifying criteria for the current system. — Whilst Pension Credit is still in place we recommend: — Methods of automatic calculation of entitlement to Pension Credit should be investigated, to ensure that no one is living in poverty in retirement. — Savings Credit entitlement calculations should be revised to ensure those with less than full entitlement to the Basic State Pension do not suVer 100% withdrawal rate on their savings. Equal Opportunities Commission September 2004 Work and Pensions Committee: Evidence Ev 165

Supplementary memorandum submitted by the Equal Opportunities Commission (PC 09A) ENSURING COVERAGE OF PARENTS AND CARERS WITHIN THE STATE PENSION SYSTEM CAN WE WIDEN THE CONTRIBUTORY PRINCIPLE ENOUGH?

Improving Coverage under the Current System 1. Coverage under the current system is clearly not satisfactory and leads to many people missing out. We would obviously welcome any changes to the system that would enable more women to qualify for at least some entitlement to the basic state pension in their own right, such as: — replacing Home Responsibilities Protection (HRP) with a positive weekly credit for all parents and carers; — making the system work better for the increasing number of people who are caring for adults or people with disabilities, for example reducing the time threshold for caring from the current 35 hours per week limit; and — abolishing the 25% rule. 2. However, we feel that even with the suggestions for improvement that have been made to increase coverage for parents and carers it is diYcult to envisage a system that could ever cover the wide spectrum of care giving that individuals are prepared to give without financial reward, upon which our country depends. Even if such a system of crediting could be devised it would be enormously complex and exceedingly diYcult to administer.

AUniversal State Pension Would be the Safest, and Most Efficient Way of Ensuring that All Parents and Carers Would Have Entitlement to a State Pension in their Own Right 3. We believe that a Universal State Pension would ensure coverage for all parents and carers and would reduce the complexity of the current system.

AUniversal State Pension Would Capture all Parents and Carers,No Matter How Complex their Caring Commitments 4. It is diYcult to imagine a crediting contribution that could ensure coverage for the diversity and complexity of caring and parenting patterns that some individuals undertake. Some carers are not just caring for one individual, for example many women have a complex set of caring responsibilities for grandchildren and elderly parents that restrict their ability to engage in paid employment but without one caring commitment great enough to take them over any weekly time threshold to be considered carrying out enough caring to qualify for credits. 5. The current system works on the model of one carer per person, and does not recognise those individuals who share the caring responsibilities, such as two sisters who look after an elderly parent, or two parents sharing the care of a disabled child, for whom the care needs may be so severe it restricts both their abilities to earn beyond the level of the Lower Earnings Limit. 6. Caring requirements are not always a full time, permanent commitment, for example if someone cares for an individual whose illness has periods of attacks and remission which enables their carer to work during periods of remission, would this individual then have to remember to submit a claim for each period they were required to provide care?

AUniversal State Pension Would Immediately Improve the Situation for the Many Women Pensioners with NoorLittle Entitlement to State Pensions in Their Own Rights 7. Any improvements to the crediting system if not made retrospectively would do nothing for those women currently retired or reaching retirement. Changes could potentially be made retrospectively, but it is not diYcult to imagine how complex, time consuming and administratively expensive this would be. 8. Retrospective changes would be a contentious issue to those women who have paid the married women’s reduced rate National Insurance contributions. Under the current rules these women are not eligible for any coverage for parenting or caring commitments prior to which they had been paying reduced rate contributions. These women may feel that they would have revised their decision to pay reduced rate contributions had they known that coverage would have been available for the periods they spent raising children or caring for others.

AUniversal State Pension Would Ensure Coverage, without the Need to Claim 9. Those in receipt of child benefit, income support or carers allowance receive HRP automatically. Since 2002 other carers have had to make a claim for HRP within three years of the time spent caring, rather than the previous system of being able to claim until retirement. If improvements were made to the crediting Ev 166 Work and Pensions Committee: Evidence

system there would be increased onus on individuals to claim for their coverage, within this strict time limit. The current system is diYcult for individuals to understand and without good advice they may not submit their claim and realise only too late once they get their state pension entitlement forecast.

AUniversal State Pension Would Not be Affected by Changing Family Work Patterns 10. The current link between coverage for parents and the payee of the child benefit provides a strong a secure coverage for parents, so long as the payee of child benefit remains the main carer for the child. However, if the parents decide to change the main carer, they have to understand the link between the child benefit payee and state pension protection and change the child benefit payee. With the mother/father breadwinner/carer pattern becoming more flexible and men taking a greater share of caring responsibilities it is easy to envisage more couples losing out on the coverage oVered in the state pension system for parents. 11. We feel that serious consideration should be given to the option of a Universal State Pension. The EOC would like to see further information available in the public domain about the circumstances of people not currently building entitlement to their state pensions (either through payment of National Insurance Contributions or credits) to enable an informed debate about who could potentially benefit from a Universal State Pension in comparison to who would be able to benefit from a revised system of parents and carers credits. Equal Opportunities Commission November 2004

Memorandum submitted by Help the Aged (PC 10)

Summary 1.1 In our evidence to the Select Committee’s Pension Credit inquiry of 2001–02 Help the Aged set out its concerns that the means-tested approach would be too bureaucratic and many of those who were entitled would never receive their entitlements. Over the year since the Pension Credit was launched these concerns have been proved correct. Therefore, the Charity continues to call for the State Pension to be significantly increased to a level that meets basic need, so that the vast majority of pensioners do not need to claim extra means-tested benefits. 1.2 Although errors and delays in processing applications only aVect a minority of customers the Pension Service still seems to struggle to resolve problems satisfactorily when they do occur. Help the Aged would urge the Pension Service to tackle administrative failures much more seriously, rather than just seeming to accept that claiming will be a nightmare for some. 1.3 The local service has a key role to play in reaching the most disadvantaged groups who will find it the hardest to make a claim. But with so many barriers to accessing home visits it is hard to see how many will get this vital help. The Pension Service will have to focus much more on the “harder to reach”, and to do this it needs to strengthen the local service and improve access to the vital face-to-face advice on oVer. 1.4 The introduction of the Pension Credit has made the relationship between centrally and locally administered means-tested benefits even more complex. This has resulted in confusion and anger for those who have been caught between Pension Service and Housing and Council Tax Benefit administrators who seem not to communicate or understand each other. The DWP needs to take much more care to ensure all local authorities administer benefit changes fairly and accurately. 1.5 Though the Pension Service has made progress on take-up, it is disappointing so many pensioners have missed out. Help the Aged believe it is unacceptable for the Government set a target that five years after the launch of the Pension Credit allows the Pension Service to leave over one million pensioner households without their entitlements. The Charity continues to believe that the DWP should be set a target of 90% take-up, to ensure real progress is made over the next few years.

Introduction 2.1 Help the Aged was set up in 1961 to respond to the needs of poor, frail and isolated older people at home and overseas. As a national organisation we campaign with and on behalf of older people, raise money to help pensioners in need and provide direct services where we have identified a gap in provision. 2.2 Help the Aged welcome the Select Committee’s inquiry in to the introduction of the Pension Credit. As we stated in our evidence to your 2001–02 inquiry into the Pension Credit, the Charity welcomes the extra money being invested in pensioner incomes through the introduction of the Pension Credit. However, we were concerned that the means-tested approach would be too bureaucratic and many of those who were entitled would never receive their Pension Credit entitlements. Over the year since the Pension Credit was launched these concerns have been proved correct. Therefore, the Charity continues to call for the State Pension to be significantly increased to a level that meets basic need, so that the vast majority of pensioners do not need to claim extra means-tested benefits. Work and Pensions Committee: Evidence Ev 167

2.3 Help the Aged gives advice and information on benefits to 100,000s of older people every year. SeniorLine, our free and confidential telephone advice service, answers 75,000 calls a year, around a third of which are regarding benefits issues. The Charity produces easy-to-understand information leaflets on a wide range of issues, and over the last year we have already distributed over 350,000 leaflets on the Pension Credit. We also provide local older people with face-to-face benefits advice from trained staV and volunteers in six areas of the UK. In the last year our benefits advisors have already helped over 12,000 people and identified over £2 million worth of benefit entitlements. In addition, the Charity receives many emails, letters and calls on this subject and meets with older people’s groups across the country to discuss benefits and financial issues. This evidence paper is rooted in our diverse experiences of working with and supporting older people.

Claiming the Pension Credit

Gaining from the Pension Credit 3.1 The Pension Credit has made a welcome contribution to the income of pensioners who have made a successful claim. According to the latest Government figures 1.94 million pensioner households have gained from the introduction of the Pension Credit by on average £16.33 a week. The majority of these were already in receipt of the Minimum Income Guarantee and have gained from the Savings Credit element and the changes in the capital rules. 930,000 are new claimers who have gained £23.22 a week on average. Many of these people were entitled to the Minimum Income Guarantee (MIG) but had never claimed. 3.2 The special backdating rules have been of particular benefit to many, meaning most claimants now get a significant lump sum as well as an increase in their income. Help the Aged welcomes the Government’s decision not to stop these backdated awards of up to one year’s worth of Pension Credit after October 2004. Ending these special backdating rules would have been unfair on those who had missed out on their entitlements and claimed late.

Applying for the Pension Credit 3.3 When the Pension Credit was proposed Help the Aged was very concerned about the service that claimants would get over the telephone. This was based on our negative experience of the MIG Application Line. SeniorLine frequently received calls from people unhappy with the service they had received or questioning the accuracy of the information they were given when they had tried to claim MIG over the phone. In 2002 we wrote to the Work and Pensions Committee setting out our concerns and citing dozens of cases where people had received incorrect advice from the MIG Application Line. 3.4 However, SeniorLine and other Help the Aged staV have received many positive reports of the service oVered by the Pension Credit Application Line (PCAL). The DWP seems to have made significant improvements to the phone services it oVers in the move from MIG to Pension Credit. DWP research on customer experiences of claiming over the phone has also found high levels of satisfaction. But, as Casestudies 1, 2 and 3 show problems and delays continue to occur for a minority of Pension Credit claimants.

Casestudy 1: On 19 January 2004 SeniorLine received a call from an older man who had completed a Pension Credit application form in September and still hadn’t received an award, despite telephone calls chasing them up. During one conversation with a member of Pension Service staV the man was told he shouldn’t expect to get anything as he got housing benefit and it was implied he was being greedy. SeniorLine calculated that he is entitled to £7.00pw Savings Credit.

Casestudy 2: On 29 January 2004 SeniorLine received a call from an older person who had completed a Pension Credit application form in September which the Pension Service lost so the caller completed another one which also got lost. The caller’s third claim began in December so has not been processed yet. SeniorLine calculated the caller was eligible to £43.07pw.

Casestudy 3: In November 2003 SeniorLine received a call from a man who was trying to claim Pension Credit on behalf of his mother who lived in a care home. As the claim was going to be complicated, because it involved her house as an asset (it is a financial liability) and the deferred payment or care costs, the Pension Service arranged to call him back at a more convenient time. When they did not call back at the allotted time he went to get a claim form from a Jobcentre as the Pension Service had informed him they were available there. However, he was annoyed to discover when visited his local Jobcentre that they did not have any forms. Ev 168 Work and Pensions Committee: Evidence

3.5 Although errors and delays in processing applications only aVect a minority of customers the Pension Service still seems to struggle to resolve these issues satisfactorily when they occur. Customers find it can be diYcult to get an individual member of staV to take responsibility for resolving problems, and communication could be improved. Help the Aged would urge the Pension Service to take these issues much more seriously, rather than just accepting that claiming will be a nightmare for some.

The Local Pension Service 3.6 Help the Aged also remains concerned about the substantial minority of older people who would find it diYcult to make a claim over the phone. For instance 32% of people aged 65! have hearing diYculties39 and almost a quarter of a million pensioners are registered blind or partially sighted.40 People who would struggle to make a telephone claim are supposed to be able to arrange home visits from the local Pension Service, but there are a number of barriers. Firstly, the availability of home visits is not advertised, and no mention of the local service was made on any Pension Credit literature until very recently. People can’t ask to use something they don’t know exists and will assume the phone is the only option. Secondly, the only way to arrange a home visit is over the phone. It is therefore unsurprising that seemingly few people are referred from PCAL to the local service. 3.7 The Charity has also been concerned about the number of completed or half-completed forms that PCAL have sent out for checking and signing by the claimant that have never been returned. This could be seen as an indication that these people needed greater support through the claims process and some face- to-face help. We therefore welcome the fact that the Pension Service has started taking a more proactive approach with people who don’t complete the application process, and now contact them and oVer extra help from the local service. 3.8 The local service has a key role to play in reaching the most disadvantaged groups who will find it the hardest to make a claim. But with so many barriers it is hard to see how many disabled people, older carers and people from black and minority ethnic communities will be able to access this vital face-to-face help. It is likely that those who find it easiest to claim by phone and complete forms will have largely already done so, and the Pension Service will have to focus much more on the “harder to reach”. To do this it needs to strengthen the local service and improve access to the vital face-to-face advice on oVer.

Connections with the State Pension 3.9 Help the Aged is concerned that other areas of benefits administration have suVered from being reprioritised by the Pension Service, because of the huge amount of eVort and resources that have been diverted into Pension Credit administration. Since the Credit was launched in October the Charity has received a large increase in the number of complaints about State Pension administration, when before this was not a particular issue. 3.10 In particular, some people have received huge delays in getting their pension claim processed, which can lead to severe hardship. This is particular stressful for people who have no other income or need their pension recalculated and increased following the death of their spouse. It is impossible, or at least very diYcult, to get a decision made on Pension Credit without knowing how much State Pension you are entitled to, so people in this situation often suVer the double-whammy of missing out on both. Casestudies 4 and 5 illustrate the problem:

Casestudy 4: In November 2003 a 60 year old woman called SeniorLine because she had now been without any income for three weeks. She had claimed her State Pension and Pension Credit four months earlier but delays in State Pension processing had meant she had received neither, even though the Incapacity Benefit she was living on had now stopped. She had just been told it would be another four to six more weeks before she received any money. With no savings or income and only very limited ability to borrow money from her family she had been unable to top-up her pre-payment meters and had been without electricity or gas for three days. She tried to claim a Crisis Loan but a DWP oYcial told her she was not eligible as she did not have any benefit or pension income to pay the loan back.

Casestudy 5: On 23 December 2003 a woman who had recently passed her 60th birthday called SeniorLine because she had still not received her pension three months after making her application. When she phoned the Pension Service to ask when she would get her pension she was told that she would have to wait another 90 days as they were “recalculating” it. She was told to apply for Pension Credit as they may pay that quicker.

39 People Aged 65 and Over, supplementary report to Living in Britain 2001,OYce for National Statistics, 2003. 40 Registered Blind and Partially Sighted People Year ending 31 March 2003, DoH, December 2003. Work and Pensions Committee: Evidence Ev 169

3.11 Help the Aged believe that the Pension Service need to re-prioritise State Pension administration. Usually claiming the State Pension is an older persons first experience of the Pension Service, and the image of the service and the benefits it administers will be damaged if problems continue to occur at this level. Without eYcient State Pension claims processes it is impossible to improve standards in Pension Credit administration.

Disability and Carer’s Additions 3.12 The Severe Disability Addition and Carer’s Addition (previously called premiums) remain important elements of Pension Credit, without which many recipients of disability allowances and their carers would not gain entitlement to the benefit. It is clear that benefits staV sometimes fail to identify entitlement to these premiums and Pension Credit literature and leaflets often does not adequately communicate the fact that higher levels are available. The “overlapping” benefit rule makes the Carer’s Allowance and Carer’s Addition particularly diYcult for staV and customers to understand. 3.13 Help the Aged believes the Department should be more proactive in identifying potential entitlements to these additions. More eVort should be put into communicating specific messages on the more generous rules to older people in receipt of Attendance Allowance, Disability Living Allowance and Carers Allowance. In addition more eVort needs to be put into getting carers to claim allowances in the first place, so that they can then gain from the Pension Credit

Housing and Council Tax Benefit 4.1 The Pension Credit is very complex in itself, but it is where it interacts with other benefits that the greatest complexity occurs. The introduction of the Credit has made the relationship between centrally and locally administered means-tested benefits even more complex. The Savings Credit is counted as income in the calculation of Housing Benefit and Council Tax Benefit (HB and CTB). This means an award of Savings Credit can result in a reciprocal reduction in HB and CTB of up to 85% of the value of the original Savings Credit award. This means a number of older people are little better oV after making a claim than they were before—a source of great anger and frustration to some, particularly those who found claiming diYcult and stressful in the first place. Casestudies 6 and 7 are just two of a number of examples Help the Aged has received of older people wishing they had never made a claim because of this issue. These cases serve to feed one of the major barriers to claiming: the perception that it is not worth the hassle because you will end up little or no better oV.

Casestudy 6: In July 2004, Mr C of North London was awarded just over £9 a week of Savings Credit, but now has to pay almost £8 a week in rent and council tax instead of receiving full HB and CTB. He is in his 80s and lives alone and finds it very diYcult to understand the forms and letters he receives from the Pension Service and his local authority. He contacted Help the Aged through an intermediary because he is convinced he is now worse oV and wishes he had never made a claim.

Casestudy 7: In December 2003 SeniorLine was called by an older woman from Kent who had been awarded Savings Credit a month earlier. A few weeks later the council sent her a council tax bill of nearly twice the amount that she previously paid, explaining that this was due to the extra income she received from Savings Credit. The woman was adamant the council were wrong because the Pension Service had told her that Pension Credit would not reduce the benefits that she was already getting. She was concerned that she was getting conflicting information from the Pension Service and the council, and wished she had not applied for the Pension Credit. 4.2 The Department to a certain degree predicted this problem and in October 2003 increased HB and CTB by the value of the maximum Savings Credit award for people aged 65!. However, this pre-emptive increase seems to have made little or no impact on peoples’ responses to discovering their other benefits will be reduced as a result of claiming Savings Credit. As a result the Department had to produce a 23 page booklet for frontline benefits staV admitting that “customers may perceive a decrease in their weekly income”,41 but setting out in a series of graphs and tables why people are better oV compared to before October 2003. However, the experience of Help the Aged staV is that this is a diYcult message to communicate. 4.3 The problem has been compounded by inadequate standards of administration and communication in some local authority benefits departments. The letters are often unintelligible and can leave people feeling like they are accused of trying to cheat the system by getting money they shouldn’t. It is also likely that in a number of cases the local authorities will have bungled the change and reduced HB and CTB by more than

41 The eVect of Savings Credit awards on Housing Benefit and Council Tax Benefit, DWP, April 2004, p 3. Ev 170 Work and Pensions Committee: Evidence

they should. At least one local authority has tried to illegally charge arrears of rent and council tax for the period of the backdated award, when these lump sums should be disregarded. The new savings rules have also caused problems, with local authority staV not always understanding the new complexities:

Casestudy 8: In August 2004, SeniorLine was called for advice on benefits by an older woman who was living with her husband on savings of £60,000, but with no income. She was advised of her entitlement to Guarantee Credit and therefore full Council Tax Benefit. On visiting the council tax oYce that afternoon, she was informed incorrectly that she could not claim CTB because her savings were over £16,000 (irrespective of whether or not she was receiving Guarantee Credit). The council oYcial stated that the caller like many others, who had approached her desk before, had been misinformed and that there was no way that anyone with savings of over £16,000 could get CTB. The council employee was totally unaware of the new benefit rules under Pension Credit. 4.4 The introduction of the Pension Credit has resulted in confusion and anger for those who have been caught between Pension Service and Housing and Council Tax Benefit administrators who seem not to communicate or understand each other. It is unclear how widespread such problems are as the Department does not appear to have made any specific assessment of how well local authorities administered the change. Given the new complexities and the problems some local authorities already have had in administering HB and CTB it seems strange the DWP hasn’t done more to monitor this issue. Help the Aged believes the DWP needs to take much more care to ensure all local authorities administer benefit changes fairly and accurately, and communicate eVectively with older people.

Not Claiming the Pension Credit

Take-Up of Pension Credit 5.1 Help the Aged has consistently criticised the Government’s policy on means-tested benefits on the basis that take-up will be inadequate and too many older people will miss out. These concerns have been borne out by the Department’s progress on take-up so far and its plans for the future. The Charity is concerned that the Department’s targets are too low and will leave over one million pensioners missing out even by 2008. 5.2 At August 2004 there were 2.61 million pensioner households in receipt of the Pension Credit. The DWP estimates that 3.75 million pensioner households are currently entitled to the benefit, meaning that over 1.1 million households are still missing out on their entitlements. This equates to a take-up rate of 69%, only a little higher than the much derided levels of take-up under MIG. 5.3 In the Spending Review 2002 the Government’s Public Service Agreements (PSAs) were published for the period 2003–06. The DWP was set the target of increasing take-up of Pension Credit to three million pensioner households by 2006—representing 76% of eligible households. However, the DWP estimates that 3.95 million pensioner households will be entitled in 2006–07. This means that the Department could meet its target and still leave 950,000 eligible households not in receipt of Pension Credit (see table 1 below). 5.4 Help the Aged called on the Government to adopt a more ambitious target for the period 2006–08 in the Spending Review 2004, published in June. However, the new target was disappointing. The 2006 target of three million remains, and a new target of 3.2 million pensioner households is set for 2008. The DWP estimates that 4.25 million pensioner households will be entitled in 2008–09. This means that the Department could meet its new target by only reaching 75% of eligible households. This would leave 1.05 million households not in receipt, an increase of 100,000 in non-claiming households (see table 1 below).

Table 1

PENSION CREDIT ELIGIBILITY

Eligible Target Ignored (million) (million) as % (million)

Spending Review 2002: Current Progress 3.75 2.55 68% 1.20 Spending Review 2002: Target 3.95 3.0 76% 0.95 Spending Review 2004: Target 4.25 3.2 75% 1.05

Takeup figures from statement by Secretary of State for Work and Pensions, OYcial Report 15 July 2004 Col 772S–78WS and from DWP’s Public Spending Agreements. Eligibilty figures for 2004–05, 2006–06 and 2008–09 taken from written parliamentary answer, 7 June 2004. Work and Pensions Committee: Evidence Ev 171

Future Resources and Take-up Work 5.5 The rate of progress on increasing take-up already seems to be slowing compared to the period immediately after the October 2003 launch. August 2004 has seen the smallest increase in recipients—just 15,000 households. However, these targets allow them to slow progress much further. Assuming the Department just meets both its PSA targets then it will only have to increase by 7,700 households a month between March 2006 and April 2008 (see table 2). It is unclear why the DWP believes progress will be so much slower in the future. It appears that the Department has little confidence in its ability to help the “harder to reach” groups or is unwilling to commit the necessary resources to take-up work.

Table 2

MONTHLY TAKEUP RATES

October 2003– July 2004– March 2006– June 2004 February 2006 April 2008 (benefit units) (benefit units) (benefit units)

Actual average monthly takeup (net new claimants) 74,000 SR(04) target minimum average monthly claimants 22,500 7,700

Figures rounded to three significant figures. Household is a proxy for Benefit Unit. 5.6 Help the Aged believes that for the Pension Credit to be judged a success take-up needs to reach at least 90% (the limitations of a means-tested system would make 100% take-up unlikely). Reaching 90% would cut the numbers excluded from the benefit in half, compared to the Government’s 75% target, and would show the Government was serious in its attempts to reduce pensioner poverty using the Pension Credit. See Table 3.

Table 3

PENSION CREDIT: A FAIRER TARGET

Eligible Target Ignored (million) (million) as % (million)

Spending Review 2002 3.95 3.0 76% 0.95 New target minimum 4.25 3.8 90% 0.43

See footnotes in Table 2. 5.7 As part of the Gershon review the DWP plans to shed 30,000 employees during this period, without reducing front line services. As the Pension Service currently employs over 10% of the Department’s staV it is likely to lose at least 3,000 employees. The Department argues that eYciency savings will mean it is able to do just as much with fewer staV. Certainly there is much room within the Department for greater eYciency, if rules and processes are simplified and IT systems improved. However, face-to-face take-up work, though highly eVective, is necessarily staV intensive. Front line staYng needs to be increased rather than cut. 5.8 Help the Aged believe it is unacceptable for the Government to set a target that five years after the launch of the Pension Credit allows the Pension Service to leave over 1 million pensioner households without their entitlements. The Charity continues to believe that the DWP should be set a target of 90% take-up, to ensure real progress is made over the next few years. Richard Wilson 6 October 2004

Memorandum submitted by Association of British Insurers (PC 11)

1. Introduction 1.1 This is the written submission of the Association of British Insurers (ABI) for the inquiry by the Work and Pensions Select Committee into the introduction of the Pension Credit. 1.2 The ABI is the trade association for Britain’s insurance industry. Its more than 400 member companies provide over 97% of the insurance business in the UK. It represents insurance companies to the Government, and to regulatory and other agencies, and is an influential voice on public policy and financial services issues. ABI member companies hold more than a fifth of all investments traded on the London Stock Exchange, on behalf of millions of pensioners and savers. Ev 172 Work and Pensions Committee: Evidence

2. Executive Summary — The success of the Pension Credit has to be measured against the Government’s two key pension policy objectives, both of which we support, namely targeting resources on the poorest pensioners and encouraging those who can aVord to save to do so. — According to the Government, their state pension reforms introduced since 1997 have succeeded in lifting 1.8 million of today’s pensioners out of poverty. This is probably an over statement of their success but nevertheless a lot has been done to help the poorest pensioners. However, latest figures from the Department for Work and Pensions (DWP) show that less than 70% of those eligible take up the Pension Credit. — The Pension Credit is storing up problems for tomorrow’s pensioners. It blunts the incentive to save and leaves individuals uncertain about what the state will provide for them and consequently unable to decide how much to save or whether to save at all. This is starkly illustrated by the fact that 50% of people questioned in an ABI survey said they would start to save or save more if the Government promised it would not reduce their state benefits because of their pension saving. — There is widespread consensus that the state pension system needs to be reformed in a way that drastically reduces means testing. The ABI’s proposals for state pension reform, outlined in detail in the enclosed report Adequacy, aVordability and incentives: a better future for state pension, would increase S2P suYciently to lift people out of means testing. This would solve the issue of non take up of the Pension Credit and the disincentive to save which it represents, all at no extra cost to the taxpayer and without raising the state pension age. The proposals would also continue to target resources on lower earners while properly incentivising those who can save to do so.

3. The ABI’s Role in Welfare Reform 3.1 The insurance industry is committed to working with Government to maximise the positive impact of savings and insurance products on the country’s overall welfare. It is only through this partnership that a fair and workable system can be developed which encourages those who can aVord to save for their retirement to do so while targeting Government resources on those who cannot. The Government’s target of increasing the proportion of retirement income coming from private sources from 40% to 60% will be instrumental in achieving the latter objective and we support it. 3.2 It is against this dual aim that we need to measure the success of the introduction of the Pension Credit.

4. Targeting Resources at the Poorest Pensioners 4.1 According to the Government, through the state pension reforms which it has introduced since 1997, it has succeeded in lifting 1.8 million pensioners out of poverty. This is probably an over statement of its success, but with almost half of the extra money (p10 billion in 2004) that it is spending on pensioners going to the poorest third of pensioners, the Government has succeeded in targeting resources at the poorest pensioners. 4.2 Clearly the Government’s policy of introducing generous means tested benefits has succeeded therefore in reducing levels of poverty among today’s pensioners. 4.3 That is not the full story however. The latest figures from the Department for Work and Pensions (DWP) show that more than 30% of pensioners eligible for the Pension Credit do not claim it.42 Just over 3.1 million individual pensioners receive the Credit out of a target of just over 5 million. And the DWP does not envisage this changing much, since their spending plans assume that by 2008 well over a million pensioners who could claim the Pension Credit will still not have done so. This statistic, taken together with estimates by the Institute of Fiscal Studies43 which suggest that, were things to continue as they are, three out of every four people entering the labour market today can expect to be eligible for means tested benefits when they retire, paints a worrying picture. 4.4 Another problem, which means tested benefits like the Pension Credit tend to suVer from, is the expense of administration. It is very expensive to administer the Pension Credit because each claim has to be worked out individually. The Savings Credit element is particularly complicated—for example, two people with the same overall pension income, one of which has full basic state pension entitlement and one of which does not, will be entitled to diVerent amounts from the Savings Credit.44 According to Liberal

42 See DWP Press Release “Pension Credit take up figures for July” dated 8 September 2004. 43 See the Institute for Fiscal Studies’ Briefing Note No. 28—“The tax and benefit system and the decision to invest in a stakeholder pension”. 44 At the very least this should be addressed so that the savings credit of the pension credit can be awarded to those with less than the full basic state pension in respect of ALL their private savings. This would help women in particular. Work and Pensions Committee: Evidence Ev 173

Democrat MP, Steve Webb,45 it costs about £4 per week per claim to administer the Pension Credit, which, against a background of 65,000 people receiving less than that from the Pension Credit, means it costs more to administer than many people actually receive. 4.5 The ABI believes, in common with many other commentators, that the above makes the current system—with its heavy reliance on means testing—unsustainable in the long term. There is firm agreement among industry experts, think tanks, lobby groups and politicians46 that a higher state pension, via either an increased basic state pension or increased S2P, which provides a pension at the level of the Pension Credit Guarantee, is needed. This would reduce the growing numbers of people relying on means testing, reduce administration costs and solve the problem of take up. It could be achieved at neutral cost to the Government under the ABI’s proposals for reform of the state pension which focus on reforming S2P.47

5. Encouraging Those Who Can Save to do so

5.1 Through the savings element of the Pension Credit, the Government has succeeded in rewarding today’s pensioners for saving, to a greater degree than they would have been rewarded under the previous system. Instead of benefits being withdrawn pound for pound in respect of modest private savings over the level of the basic state pension, they are now withdrawn at a rate of 40p for each pound of income possessed above the full basic state pension. However, the “reward” for saving moderate amounts—eVectively a withdrawal rate of at least 40%—although better than the previous position of a 100% withdrawal rate, is still not suYcient to allow the message “it always pays to save” to be disseminated. In addition there is still a 100% withdrawal rate for savings amounting to less than the full basic state pension entitlement. This has the eVect of blunting the incentives to save in a private pension. 5.2 The Pension Credit and its interaction with private savings also acts as a disincentive to save due to its generosity—because the Pension Credit is more generous than the Minimum Income Guarantee due to the Savings Credit element (which applies to S2P income as well as private income) it increases income in retirement so reduces the urgency to save. This needs to be considered alongside the eVect that, because there is still a withdrawal rate on savings,—albeit no longer on a pound for pound basis—the increase in ability to spend in retirement that a pound of saving will produce has to be weighed up against current consumption of that pound. These two eVects and their likely impact on diVerent groups of people is discussed in detail in the Institute for Fiscal Studies’ (IFS) Briefing Note No. 28.48 5.3 As a result of the complication which the Pension Credit brings to the state pension system, individuals have no certainty about what the state will provide for them at retirement. Therefore they cannot decide—and their advisers cannot advise—on an appropriate level of private saving or whether to they should save at all. 5.4 A practical demonstration of all of this arose in the latest ABI Pensions and Savings Index survey49 where 50% of those questioned said that they would be persuaded to increase their savings for retirement (or start to save) if the Government promised not to reduce their entitlement to state benefits because of their pension. The following question was asked in the survey:

Q. Which of the following, if any, would persuade you to begin saving in a pension or to save more in a pension? [tick all that apply]: A promise from the Government that they would not reduce your entitlement to state 50 benefits becauseof your pension A guaranteed return on your savings, even if this meant lower returns 31 Being allowed access to your pension before you retire 22 More information and education 5.5 This illustrates how far means testing is already undermining incentives to save and provides clear evidence that, while helping today’s pensioners, the Pension Credit is storing up problems for tomorrow’s pensioners.

45 Speaking on BBC Radio 4’s Money Box programme on 14 September 2004. 46 Including the Institute for Public Policy Research (IPPR), the Pensions Policy Institute (PPI), the National Association of Pension Funds (NAPF), the TUC, Frank Field MP, the Liberal Democrats etc. 47 See enclosed report Adequacy, aVordability and incentives: a better future for state pensions for further details. 48 The tax and benefit system and the decision to invest in a stakeholder pension. 49 Carried out for the ABI by YouGov during July 2004. Ev 174 Work and Pensions Committee: Evidence

6. Reform 6.1 The ABI’s proposals for state pension reform work with the state pension components already in place to address the means test derived disincentive to save and to remove complexities such as that caused by neutral contracted out rebates. 6.2 The basic state pension (BSP) is well understood and, despite its paucity, pensioners appreciate it. It should stay in its current form. Calls for a substantial increase, funded by raising state pension age to 67 or even 70, are misplaced. Any increase in state pension age would hit the poorest (those with lowest life expectancies) hardest. 6.3 A means-tested minimum income is also an essential part of the framework. But it has to be a safety net for the few who cannot aVord to save, rather than a source of confusion for the many. The ABI proposes to phase out the savings credit element of the Pension Credit over the next 20 years, ensuring that those who are close to retirement do not lose out, while sending a clear message to younger workers about their personal responsibility for retirement provision. A safety net minimum would remain, ensuring that no one was worse oV than under the current Guarantee Credit (previously the MIG). 6.4 The state second pension (S2P) is the least understood but, potentially, most important component in the current system. Our proposals would improve it in three key ways. (a) First we would make it more generous, increasing the pension rights of 8° million lower-paid employees and ensuring that the combination of BSP and S2P paid around 25% of average earnings—suYcient to keen the vast maioritv of future pensioners out of means testing. To achieve this we propose raising the lower earnings threshold to £15,00050 and making S2P flat at this level ie everyone, whether earning more or less than £15,000, will receive an S2P entitlement based on earnings of £15,000. (b) Second, contracted out rebates will continue to be earnings related. So for those earning less than £15,000 it will make sense to be contracted in and for those earning more than £15,000 it will make sense to be contracted out. This solves the contracting out advice problem at a stroke and should improve public understanding while providing a clear signal to higher earners to kick-start their own private provision through contracting out of the state scheme. Contracting out could potentially be a key lever in shifting pension provision from the public to private sector and should be retained and improved in this way rather than abolished. (c) Third, we would bring the self-employed into S2P on broadly the same basis as employee, boosting the pension rights of 2° million self-employed people. This would mean a small element of compulsion for the self employed but only as much as is applied to employees.

7. Conclusion 7.1 While the Pension Credit has undoubtedly helped today’s poorest pensioners, the current system of means tested benefits is not sustainable for the future and will inevitably suVer from problems around take up and administration. It is storing up problems for tomorrow’s pensioners by disincentivising saving and 50% of people would be willing to start saving or save more if this were not the case. 7.2 The ABI has an aVordable set of proposals for state pension reform which would alleviate the take up and disincentive problems of the Pension Credit while keeping resources targeted on lower earners, all without raising the state pension age. We urge the Government to adopt these proposals and phase out the Pension Credit. Julie Stark ABI 30 September 2004

Memorandum submitted by Pensions Policy Institute (PC 12) Summary 1. The Pension Credit is intended to: — Ensure the poorest people over age 60 have a minimum income, by topping up income at least to the level of the Guarantee Credit. — Reward saving, by giving Savings Credit to those over state pension age who have some income above the Basic State Pension. 2. The Government also claims that the Pension Credit will help to keep pension-related state spending within sustainable limits.

50 £15,000 is the figure which S2P entitlement would have to be based on in order for the combination of BSP and S2P to be enough to keep people out of means testing. Work and Pensions Committee: Evidence Ev 175

3. This submission highlights what it takes for the Pension Credit to be successful on these policy aims. It finds that Pension Credit is not succeeding in meeting these aims, and it is not clear whether improving delivery can ensure the aims are met. The problem is the design of Pension Credit, especially the Savings Credit part. 4. The particular concerns are: — Guarantee Credit is doing some good in poverty avoidance, but take-up is less than 100% take- up, it is not guaranteed to keep its value in future, and its scope is being scaled back. — Savings Credit cannot act as a reward for saving even if delivery were excellent. It is too complicated and disconnected from the savings decision. — Savings Credit take-up levels are very low. There is no spur to claiming Savings Credit so eligible people may drift for some time not realising they need to claim. — Savings Credit is a real barrier to saving for today’s workers. — The cost of Pension Credit may be significantly higher in future than Government projections suggest. — The cost of administering Pension Credit raises doubts about the eYciency of its delivery. 5. The submission concludes that, in addition to the problems highlighted above, Savings Credit complicates pension reform.

The Role of the Pensions Policy Institute 6. The Pensions Policy Institute (PPI) promotes the study of pensions and other provision for retirement and old age. The PPI is unique in the study of pensions, as it is independent (no political bias or vested interest); focused and expert in the field; and takes a long-term perspective across all elements of the pension system. The PPI does not make policy recommendations, but exists to contribute facts and analysis to help all commentators and policy decision-makers. 7. This submission is written by Alison O’Connell, Director, and Chris Curry, Research Director. Alison trained as an actuary and has over 15 years’ experience in the financial services industry and pensions policy. Chris has worked in pensions for the Government and the private sector for 10 years.

The Aims of the Pension Credit 8. When the Pension Credit was first announced in 2000, its stated aims were to:51 — Ensure the poorest people over age 60 have a minimum income, by topping up income at least to the level of the Guarantee Credit, and — Reward saving, by giving Savings Credit to those over state pension age who have some income above the Basic State Pension. 9. Since then, the Government has also stated that current policy (including the Pension Credit) will help to keep pension-related state spending within sustainable limits. 10. It is not clear that these aims are being met by the Pension Credit.

Ensuring the Poorest Have a Minimum Income 11. The Pension Credit is intended to ensure that the poorest people over age 60 have a minimum income, by giving those with no other income at least the level of the Guarantee Credit (currently £105.45 per week for singles and £160.95 per week for couples; around 22% of national average earnings, NAE). 12. The Guarantee Credit will be eVective at this aim if: — All people who are eligible for the Guarantee Credit receive their entitlement, that is, take-up is 100%, and, — The level of the Guarantee Credit is increased annually in line with average earnings, and, — The age of entitlement is appropriate. 13. Pension Credit take-up is currently 74% of eligible households.52 14. Take-up has been increasing as the new Pension Service beds in, but the monthly increase in the number of households receiving Pension Credit appears to be slowing (Table 1).

51 Department of Social Security (2000) Pension Credit: A consultation paper. 52 Statement to the House of Commons by the Minister for Pensions 16 September 2004, House of Commons Hansard, column 185 WS for current claimants; compared to eligibility data from Department for Work and Pensions. These figures are not directly comparable to oYcial estimates of take-up, which are based on survey data rather than administrative data. Ev 176 Work and Pensions Committee: Evidence

Table 1 SLOWING OF PENSION CREDIT NEW ENTITLEMENTS53

Month Increase in number of households receiving Pension Credit

June 2004 66,000 July 2004 52,000 August 2004 25,000

15. While there could be seasonal or other explanations for this short-term trend, it does suggest that it will get harder to increase the take-up rate beyond 75%. 16. In recent years the estimated take-up of means-tested minimum income benefits has been falling as the number of people entitled to them has increased. In 2001–02 (the last year for which oYcial take up estimates have been published), between 63% and 72% of people entitled to the Minimum Income Guarantee were receiving it. Even when take-up was estimated to be at its highest in 1998–99 (the year before the introduction of the Minimum Income Guarantee), between 68% and 81% of people were receiving the benefit they were entitled to.54 17. The elimination of poverty depends on the take-up of Guarantee Credit being 100%. Some breakdown of take-up by type of Pension Credit benefit is possible, but not on the same basis as the current 74%. The latest figures, for May 2004, show beneficiaries receiving Pension Credit (rather than households) as a % of beneficiaries eligible (Table 2).

Table 2

TAKE-UP OF BENEFICIARIES RECEIVING DIFFERENT TYPES OF PENSION CREDIT, MAY 2004

Type of benefit Eligible beneficiaries Beneficiaries May 2004, Implied take-up 2004–05, ‘00055 00056 Guarantee Credit only 1,250 928 74% Guarantee Credit and Savings 1,700 1,452 85% Credit Savings Credit only 1,700 639 38%

18. The pattern of take-up is clearly higher for the “poverty avoidance” part of Pension Credit than for the “savings reward” part. Guarantee Credit may be more successful at taking pensioners out of poverty than the headline take-up figure suggests. For tracking policy eVectiveness, it would be useful to see take- up figures published monthly by type of Pension Credit benefit. 19. The Government is assuming that the headline take-up rate remains at the 75% level57 for the next 50 years in their long-term projections of expenditure on state pensions and benefits.58 While putting the assumption in a projection of expenditure need not be related to achievable targets, it clearly makes more sense if they are. 20. It would be possible for the take-up rate for Guarantee Credit (with or without Savings Credit) to be 95% and the take-up rate for Savings Credit to be 50% and the overall take-up of Pension Credit to still headline at 75% by 2014.59 This is because the number of beneficiaries eligible only for Savings Credit grows by two-thirds over the next 10 years (to 2.85 million) and the number eligible for Guarantee Credit grows by only by one-fifth (to 3.5 million). We understand that the DWP does assume diVerent future take-up rates for Guarantee and Savings Credit which combine to the 75% headline. For tracking policy eVectiveness, it would be useful to see short and long-term take-up targets published by type of Pension Credit benefit.

53 Ministerial Statements to the House of Commons. 54 Based on DWP and DSS publications Income Related Benefits: Estimates of Take-Up for years from 1996–97 to 2001–02 for take-up of Income Support for pensioners and the Minimum Income Guarantee (from 1999 onwards). These figures are estimated from survey data, rather than administrative data so are not directly comparable to the figures in paragraph 13 and table 2. The range indicates the confidence interval in the sampling. 55 Figures from the Department for Work and Pensions. A “beneficiary” is the person eligible and his or her partner. 56 DWP Pension Credit Quarterly Statistical Enquiry, http://www.dwp.gov.uk/asd/pcqse.asp 57 PQ Mr David Willetts 13 September 2004 House of Commons Hansard column 1393W. 75% represents the proportion of pensioners entitled to any element of Pension Credit. 58 DWP long-term projections, www.dwp.gov.uk/asd/asd4/long-term.asp consistent with HMT (2004) Prudence for a Purpose: A Britain of Stability and Strength Budget 2004; PPI Briefing Note Number 14. 59 PPI estimate based on DWP forecasts of eligibility. Work and Pensions Committee: Evidence Ev 177

21. The other crucial aspect of Pension Credit succeeding in poverty avoidance is that the Guarantee Credit level continues to increase annually in line with national average earnings, so that the minimum level of income a claimant has to live on keeps up with that in the rest of society. 22. While raising Guarantee Credit levels in line with prices reduces the number of people eligible for the benefit,60 it means that those left claiming the benefit become poorer relative to the rest of society (Chart 1).

Chart 161

Guarantee Credit only protects against poverty if it is claimed and linked to earnings

Pension income as % of national average earnings for the average female pensioner, age 60 in 2004 35%

30% Current system, GC increases in line with 25% earnings

20% GC increases in line with prices 15% GC not claimed

10%

5%

0%

60 62 64 66 68 70 72 74 76 78 80 82 84 Age

23. Annual increases in Guarantee Credit levels are not set in legislation, but set at best one Parliament at a time. This introduces regrettable uncertainty into this important aspect of pension policy. 24. The eligibility age for Guarantee Credit is to be raised from 60 to 65 between 2010 and 2020.62 This is logical in terms of consistency with the increase in the state pension age for women, with increasing longevity in general and with encouraging working at older ages. However, it is at odds with the Government’s stated reason for not increasing state pension age—that it would discriminate against poorer men in manual jobs and/or in deprived regions who tend to have a lower life expectancy than the population average. 25. The poorest people aged 60–64 who would otherwise be eligible for Guarantee Credit (£105.45 per week for a single person) will instead be eligible for Income Support (£55.65 per week). The power of Guarantee Credit to protect against poverty is therefore being reduced at these ages. The eVect of this depends on the income profiles of people aged 60–64 in 2020, but as of now, 59% of men claiming Guarantee Credit only are aged 60-64 and 36% of women.63

Rewarding Savings 26. The Savings Credit can reward saving if: — The rules for what counts as “other income” to be rewarded under Savings Credit fairly recognises saving, and — People eligible for Savings Credit recognise it as a “reward” and take-up the benefit, and — People saving now can be sure that Savings Credit will reward them for having done so when they reach pension age.

60 For example, Disney and Emmerson (2004) Public pension reform in the United Kingdom: what eVect on the financial well being of current and future pensioners? Table 4.2. 61 PPI estimates using the Individual Model. Figures for an average female pensioner are derived from DWP administrative data on state pension entitlement and the Family Resources Survey. 62 Department for Work and Pensions (2002) Simplicity, Security and Choice: Working and saving for retirement page 101. 63 Department for Work and Pensions, Pension Credit Quarterly Statistical Enquiry May 2004, http://www.dwp.gov.uk/asd/ pcqse.asp Ev 178 Work and Pensions Committee: Evidence

27. Savings Credit pays a benefit of 60p in the £ for any “other income” being received in the gap between the level of the full Basic State Pension (BSP) and the Guarantee Credit level. The amount of Saving Credit then reduces by 40p for every £1 of income above the Guarantee Credit level. The maximum Savings Credit that can be received is £15.51 per week for a single person (£20.22 for a couple), and Savings Credit is no longer payable when income exceeds £144 per week (£211 for a couple). 28. There are many counter-intuitive aspects in the rules for the Savings Credit calculation. It is therefore diYcult to say that the rules fairly recognise saving. For example: — Person A with £1 more other income than Person B could receive 40p less Savings Credit than B and only 60p higher total income. In eVect, A’s savings have been taxed at 40%. This is better than being taxed at 100% (which was the case with Minimum Income Guarantee before Pension Credit was introduced) but is not as good as not being taxed at all (which would happen if the state guaranteed a pension at least at the Guarantee Credit level). — Only saving above a full BSP is recognised. This disadvantages people who may have done the right thing and saved, but for some other reason did not get a full BSP. This situation tends to disadvantage mostly women who take time out of work to care for children and others. The average BSP received by a female pensioner today is 72% of the full BSP;64 even by 2020 it is expected to be 86%.65 — “Other income” includes “saving” from State Second Pension (S2P, or its predecessor SERPS). So self-employed people, who do not join S2P, need to have done much more personal saving than, say, an employed person in an occupational scheme to get the same Savings Credit. Similarly, someone who was in an occupational scheme by luck rather than judgement (eg, a compulsory scheme) gets Savings Credit, although he or she did not take any action to be rewarded. — Some people receiving Working Tax Credit (WTC) can get a Government boost to their savings that is then reinforced by Pension Credit. WTC is calculated on income net of private pension contributions, so a contribution to a private pension is oVset by an increase in WTC (as well as attracting tax relief). The resulting pension can then also increase Pension Credit when it comes into payment. This seems to have come about not through careful design of the benefit system, but as an unforeseeable consequence of overlapping complex benefits. 29. It is not at all clear that people eligible for Savings Credit recognise it as a “reward”. The recipients of Savings Credit today did not know they would receive it, as it was not in place when they were facing savings decisions. In eVect Savings Credit is currently rewarding people for having saved. 30. It is notoriously diYcult for pension experts to understand Savings Credit. Even allowing that individual claimants do not need to understand the small print of the calculations, it is hard for individuals to understand why they are eligible to (or not) a certain amount from the Savings Credit. Compared to Guarantee Credit with the simpler message of “if your income is below £105 a week we will top it up”, there is no simple connection an individual can make between the information they are giving to the Pensions Service and the decision on Savings Credit eligibility. 31. As seen in Table 2, the take-up rate of Savings Credit appears much lower than the take-up rate when there is eligibility for Guarantee Credit. The low take-up may be due to the sheer complexity and counter- intuitiveness of Savings Credit. It may also be that the average benefits are fairly small (£10 per week), except where there is eligibility for Guarantee Credit as well (£38 per week).66 It seems to hold more generally that people eligible for small amounts tend not to take-up benefits.67 32. The other major design feature preventing a high take-up of Savings Credit is that eligibility creeps up as people become older. While most pensioners will be entitled to claim Pension Credit at some point in retirement, they generally become entitled to Savings Credit first and then Guarantee Credit. For example, a median earner who works throughout life, and retired this year at age 65 with some private pension income will become eligible for Savings Credit at age 76, and Guarantee Credit at age 99, if of course he lives that long (Chart 2). 33. Pensioners with no saving above that in the State Second Pension (S2P) will get Savings Credit (because of their S2P) even earlier (Chart 3). 34. Most pensioners will become entitled to Savings Credit as eligibility is increasing very fast. The gap between the price-linked BSP and the earnings-linked Guarantee Credit increases faster then earnings; and it is this gap that determines the spread of Savings Credit entitlement.

64 Department for Work and Pensions (2004) State Pension Summary of Statistics: March 2004. Based on a woman aged under 80. 65 Government Actuary’s Department (2003) Government Actuary’s Quinquennial Review of the National Insurance Fund as April 2000. 66 Department for Work and Pensions Pension Credit Quarterly Statistical Enquiry May 2004. Average for Guarantee Credit only was £71. 67 Hancock et al (2003) The Take-Up of Multiple Means-Tested Benefits by British Pensioners: Evidence from the Family Resources Survey Discussion paper in Economics 03/7 University of Leicester. Work and Pensions Committee: Evidence Ev 179

35. The implication for pensioners is that they can be ineligible for Savings Credit one year then eligible the next. They may not have a spur to claim Pension Credit, so drift on for some time not realising that they could claim. They may have claimed once before, been found ineligible and then thought it was not worth claiming again. With this design feature, and such complexity for a small benefit, it seems very hard to see how take-up for Savings Credit could ever increase to a level where it is an eVective reward for saving.

Charts 2 and 368

Most pensioners will been titled to Savings Credit first, then Guarantee Credit

Age at which the illustrative pensioners, aged 65 in 2004, become entitled to Pension Credit assuming some private pensions saving while working +120 99 93 77 88 Guarantee 65 71 Credit

92 Savings Credit 65 65 65 69 73 76

Non- Illustrative Low earner Illustrative Illustrative Median High standard woman man couple earner earner worker

Pensioners with no additional private savings will be eligible for Savings Credit earlier

Age at which the illustrative pensioners, aged 65 in 2004, become entitled to Pension Credit assuming NO private pensions saving above S2P while working 105 Guarantee Credit 80 87 85 with no 65 65 67 Savings

Savings 79 Credit with 65 65 69 67 65 65 no savings

Non- Illustrative Low earner Illustrative Illustrative Median High standard woman man couple earner earner worker

36. Savings Credit is intended as a reward to encourage people of working age to save now. The issues of complexity and the disconnect between action and reward apply to working age people similarly to the discussion regarding current pensioners in paragraph 30. It is exacerbated because the Savings Credit parameters are not set into the future. These parameters 20 or 30 years from now—indeed the very existence of Savings Credit—are impossible to guarantee. So it is diYcult to see how Savings Credit can act as a reward for saving for today’s would be savers.

37. Savings Credit was intended as a softening of the means-testing trap which existed when only Guarantee Credit was in place. With the full Pension Credit in place, the trap still exists (Chart 4). Someone on median earnings throughout a full-time career, aiming for a two-thirds final salary pension in 2031, would need to save 18% of salary from age 40, on top of S2P. 34% of his final salary would come from the private pension. But if he saved nothing, he would still get around a third of that saving (10% of final salary) from Pension Credit.

68 PPI (2004) State Pension Reform: Managing Transition. Ev 180 Work and Pensions Committee: Evidence

Chart 4

The means - testing trap

Income for an individual on median earnings retiring in 2031 at age 65, % of final salary 67% Private pension income 24% 43% Private pension Pension Credit 10% replacing 10% PC

BSP and 33%BSP and 33% SERPS/S2P SERPS/S2P

No private pension Pension contributions contributions of 18% from age 40

38. Savings Credit has complicated the calculation working out to what extent the means-testing trap bites—so to what extent it is worth saving—and that calculation is more sensitive to what the parameters in the calculation might be in future. It cannot be said with certainty that it always pays to save—except for people so far up the income distribution that they will remain clear of Pension Credit throughout their life. There are not many people that will definitely be in this category. This can be seen by: — Charts 2 and 3 show that most typical people will become eligible for Pension Credit at some point. It looks unlikely for only the “High Earner” who earns twice median earnings throughout his career so represents someone in the top 6% of the working population by income. — It is estimated that 64% of pensioners will be eligible for Pension Credit by 2025 and 71% by 2050.69 39. Individuals are not likely to attempt these calculations themselves, but any pensions adviser has to try to do so in order to be able to sell a pension product. Because there is such uncertainty in whether it is “best advice” to save or not, and advisers tend to be cautious, sales of pension savings products falter. This applies both to sales to individuals and sales to groups of employees. 40. This confusion may also apply to employers, who question the value of providing an occupational pension to lower-middle income workers if the benefit will be caught in the means-testing trap. 41. In summary, Savings Credit cannot act eVectively as a reward for saving.

Keeping State Spend on Pensions within Sustainable Limits 42. Pension Credit will help to take state pension-related spend within sustainable limits, if: — People do save as expected; and — People take up the benefit as expected; and — The cost of delivering Pension Credit, including the cost of encouraging people to claim, is reasonable. 43. Government long-term spending forecasts show that Pension Credit is the fastest growing component of cost: from 0.5% of GDP in 2003–4 (£5.1 billion) to 1.5% of GDP in 2053. 44. These forecasts project how much state pension (BSP and S2P) people will have in future and also make assumptions about how much other income they will have. This enables the rules for Pension Credit to be applied to sample cases, and estimates made of how many people will be eligible for how much Pension Credit in future. Clearly, this calculation is very sensitive to the amount of other income brought into account. The assumption made is that all this “other income” increases in line with earnings. 45. This seems a strong assumption to make. Contributions to private saving are at best flat (relative to earnings), whereas they should be rising if they are to provide growing pension incomes as the cost of pensions increases with longevity improvements. The potential growth in earned income over pension age is unclear.

69 Disney and Emmerson (2004) Public pension reform in the United Kingdom: what eVect on the financial well being of current and future pensioners? Table 4.2. Work and Pensions Committee: Evidence Ev 181

46. Therefore the long-term cost of Pension Credit may turn out to be much higher than assumed in Government projections. If instead of growing at earnings, “other income” grows at prices, then the cost of Pension Credit in 2050 could be 2 percentage points of GDP higher.70 The growth of the other income is largely out of the control of Government. It is a concern that the barriers to saving put up by Savings Credit might actually prevent savings at a rate which will allow the cost of Pension Credit to be sustained. 47. The other uncertainty in the cost of Government projections for Pension Credit is the take-up rate. As seen earlier, the assumption made is that take-up remains at 75% for the next 50 years. If take-up were 100%, this could add another half a percentage point of GDP to the cost in 2053. 48. The “funnel of doubt” for the cost of Pension Credit matters for Government planning of long-term state finances. It matters also to people of working age today. If there is a doubt whether Pension Credit can be aVorded in future, so that it is suspected that a future Government may erode Pension Credit to keep costs down, then long-term personal financial planning cannot be made on secure assumptions about future state benefits. 49. The administration costs of Pension Credit are small compared to the cost of the benefit payouts. But it is still important that it is delivered eYciently. However, it is very hard from the available indicators to assess the eYciency of Pension Credit. 50. The overall DWP administration costs of paying benefits to pensioners increased from £255 million in 1997–98 to an estimated £500 million in 2003–04.71 Part of this reflects the cost of introducing the Pension Credit—an estimated £285 million between 2001 and 2004.72 The Pensions Service had to recruit 7,000 new staV to administer Pension Credit.73 And advertising Pension Credit, to try and increase take-up, cost more than £15 million in 2003–04.74 51. The DWP administration costs of paying benefits to pensioners, even after the one-oV cost of introducing the Pension Credit has been paid, is still expected to be £455 million a year in 2005–06. This is £200 million a year more than the costs in 1998–99 (on as like for like as basis as possible from published figures).75 The annual cost of administering a means-tested benefit for one year (£54) is ten times more expensive than paying a basic state pension (£5.40).76

Savings Credit Complicates Pension Reform 52. The PPI is pursuing a research programme looking at possible reform models for the UK’s state pension system.77 There is a growing consensus that there should be reform, largely because of the concerns over the widespread extent of means-testing with Pension Credit. 53. All reform proposals78 made are based, in one way or another, on increasing the foundation state pension to a level at least at the Guarantee Credit level (£105 pw and indexed to earnings). This means that Guarantee Credit would still be in the policy mix, but only a minority of pensioners would be expected to be eligible for it. 54. It has become clear as the PPI has developed its work on modelling the economics of the current pension system, and possible future reform, that Savings Credit has introduced a major complication.79 Designing a cost-eVective and practical transition from the current system to any alternative is more diYcult now that Savings Credit exists. This is because: — Any reform would probably involve scrapping Savings Credit, because the point of reform would be to reduce complex means-testing. But those pensioners currently receiving it could not have a drop in income, so some phasing out would have to be designed in. This could be by freezing current Savings Credit awards (or eligibility), or starting transition with the new state pension at a higher benefit than the ultimate level.

70 PQ Mr David Willetts 3 June 2003, House of Commons Hansard column 390W. This figure may be even higher in light of recent updates of the long-term expenditure projections. 71 Department for Work and Pensions (2004) Departmental Report 2004 Table 5. The estimates have been adjusted to reflect the restructuring of the Department. 72 Department for Work and Pensions (2004) Departmental Report 2004 Figure 25. 73 National Audit OYce (2002) Tackling Pensioner Poverty: Encouraging Take-up of Entitlements. 74 Department for Work and Pensions (2004) Departmental Report 2004. 75 Department for Work and Pensions (2004) Departmental Report 2004. 76 As reported in evidence by the Department for Work and Pensions reproduced in the House of Commons Committee of Public Accounts (2003) Tackling Pensioner Poverty: Encouraging Take-up of Entitlements. Figures relate to the Minimum Income Guarantee in January 2003. 77 See O’Connell (2003) A Guide to State Pension Reform; (2004) State Pension Reform: The Consultation Response; (2004) Citizen’s Pension: Lessons from New Zealand; PPI (2004) State Pension Reform: Managing Transition, all PPI. 78 For example, the Conservatives, Liberal Democrats, CBI, TUC, ABI, NAPF, Age Concern, Help the Aged, EOC, IPPR, OECD. 79 Explored further in PPI (2004) State Pension Reform: Managing Transition. Ev 182 Work and Pensions Committee: Evidence

— The designing-out of Savings Credit in transition would have a cost. Savings Credit is growing very fast: from 3.4 million beneficiaries in 2004 to 5.1 million in 2015, a 10-year growth rate of 50%; and the growth in Savings Credit only beneficiaries is 68%, from 1.7 million to 2.85 million. This means that it will be better to reform sooner rather than later. Pensions Policy Institute 8 October 2004

Memorandum submitted by Citizens Advice Scotland (PC 13)

1. Citizens Advice Scotland (CAS) is the umbrella organisation for Scotland’s network of 77 Citizens Advice Bureau (CAB) oYces. These bureaux deliver frontline advice services throughout the country, from the city centres of Glasgow and Edinburgh to the Highlands, Islands and rural Borders communities.

2. In 2003–04, the CAB service in Scotland dealt with a total of 406,666 new enquiries. Of these, 134,393—or 33%—related to social security benefits, making it the largest category of enquiry for bureaux. Queries relating to the new pension credit (PC) accounted for 5,866—or 4.4%—of the total number of benefits enquiries.

3. The most recent figures released by the DWP80 indicate that, whilst take up of pension credit has increased, nearly a year after its introduction in October 2003 approximately 1.2 million entitled households are still not claiming the benefit. This equates to nearly a third of those entitled to pension credit and means that thousands of pensioners across the country are missing out on much-needed money that they are entitled to.

4. Take up of Pension credit has been variable in Scotland. At a meeting attended by CAS in August 2004, The Pension Service reported that it was at its highest in the Borders, around Edinburgh and in certain areas in the north east such as Moray and Aberdeenshire. The lowest band of take-up was evident in the Highlands and Islands and in some areas lying to the east of Glasgow, such as East Dunbartonshire and North Lanarkshire, and the north of Glasgow, such as West Dunbartonshire.

5. The CAB service in Scotland is committed to joint working with The Pension Service in order to ensure that pensioner clients benefit from an eYcient and high quality service. This commitment to joint working has been demonstrated in a number of ways and, in April 2003, CAS became the first organisation in Scotland to sign a Partnership Framework agreement with The Pension Service. This was subsequently followed by a number of regular liaison meetings, which oVered a useful platform for sharing client feedback and developing workable solutions to common problems.

6. This commitment to joint working with The Pension Service has also been demonstrated at a local level. For instance, Angus—Arbroath CAB holds a joint clinic at the bureau with representatives from The Pension Service, whilst Penicuik CAB and Perth CAB both conduct outreach work in conjunction with staV from The Pension Service.

7. It is with this background that CAS has welcomed the present opportunity to respond to the Work and Pensions Committee inquiry into the introduction of Pension credit and its first year of delivery. While we welcome any attempt to tackle the problem of pensioner poverty, our case evidence indicates that clients have faced a number of administrative and structural problems in relation to Pension credit that have, in many cases, led to significant stress and financial hardship.

8. This response examines a number of these issues, starting by looking at problems relating to take-up of pension credit. However, merely increasing the numbers of individuals claiming pension credit will not in itself resolve many of the problems that clients have brought to bureaux, and so this response also addresses other issues relating to pension credit, such as diYculties with the telephone application process, the impact of direct payment and problems with delayed payments.

9. Our response is based on the actual experiences of CAB clients, anonymised and presented as client case evidence. This is made possible by the CAB service’s social policy feedback mechanism. Bureaux throughout Scotland highlight the problems in their area by submitting specific case examples that are indicative of wider issues. This information is collated and analysed by Citizens Advice Scotland in conjunction with bureaux social policy statistics.

80 DWP Press Release, 8 September 2004, http://www.dwp.gov.uk/mediacentre/pressreleases/2004/sept/pens-0809-credit.asp Work and Pensions Committee: Evidence Ev 183

Lack of Awareness of Pension Credit 10. The first step in the complex process of improving uptake of Pension credit is ensuring that those who are entitled to it are aware of their rights. However, our case evidence demonstrates that many bureaux clients are simply not aware of either the benefit itself, or their entitlement to it: A West of Scotland CAB reports of a retired client living with his partner in receipt of a number of benefits—incapacity benefit, retirement pension and disability living allowance. However, the client knew nothing about pension credit and should have also been receiving full council tax benefit. The bureau notes that, despite the Government’s advertising, many people are still unaware of their entitlement to pension credit. A West of Scotland CAB reports of a couple that was struggling to make ends meet and wanted to know if there were any benefits they could claim to maximise their income. The bureau advised the wife on claiming disability living allowance and also informed the couple that they were entitled to pension credit. In fact, as their current weekly income was only £115, they were entitled to £40.80 pension credit each week—this represents a 35% increase in their weekly income. A West of Scotland CAB reports of a client who, on approaching his 65th birthday, phoned the bureau for advice about his incapacity benefit claim. Over the course of the interview, the adviser established that he was entitled to £28.22 pension credit each week and full council tax and rent rebate. The client knew nothing about these benefits and would not have started claiming them if he had not approached the bureau about another issue. 11. In some instances, our client evidence demonstrates that although clients may have a general awareness of Pension credit, they are not actually aware that they are required to apply in order to receive it: A West of Scotland CAB reports of a male client who needed bureau assistance with an application for a community care grant. While assisting him with this, it became apparent that, although he had recently turned 60, he had not received any pension credit. The client had not realised that you will only receive pension credit if you apply for it. 12. In order to address this problem of lack of knowledge of pension credit, CAS would like to see the DWP introducing targeted uptake campaigns, particularly focused in areas of Scotland where uptake has been poor. However, increasing uptake will not in itself be enough to relieve pensioner poverty—as demonstrated in later chapters, the first year of pension credit has been marred by administrative errors and delays, and it is therefore vital that, having encouraged people to claim pension credit, the necessary systems and resources are in place to provide a quick and eYcient service. 13. Although the Department for Work and Pensions (DWP) has engaged in an advertising campaign to promote take-up of pension credit, it does not seem to be making the most of its own communications with existing benefits claimants to inform them of possible entitlement to pension credit. The DWP should capitalise on existing opportunities for promoting pension credit, and ensure that all clients claiming income support, jobseeker’s allowance and incapacity benefit are informed well in advance of their sixtieth birthdays about the changes that will occur to their benefit entitlement and how to apply for pension credit. Furthermore, CAS believes that these claimants should be automatically transferred onto pension credit on their sixtieth birthdays, alleviating a significant amount of administrative strain on The Pension Service and reducing paper work and uncertainty for claimants. A West of Scotland CAB reports of a female client who would shortly be turning 60, currently in receipt of long-term incapacity benefit of £74.15 per week. She had just received a letter from The Pension Service advising that her state retirement pension would be £55.73 per week. Although the letter does contain a paragraph on page four mentioning that she might be entitled to pension credit, the client had overlooked it and was extremely concerned that, as of September, her only income would be her state pension. The adviser informed the client that she would also be entitled to pension credit of £49.72 each week, to top-up her income to the guaranteed level of £105.45. The bureau reports that the information about pension credit is not obvious enough and that it would have much more impact if it were displayed prominently, on the first page. A West of Scotland CAB reports of a male client who was approaching his 60th birthday. He received a very uninformative letter about his incapacity benefit being stopped, and was not advised to apply for pension credit. The adviser explained his entitlement and organised a fast- track application for pension credit. The bureau notes that the lack of proper communication from the DWP is causing unnecessary anxiety for clients.

Problems with the Application Process

The Telephone Application System 14. Bureaux have highlighted a large number of problems relating to the application process and, in particular, the fact that one of the primary ways of administering pension credit is via a telephone application system. Telephone systems can be confusing, inaccessible and intimidating—particularly for older people—and this therefore creates a very real barrier to pension credit uptake. An East of Scotland Ev 184 Work and Pensions Committee: Evidence

bureau notes that a greater proportion of its pensioner clients seek advice by visiting rather than telephoning the bureau. However, given that personal face-to-face contact is obviously a medium that older people feel comfortable with, they are not being given this option by the DWP in relation to pension credit. An East of Scotland CAB reports of a 74 year old male client with learning diYculties and physical health problems. He complained that when trying to sort out his pension credit application he was unable to get any help at the local DWP oYce. The bureau notes that, given his learning diYculties and health problems, it is asking a lot of him to make his application by telephone, particularly when he only has access to a public phone. The client pointed out that if he were of working age, the DWP would deal with him directly, which is what he is used to and what he requires. A North of Scotland CAB, based in a hospital, reports that not everyone has easy access to or likes to use a telephone, and in their experience the majority of elderly CAB clients have no access to and do not understand the Internet. The problem of telephones is exacerbated in a hospital setting, because mobiles are not permitted. The bureau notes that The Pension Service has been asking family members to make the telephone application which is causing considerable “double handling” of information. Feedback from many clients has indicated that a printed form should be available by post or from DWP OYces/Post OYces for claimants to fill in from the outset, as an alternative option to telephone or Internet applications. This would possibly add to the take up of this credit. At a local level, the bureau has downloaded and photocopied a master, and is using it for clients on the wards and clinics. 15. In addition to the basic problems of accessibility that phone applications present, client feedback also indicates that the breadth and depth of information required for pension credit applications is sometimes too complex to be handled eYciently over the telephone. Furthermore, clients can misunderstand questions or be embarrassed to discuss certain issues and, in some instances telephone interviews are entirely inappropriate, such as with claims from patients suVering from dementia,. This problem is compounded by the fact that call centre staV sometimes stick rigidly to scripts, meaning that crucial supplementary questions are not asked and therefore the necessary information is not elicited. A South of Scotland CAB reports of an 89 year old male client who had tried phoning the number given for pension credit applications. However, he was quite deaf—although otherwise very much on the ball—and so was unable to hear the helpline adviser properly and make sense of an unfamiliar accent. The client visited the bureau with all the relevant information clearly written out and the CAB adviser phoned on his behalf. The bureau notes that the process was long, taking half an hour, and that it involved many obscure questions. The bureau notes that although telephone applications are a good option in some instances, they are not suitable for many older people. In particular, it is much easier to deal with the complex information requests on paper, rather than at length over the phone. An East of Scotland CAB reports of a 60 year old client, recently widowed, who was confused about her benefit entitlements. Her late husband had dealt with all the household’s financial matters and she did not know what to do. As part of its assistance, the bureau telephoned the pension credit helpline. The bureau notes that the man on the phone was not very helpful, although the client was clearly getting upset and confused as she did not know how much savings she had. Although he was keen to complete the form over the phone, the bureau adviser asked him to post the form directly to her and told the client to return with the form for assistance completing it. 16. Other problems with telephone applications relate to administrative errors that can cause serious delays in the processing of claims. As demonstrated later in this response, processing delays can then lead to significant client detriment, both in terms of increased stress and financial hardship. A West of Scotland CAB reports of a female client who applied for pension credit via the telephone helpline. However, when she received her form through the post, it was completely blank. The details she had given had not been recorded and she was obliged to start the process again. A West of Scotland CAB reports the case of a female client who had problems with the pension credit application process. She telephoned the application line and provided the necessary information, but when the form arrived details of her savings and investments had been recorded incorrectly by the helpline member of staV. A West of Scotland CAB reports of a client whose pension credit application form had been partially completed over the telephone. When the form arrived it had been filled in incorrectly in parts, which confused the client. The client also felt that The Pension Service had provided insuYcient information to help him complete the form. The bureau was able to provide written details of which parts were to be completed by the client and which documents should be submitted with the form. 17. CAS believes that the DWP needs to make significant improvements to its pension credit telephone application system to make it both more accessible and eYcient. Additionally, alternative means of application need to be provided for those people who are unable to use the telephone system. Although The Pension Service has a system of “local service” in place—involving visits to vulnerable claimants to assist with form filling—in order to provide an eVective alternative, it must be much better publicised, more widely available and easier to access. CAS also believes that a supply of hard-copy paper forms should be made Work and Pensions Committee: Evidence Ev 185

available for claimants who are unable to use one of the other systems of application. Although it is possible to print application forms from the DWPs website, this requires firstly that individuals are aware of this option, and secondly that they have the access and computer knowledge to make it possible. Whilst organisations like citizens advice bureaux are able to print forms oV for clients, the form and accompanying guidance notes total 32 pages, and so the resource implications of printing it for numerous clients are a limiting factor.

Carer’s Premium 18. Claimants of pension credit are entitled to the carer’s premium if they normally spend at least 35 hours a week looking after someone who is severely disabled and also in receipt of attendance allowance or disability living allowance care component at the middle or high rates. This generally means that people who are entitled to the carer’s premium are in receipt of carer’s allowance, or have underlying entitlement to it even if it is not in payment. 19. However, the application form for pension credit is not specific in asking applicants questions about their entitlement to the carer’s premium. The Pension Service staV are theoretically able to access the DWP’s mainframe computer system to check if entitlement to carer’s premium can be included in the pension credit claim, but our bureaux evidence indicates that this does not happen consistently, meaning that claimants are not receiving money that they are entitled to. An East of Scotland CAB reported problems with the pension credit claim pack. There is no provision in the form to highlight where the claimant is receiving carer’s allowance for looking after someone else (rather than someone else receiving carer’s allowance for looking after the claimant). There is also nothing which flags up that claimants should highlight an underlying entitlement to carer’s allowance, even if it is not actually in payment. 20. CAS would therefore like the necessary questions to be added to the claim form, or assurance that if a client turns out to be entitled to carer’s premium, but this was overlooked in their initial award, this will be considered as an oYcial DWP error.

Providing Proof by Post 21. Another issue with the application process which has been highlighted by bureaux case evidence is the requirement for applicants to send original documents in the post as proof of identity. Clients are fearful of sending such important documentation out in the post, and this might dissuade some eligible people from claiming pension credit. CAS believes that a system should be introduced which allows these documents to be present and verified in person at local social security oYces. A West of Scotland CAB reports of a 76 year old client who had claimed pension credit but wished that he had not bothered. This was because of the trouble he had had providing proof of his capital and occupational pension. He was reluctant to put his bank book in the post and would have preferred to have the option of showing it to his local social security oYce. However, The Pension service said this was not now possible and he must post his proof. The client felt that the DWP is making it diYcult for people to claim pension credit. A West of Scotland CAB reports of a client who was concerned about posting original documents. She was also worried about the apparent insecurity of the envelope provided for this purpose.

Bad Advice From DWP StaV

22. Case evidence also demonstrates that bureaux clients are being hampered in their applications for pension credit due to receiving poor advice from staV employed by The Pensions Service or other DWP oYces. This indicates a need for better training of frontline DWP staV and better communication amongst diVerent DWP departments, so that all enquiries about pension credit are handled in a consistent and eYcient manner. An East of Scotland CAB reports of a client in receipt of the guarantee element of pension credit. She was concerned about an increase in her occupational pension and how she should notify The Pension Service. The bureau informed the client that as she had an income assessment period, an increase in occupation period did not qualify as a notifiable change in circumstances. The bureau contacted The Pension Service to request a list of notifiable changes of circumstance for the client and was advised by both an adviser and team leader that all changes in income had to be reported as they could have an eVect on the pension credit award. The CAB adviser pointed out the information about income assessment periods in the DWP’s pension credit information leaflet, but The Pension Service still insisted that they required this information. The bureau sent the relevant details from the leaflet, and the regulations and legislation details to The Pension Service. The Ev 186 Work and Pensions Committee: Evidence

bureau notes that the client was a frail, housebound person with multiple health problems who would have been put to a lot of unnecessary trouble, possibly resulting in an error being made on her pension credit award, without the intervention of the bureau. An East of Scotland CAB reports of a male client who called at a DWP outreach clinic to enquire about pension credit. The adviser said that he didn’t “know much about it”, and that the client should contact the DWP or benefits agency by telephone. The client had health problems and lived in a rural location and, having accessed what he believed to be a competent source of advice, was met by another barrier. The bureau notes that when the client contacted them at a CAB outreach clinic, their adviser was able to provide information and even give an estimate of entitlement. On following this up on behalf of the client with signed mandates, the bureau was then able to advise the client that he was entitled to the savings element of pension credit and council tax benefit and assist with his claim. An East of Scotland CAB reports of a client who applied for pension credit and then received a notification letter which did not include her eligible housing costs. The client was therefore advised that she had no entitlement to the guarantee element of pension credit and was only entitled to the savings element at a rate of £15.22 per week. The bureau adviser phoned the pension credit helpline, but was given no rational explanation as to why the eligible housing costs were not included in the calculation. They were also informed that the client was receiving too much pension credit and it was being reduced to £1.51 per week. The client subsequently received another letter which actually detailed the correct award—the appropriate amount was included for housing costs giving the client a guarantee credit of £1.51 plus full savings credit of £19.20. In addition, by getting the guarantee credit, the client was entitled to full council tax benefit. The bureau notes that it is not satisfactory that the advisers at the pension credit helpline are unable to provide full and accurate information to telephone enquiries which can further confuse clients and put them oV claiming.

Other Administrative Issues

23. Finally, case evidence demonstrates that there have been other administrative problems in the way that pension credit applications have been processed in their initial year that have led to client detriment. Such delays and mistakes indicate that The Pension Service is struggling to cope with its current workload— given the huge number of eligible households that have not yet claimed pension credit, this clearly highlights the ongoing need for investment in staV and resources so that pensioners receive an eYcient and prompt service. An East of Scotland CAB reports of a case in which a female client came into the bureau on 1 April wanting assistance completing a form for pension credit sent out to her by The Pension Service after an initial telephone application. The bureau contacted the helpline and was informed that they would have to start the process again as there had been too long a delay in returning the form. The client returned on 8 April and when the bureau rang the telephone application line, they were informed that they were too busy and would not be able to take the application before 12 April. The client returned on 13 April and had to wait 30 minutes for the telephone application line to be answered, only to be told that there were very few staV available as most were on strike. The application was finally completed on 22 April, three weeks after the client first came to the bureau. An East of Scotland CAB reports of a male client whose application for pension credit was refused. The bureau contacted The Pension Service oYce in Dundee who said they would investigate. The client heard nothing and, when the oYce was contacted again, the client was advised to appeal. However, because of the time that had elapsed, the appeal was refused. Eventually, the bureau managed to speak to someone in another oYce who stated that the letter confirming the client’s weekly income of £60 should have been supplied on headed company notepaper, rather than plain paper. The client had not been advised of this at any previous stage in the process. The bureau advised the client to reapply.

Problems with the Payment Process

Direct Payment and Post OYce Card Accounts

24. Case evidence from bureaux across Scotland indicates that the move to direct payments is causing a degree of concern for pensioner clients. In response to this feedback, CAS—in conjunction with Age Concern Scotland and a number of other voluntary organisations—produced a leaflet designed to explain what changes were being made as a result of the introduction of direct payments, and what options claimants would have. Work and Pensions Committee: Evidence Ev 187

25. Many of the CAB service’s clients do not have existing bank accounts, and so are being encouraged to open Post OYce card accounts. These are designed specifically for the receipt of direct payments and anyone in receipt of a state benefit can open one. Our case evidence indicates that elderly clients are often very reluctant to open a post oYce card account, and anxious about moving away from their traditional forms of benefit payment. This can lead to quite significant anxiety and increased stress. An East of Scotland CAB reports of an 80 year old female client who had received two letters about having her pension credit paid directly into an account. She does not want a bank account or PIN as she feels that she could not handle them. The bureau reports that post oYce card accounts are too diYcult for some clients, who prefer having an order book to hand over weekly. They do not like change. An East of Scotland CAB reports of an elderly widowed client who was very upset at the prospect of her pension and pension credit being paid into a post oYce account rather than having an order book. She was worried about continuing to receive her benefit and did not know what a PID was. The bureau informed her that a PID is a personal identification document which is issued on request by the DWP, and reassured her that she will continue to receive her benefits. A West of Scotland CAB reports of a male client whose wife was a long-term in-patient with Alzheimer’s. They are in receipt of pension credit and the client had repeatedly received forms about having this paid into a bank account. The client felt very strongly that he should be allowed to keep his payment book—he felt that all the changes in recent years such as the scrapping of utility coin meters and doing away with rent books had contributed to his wife’s poor health and was terrified that he would go the same way. The bureau tried to reassure the client but he still regarded this change as “the end” for him. 26. In light of such client evidence, CAS welcomed the DWPs announcement in May 200481 that there will be an exceptions service in place, allowing those who cannot operate an account to continue receiving benefit payments by cheque. However, CAS would like reassurance that this option will be well publicised and made readily available to clients who require it. We are also concerned that this method relies on postal delivery of benefit cheques and the impact that postal delays will have on this already vulnerable client group. 27. Case evidence also indicates that, as well as those clients that do not want to switch to direct payments, there is another group that is willing to switch but finding the process of opening a post oYce card account extremely onerous and oV-putting. The process of opening an account involves many stages,82 which makes the system overly complex, confusing and labour intensive. This is a particular problem for pensioners who often end up having to make repeat visits to the post oYce and citizens advice bureau. 28. The process is also time consuming, with one Scottish bureau noting that it is taking clients an average of six to eight weeks to open a post oYce card account. This is causing financial hardship and additional stress and worry for already vulnerable clients, who are having to claim social fund crisis loans to tide themselves over. An East of Scotland CAB reports of a client who applied for pension credit and then had to apply for a post oYce account. She was confused by the application process which required that she had first got a personal invitation from the DWP before actually applying for a post oYce card account. The bureau notes that the pension credit system relies very heavily on the opening of post oYce card accounts—and, because the process for opening these accounts is so complex and time- consuming, this is causing financial hardship. An East of Scotland CAB reports of a client who wanted a post oYce card account but did not understand how to go about it. The bureau explained that he would need to take a personal invitation document to the post oYce with personal identification and they would then help him to fill out the application form. After this, a sort code and account number would be sent out to him in the post and, in the meantime he should continue using his pension book. However, when the client went to the post oYce with the necessary documents, the staV there would not help him and he had to return for a second time to the bureau for assistance completing the form. A West of Scotland CAB reports of a female client in her 90s who was very confused after receiving a letter about her retirement pension and pension credit being paid into a post oYce card account. The bureau informed her of the process, but notes that the whole issue is incredibly confusing for elderly clients. 29. In order to address these issues, CAS calls for a simplification of the system for opening post oYce card accounts, focusing on a reduction in the number of stages and associated paper work. There is also a need for shorter processing times so that clients are not left struggling to make ends meet. Better training for post oYce staV and DWP helpline staV will also ensure accessibility and consistency of advice.

81 DWP press release, 12 May 2004. http://www.dwp.gov.uk/mediacentre/pressreleases/2004/may/fram-dp-110504.asp 82 Postwatch, the postal services watchdog, has diVerentiated eight discrete steps in the opening process before an account is activated. Ev 188 Work and Pensions Committee: Evidence

Delays in Payment

30. As indicated earlier, many clients are reporting having to wait weeks or months before their pension credit applications result in a payment, leading to substantial hardship. For vulnerable elderly clients, often without savings or other income, the situation is particularly grave. As previously noted, this situation must be addressed in order to reduce pensioner poverty, and to do so requires that The Pension Service is well- resourced and eYciently run. This is particularly concerning given that the DWP cuts in staV and Pension Service oYces are likely to have a negative impact on an already inadequate level of service. A West of Scotland CAB reports of a client who the bureau helped with a benefit check in December 2003. It was discovered that she was being underpaid pension credit and The Pension Service was contacted about this on 19 December. After numerous telephone calls, the arrears were finally paid on 29 March 2004, a delay of three and a half months. South of Scotland CAB reports of a client who wanted to know if she were eligible for pension credit. The bureau rang the telephone application line on 22 April 2004 and completed the form. They were informed that the application was being fast-tracked and that she would receive the form for signing the next day. The form did not arrive, but three days later it came and the client came to the bureau for assistance completing it. On 30 April the client had still not received her pension credit—the bureau phoned the relevant oYce which agreed that they had received the form, but could not locate it. The bureau managed to secure a crisis loan of £41.72 for the client, who was in severe financial hardship. On 5 May the client returned as she had still not received payment. The bureau contacted The Pension Service, who said that the delay had been due to a post oYce sort code error. A West of Scotland CAB reports of a female client whose husband had applied for pension credit three weeks previously. He had not heard anything since and so the bureau contacted the relevant oYce, but was informed that the staV were on strike and so the client would have to call back later in the week. A West of Scotland CAB reports of a couple who applied for pension credit on 20 October 2003. They were awaiting confirmation regarding carer’s allowance as an underlying entitlement to claim the carer’s premium and severe disability premium on their pension credit. They received confirmation on 17 November 2003 that this has been submitted to the relevant oYce. On 4 December, the bureau contacted The Pension Service and was informed that a payment would be made by the beginning of the following week. However, on 8 January 2004 the client contacted the bureau to say that she had not yet received a payment. The Pension Service at Motherwell informed the bureau adviser that she could not find any information on this case and would get back to them. On contacting The Pension Service again on 12 January, the adviser was informed that two cheques had been posted out on 8 January. The bureau queries why this information was not available when she phoned on 8 January and why it took over a month to process the payment.

Errors in Payment

31. In addition to delays in payment, bureaux are also reporting problems relating to clients receiving incorrect award amounts. Underpayments are similar to delayed payments in that they can cause additional stress and immediate financial diYculties for clients already managing on very limited incomes. Overpayments can be equally detrimental to clients, in that the overpayment is frequently recovered from the claimant at a later date by reducing subsequent benefit payments leading to hardship further down the line. In both cases, the clients also face the additional stress and administrative burden of trying to rectify the mistake. A West of Scotland CAB reports of a client in receipt of income support, incapacity benefit and child tax credit, providing an income of about £135 per week. The client had just turned 60 and had received a letter from the DWP with her new pension credit calculation. However, they had incorrectly included her child tax credit in the calculation, resulting in a significant drop in income from £135 to £102 per week. The client was very upset at the prospect of trying to survive on so little and did not understand why this had happened. The bureau contacted the DWP and advised them that child tax credit is fully disregarded in pension credit calculations, when assessing a claimant’s income. An East of Scotland CAB reports of a 62 year old client in full time employment, who had been oV for about eight weeks on statutory sick pay. As his income had been reduced due to his being on statutory sick pay, he had applied for pension credit using the telephone helpline. He then came to the bureau to ask an adviser to check over his printed out application form for pension credit. All his details and income were correctly shown on the application form, but the adviser calculated that his income was actually above the appropriate amount for guaranteed pension credit. The client nonetheless submitted the application and then received a cheque for £319 of pension credit Work and Pensions Committee: Evidence Ev 189

backdated to 6 October and notification that he was to receive £30.91 per week. The client returned to the bureau for reassurance that this was wrong and, after a phone call to The Pension Service, they agreed that they had made a mistake and asked for their cheque back. An East of Scotland CAB reports of a client who, since 8 September 2003 had been receiving £102.10 per week made up of a state retirement pension and minimum income guarantee/pension credit. She then received a letter from The Pension Service stating that she would receive a cheque for £2,124.88 as payment for the period from 8/9/03 to 22/2/04. The client was aware that she was not entitled to this money as it would be a double payment and wanted assistance to resolve the problem. The bureau adviser contacted The Pension Service in Newcastle who reported that there had been a “mix-up”—the cheque for £2,124.88 had been issued in error and was being recalled. An East of Scotland CAB reports a case involving a couple who had great diYculties in getting the correct award of pension credit. Errors in the calculation also resulted in the couple paying rent and council tax inappropriately, meaning the bureau also had to liaise with the council to have these refunded. Although the case was complicated by a number of changes in circumstances— such as the addition of the carer’s premium after the initial claim and subsequently the wife turning 60—the bureau notes that in each case The Pension Service was supplied with detailed and accurate information. However, numerous mistakes were made and these proved very diYcult and time-consuming to get corrected. The bureau commented that the total workload for resolving the errors was unacceptably high, particularly given that there was no good reason for the mistakes in the first place. The adviser felt that many of the DWP staV spoken to had an insuYcient understanding of the system.

Interaction with Other Benefits

Housing Benefit and Council Tax Benefit

32. Capital levels for pension credit are generous and taper slowly, whereas capital levels for housing benefit/council tax benefit are much more stringent, with an absolute cut-oV at £16,000. These discrepancies in the treatment of capital are problematic for individuals claiming both benefits. 33. There is an anomaly in the payment of housing benefit/council tax benefit for claimants in receipt of pension credit, whereby those in receipt of any amount of guarantee credit qualify for full housing benefit/ council tax benefit regardless of their capital under the pension credit capital rules. However, those in receipt of the savings credit might qualify, but do not do so automatically and must make a separate application for housing benefit/council tax benefit which is then subject to the capital level rules for these benefits. In other words, capital is treated diVerently leading to an inequitable situation. An East of Scotland CAB highlights this, noting that clients in receipt of savings credit only might be as little as 50p better oV than some claimants on guarantee credit. However, they are obliged to conform to the normal housing/council tax benefit rules, meaning that those with capital over £16,000 would not qualify at all. Claimants on guarantee credit automatically qualify for full housing/council tax benefits, with no limit on their capital levels. 34. This problem is further compounded by the fact that the assessed income periods for pension credit and housing benefit/council tax benefit are not matched, leading to the situation whereby claimants might be obliged to report changes in capital to their local authority in respect of housing/council tax benefit, even though they do not have to report it to The Pension Service. An East of Scotland CAB reports of two clients who have had substantial inheritances of £40,000 and £60,000. Both clients were in receipt of pension credit with assessed income periods of seven years. The bureau notes that, if they were in receipt of guarantee credit, they would not have to report their change in capital to anyone and would remain on full housing benefit/council tax benefit. However, if they were in receipt of savings credit, they would be obliged to inform the local authority and would lose their housing/council tax benefit under the capital cut oV rule of £16,000. The bureau notes that it is not reasonable for people—especially the elderly—to know that although they have made their claim via the pension service, and do not need to inform them of a change in capital, they do need to inform the local authority about a change of capital if it takes them over £16,000 and they are on savings credit only. Failure to inform a local authority that capital had increased by a few pounds could lead to a significant overpayment of housing/council tax benefit over the course of a year, which will later need to be recovered. 35. In order to address these problems, CAS would like the capital limit rules for housing benefit/council tax benefit to be amended so that they are the same as the capital rules for pension credit, so that any increases in capital would reduce these benefits by a taper rather than a sudden all-or-nothing cut oV point. Additionally, the system would be easier to understand and more accessible if the assessed income periods for these benefits are matched. Ev 190 Work and Pensions Committee: Evidence

Severe Disablement Allowance 36. CAS is concerned that some pensioners who have chosen to remain on severe disablement allowance rather than claiming state retirement pension might actually be worse of as a result of the introduction of pension credit. 37. Severe disablement allowance was abolished in April 2001, but is still payable to those who were entitled to it at that date. Pensioners who were entitled to severe disablement allowance before they retired have the option of choosing to continue receiving it instead of moving onto state retirement pension. There are a number of situations in which this might be advantageous to a pensioner such as: — Where they are entitled to a Category B retirement pension and severe disablement allowance is paid at a higher rate. — If they do not have suYcient NI contributions to receive their full state retirement pension entitlement and severe disablement allowance is paid at a higher rate. — Because severe disablement allowance is non-taxable, whereas Category A and B pensions are taxable. 38. The key issue is that severe disablement allowance will not qualify as income for the purposes of calculating entitlement to savings credit. This may mean that some people will now be better of claiming state retirement pension, where previously they would have been better oV claiming severe disablement allowance. 39. CAS believes that it is therefore important that DWP staV are aware of this anomaly so that they can advise claimants whether they would be better of continuing with severe disablement allowance or switching to state retirement pension on reaching retirement age. Equally, it is important to reach claimants who have previously been advised to continue claiming severe disablement allowance and oVer them better-oV calculations. Lindsay Isaacs October 2004

Memorandum submitted by Citizens Advice Bureau (PC 14)

Summary 1. Citizens Advice welcomes the establishme of the Pension Service as the delivery arm of DWP for people over the age of 60. The Pension Service has a clear focus on ensuring that older people get the benefits to which they are entitled. The take-up target for Pension Credit provides a clear (but unduly modest) incentive for the Pension Service staV to adopt a positive approach to their customers. 2. We consider that the business model is excessively telephone-based, and makes inadequate provision for the significant proportion of pensioners who are unable or unwilling to use the telephone. 3. We welcome the Government’s commitment to increase the incomes of poor pensioners, but are concerned that the complexity of Pension Credit, and the fact that it involves a means test, puts many eligible older people oV applying. We are disappointed with take-up so far, and consider that the Pension Service take-up target, 75% by 2008, is much too modest. There is a need for much more face-to-face work with older people to increase take-up, which the Pension Service may be unable to deliver because of the proposed job cuts. 4. We consider that the Government was over-ambitious in introducing the Pension Service as a new organisation, Pension Credit as a new benefit and direct payments—all over a very short period. The Pension Service has struggled to cope, leading to delays and mistakes. 5. The Government’s decision to close 10 pension centres is very worrying, and is likely to result in further disruption, delays and lost case files. There is still a great deal to do, with over 1 million eligible households not receiving Pension Credit. 6. The Government should simplify the policy and procedures on Pension Credit, to: pay savings credit from age 60, exempt all pension credit recipients from health charges, reduce the assumed income from capital, remove the housing benefit savings limit for all pension credit recipients, relax the overseas travel rules and provide automatic flow-through from income support at 60. 7. We welcome the concept of local authorities and voluntary organisations being partners of the Pension Service, but consider that the concept was inadequately thought through before it was applied. DWP and the Pension Service should review the ways in which they relate to “partners” to allow consultation at an earlier stage, and to develop more reciprocal relationships. Work and Pensions Committee: Evidence Ev 191

1. Introduction 1.1 The Government introduced Pension Credit in October 2003 to respond to pensioner poverty that arose from: — The declining relative value of the basic state retirement pension; — The failure of more than a quarter of the pensioners who were eligible for Income Support (branded as Minimum Income Guarantee) to claim it. 1.2 It sought to achieve this through a benefit that met a number of policy aims: — To target available resources on the poorest pensioners; — To lessen the disincentive to save for retirement that was provided by the Minimum Income Guarantee means test; — To provide a benefit for older people that did not incorporate the work-seeking conditionality being brought in for most benefit recipients of working age; and — To administer the new benefit more cheaply, having regard for the stable circumstances of most pensioners. 1.3 The establishment of the Pension Service in April 2002 was an important part of the preparation for Pension Credit. The concept of a DWP delivery agency devoted to providing benefits for older people is very positive, because it enables staV to have a wholly committed approach to ensuring that their customers get the benefits to which they are entitled. The introduction of take-up targets for Pension Credit means that Pension Service staV actually encourage their customers to claim benefits—a world away from the old approach of the Benefits Agency. 1.4 Research was carried out to determine how the new Pension Service should go about its business. This showed that most older people hated going to Benefits Agency oYces, and most of them had telephones and some form of bank account. So the Pension Service was set up as a largely telephone based service, operating out of 26 newly established pension centres where processing would be carried out and which would deal with most customer queries. There are no pension centres in London or the South East—these parts of the country are served from distant locations such as Glasgow, Cwmbran and Newcastle on Tyne. These centres have been phased in over a two-year period, during which time the pattern of service has varied across the country, with some processing continuing in local social security oYces. The implications of the decision to phase 10 of the new centres out over the next 18 months are discussed in Section 7. 1.5 The Pension Service recognised that some older people would be unable to do business with them by telephone, and established a local service to run drop-in surgeries and conduct home visits. Local service has no caller oYces and customers can only gain access to local service through the pension centre that serves that area. It appears to be variable whether Jobcentre Plus oYces are prepared to oVer pensioners any practical assistance with their benefits—for example, the provision of forms, use of the telephone to contact the pension centre, and document verification. We consider that Jobcentre Plus oYces should be geared up to provide assistance to pensioners who approach them, and we suggest that the Pension Service and Jobcentre Plus should develop and publicise a protocol to achieve this. 1.6 From its inception, the Pension Service has had a policy of working with “Partners” at national and local levels—that is with local authorities and any other organisations that work with or involve older people. Citizens Advice is a National Partner, and individual Citizens Advice Bureaux are local partners. We welcome the concept of partnership, but have been disappointed in some aspects of its implementation. 1.7 To the extent that the Pension Service has consulted and involved partners in making its plans and carrying them through, we welcome this as a valuable new approach. We have valued our involvement in the group Partnerships Against Poverty, England and Wales, and its Pension Credit Subgroup. But we believe these groups could have been much more valuable if DWP and the Pension Service had been willing to share and discuss proposals at a much earlier and more formative stage. 1.8 For example, all the national organisations participating in the Partnerships Against Poverty Pension Credit Subgroup pointed out that the Pension Service needed to initiate local face-to-face take-up work, in addition to the direct mail and mass media promotion, in order to get claims from harder to reach groups, but it took a long time for this advice to be accepted. Sometimes it has felt as if the key decisions have already been made, and partners are being consulted only about the detail, or worse simply informed of decisions that have been made already. We consider that the Pension Service still has some way to go to operate the partnership in the reciprocal manner that is the essence of real partnership. 1.9 The operation of the partnership approach at local level is discussed in section 6. 1.10 The introduction of Pension Credit has involved a great deal of work for Citizens Advice Bureaux— explaining how the complex rules aVect an individual’s eligibility, helping people to claim, sorting out problems with claims that have been made and incorrect awards, explaining obscure award letters, and taking urgent action on behalf of people who have been left penniless when their income support has stopped without warning at the age of 60. Bureaux have sent in well over a thousand reports of issues that have arisen for their clients. In the remaining sections of this document, we set out the experiences of CAB clients with Pension Credit and suggest improvements in policy and practice that we consider that DWP and the Pension Service should make. Ev 192 Work and Pensions Committee: Evidence

2. Policy Issues 2.1 In Citizens Advice’s response to the Pensions Green Paper, we expressed concern about the long-term viability of the government’s policies for financial support for low-income pensioners.83 Broadly this policy is that the basic state pension will increase by 2.5% a year, or price inflation, whichever is the higher, and the Pension Credit guarantee level will increase by the percentage increase in earnings. People will be able to enhance their state pension through the State Second Pension, and also be encouraged to make their own provision through occupational and private pensions. 2.2 The eVect of this approach, on the Government’s own figures is that the proportion of pensioner households that will qualify for means tested Pension Credit will increase from the current 50% to 65% by 2050. Our experience is that most pensioners consider that their State Retirement Pension should provide an adequate basic income for their retirement, and they should not have to submit to a means test in order to have enough to live on. 2.3 In his speech on Reforming the Welfare State on 11 October 2004, the Prime Minister indicated that the Government would bring forward proposals for pension reform in the light of the final report of the Pensions commission under Adair Turner, and would seek consensus as far as possible. We welcome this approach. We hope that the Government will work towards raising the level of the Basic State Pension to that of the Pension Credit Guarantee Credit and up-rating in line with earnings thereafter. We also consider that the National Insurance contribution requirements for State Retirement Pension should be greatly simplified so that most people will qualify for the full pension, and that the practicalities of a citizen’s pension should be fully examined. There should also be an enhanced pension for disabled pensioners and pension- age carers. This approach would be: — seen as fair by most people, — make it easier for people to plan how to save for their retirement because they will have more clarity about the retirement income they will have from the state, — avoid the problem of under claiming that causes means tested benefits to fail to reach many of the poorest people, and — be much cheaper to administer than Pension Credit. 2.4 The resource implications of this approach will need to be addressed through the tax system, for example by reducing tax concessions surrounding pension contributions for wealthier people, re-examining the contracted-out rebate and reviewing the tax treatment of wealthier pensioners. The recent Pensions Policy Institute paper suggests that these radical changes that are manageable and aVordable.84 2.5 For the immediate future, Pension Credit will continue to exist. We welcome: — the extra money that Pension Credit is putting into the pockets of less well-oV pensioners; — the removal of the savings limit and the reduction of the tariV income on savings that applied to Minimum Income Guarantee; and — the introduction of longer Assessed Income Periods, and the requirement for local authority housing/council tax benefit departments to use the Pension Credit assessment of means rather than submit pensioners to a further means test. There are, however, a number of policy problems that we consider that the Government should address. 2.6 It is unfair that people who do not receive a full basic State Pension get no benefit, or less benefit than those with full basic State Pension, from any other savings or income that they have. The calculation of the savings credit should be amended so that people with less than the basic State Pension should get the same amount of savings credit as they would if they were getting full basic State Pension. 2.7 The diVerent qualification ages for the guarantee and savings credits add to the complexity of an already over-complex benefit. Women in their early 60s who are living alone and have supplemented their basic State Pension consider the non-availability of the savings credit to be unfair. It is also a disincentive to their doing some part-time work. A client of a bureau in StaVordshire had been receiving incapacity benefit when she reached 60, and moved on to State Retirement Pension. She had an occupational pension that made her income too high for the guarantee credit, but if she were over 65 she would have been entitled to receive savings credit. A man in similar circumstances would retain his IB to age 65 and then qualify for savings credit at the same time as receiving his State Retirement Pension. We consider that the savings credit should become payable at 60.

83 “A Firm Foundation for Retirement”, Citizens Advice, March 2003. 84 State Pension Reform: Managing the Transition, Pensions Policy Institute, September 2004. Work and Pensions Committee: Evidence Ev 193

2.8 The relaxation of the tariV income for savings is welcome, but the rate of £2 per week for each £1,000 of savings above £6,000 still represents over 10% per annum, more than double the income that the pensioner is actually likely to be receiving. Pensioners resent this, especially as this income has been re-titled “assumed income” which they consider dishonest. They point out that no financially literate person would make such an assumption. A client of a bureau in Derbyshire had savings valued at £38,949 and his Pension Credit calculation showed an assumed income of £66 per week. The client felt this was very unfair as the actual interest he received (and which had been notified to the Pension Service) was far less. The Government should reduce the assumed income on capital to a rate that reflects the income that is actually likely to be obtained. If it is not prepared to do this, and considers that pensioners with savings over £6,000 should have to run these savings down, it should revert to the old description of “tariV income”. 2.9 The diVerential passporting arrangements from guarantee credit and savings credit are inconsistent and confusing. — guarantee credit passports to full remission of all health charges, but savings credit recipients must submit themselves to the means test of the NHS low-income scheme. But the generally more restrictive Social Fund allows applications from all Pension Credit recipients. We consider that all Pension Credit recipients should be exempt from health charges. — guarantee credit recipients are automatically entitled to full Housing Benefit and Council Tax Benefit, regardless of their savings, but people who are only getting savings credit are excluded if their savings exceed £16,000. This results in a cliV-edge, so that a small change of circumstances could lead to the loss of all housing benefit and council tax benefit. We consider that all Pension Credit recipients should be eligible for housing benefit and council tax benefit, subject to the usual income calculations but not the capital limit. 2.10 The longer assessed income period, during which Pension Credit recipients do not have to report changes in circumstances, is welcome. However, cases are being reported to us of pensioners who lose their Pension Credit because they go on a holiday abroad that lasts for more than four weeks. To reinstate their Pension Credit they have to go through the full application process again. For example: A client of a bureau in Norfolk illustrates the problems clients face if they go abroad for over four weeks. The family of a 76 year old client paid for her to visit them abroad, and as she would be away for six weeks she was obliged to inform the pension service. She was worried to hear that she would lose two weeks of Pension Credit and was especially concerned about the eVect this would have on her other benefits. The policy fails to recognise that it is quite usual for a pensioner with family abroad to go for an extended holiday visit to see them. It is likely to be a particular problem for pensioners from ethnic minorities, who are more likely to have family abroad. We consider that Pension Credit should remain payable in full during a 13 week absence abroad, and should only be suspended rather than cancelled, provided the pensioner returns to live in the UK within one year. 2.11 Pensioners who are local authority sponsored residents in care homes are amongst the poorest people in society, having only £18.10 a week personal expenses allowance. Those who receive savings credit are also allowed to keep whatever they get, up to a maximum of £4.65. Any additional savings credit up to the single person maximum of £15.51 is clawed back for the care home fees. This is contrary to the intention of Pension Credit, to reward people for saving for their retirement, and we consider that all savings credit should be disregarded when assessing contributions to care home fees. 2.12 In one respect the arrangements for Minimum Income Guarantee were better than those for Pension Credit. Recipients of Income Support moved automatically to Minimum Income Guarantee on their 60th birthday, receiving more money each week but not having to make a new claim. All people receiving Minimum Income Guarantee when Pension Credit was introduced in October 2003 were moved automatically to Pension Credit. But anyone on IS who has reached the age of 60 since then will only get Pension Credit if they apply for it. This is a step backwards, and we consider that all recipients of Income Support should be automatically transferred to Pension Credit when they reach the age of 60. 2.13 A number of inconsistencies apply to the new arrangements: 2.13.1 Notional capital. Regulation 21 deals with notional capital. It has already been changed in April 2004 to remove ambiguity, but there are still problems, particularly around Regulation 21(2). For example, it is unclear how disposal of capital by partners of claimants will be treated. 2.13.2 Notional income. If someone chooses to defer their state pension, the pension they would have received counts as notional income for Pension Credit. This is a disincentive to deferment. 2.13.3 One of a couple in a care home. People in permanent care who wish to pay occupational pension to their spouse cannot contribute more than 50% of the occupational pension. It is not clear how this income has to be treated in calculating the Pension Credit of the spouse at home. If it is treated as maintenance, it counts for guarantee credit but is ignored for savings credit—which is disadvantageous to the spouse at home. Couples in this situation usually Ev 194 Work and Pensions Committee: Evidence

have additional costs, for example for visiting the spouse in the care home, and would benefit if the 50% of occupational pension was ignored for assessing the Pension Credit of the partner at home. 2.13.4 Temporary care/Hospital. Couples where one is temporarily in care lose their severe disability premium of Pension Credit when the DLA/AA stops after 28 days, but this does not happen when one of a couple is in an NHS hospital. The diVerence is unfair. 2.13.5 Permanent care/Sheltered accommodation. If a person moves into permanent residential care, the AIP ends, and any equity from a house sale is counted as capital for the next AIP. This does not happen if someone goes into permanent sheltered accommodation. This is unfair on those going into residential care. 2.13.6 Pension Credit and Tax Credits. WTC is ignored for savings credit, which, for most people reduces the incentive to work. There may be a small number of people who benefit from the current rule but we consider that DWP should consider changing the current rules. 2.13.7 Pension Credit and housing benefit/council tax benefit. There has been considerable convergence between Pension Credit and housing benefit/council tax benefit for those aged 60 and over, but there are still diVerences. For example, in lone parent working disregards, and the treatment of maintenance. We consider that all the inconsistencies should be removed. 2.13.8 Pension Credit and housing benefit/council tax benefit. Some people aged 65! have extra housing benefit/council tax benefit because of the up-rating of housing benefit/council tax benefit applicable amounts when Pension Credit was introduced. Some who would only receive savings credit feel that it is not worth the bother of applying, because 85% of their savings credit award will be clawed back from housing benefit/council tax benefit. This means lack of access to passported benefits from Pension Credit, such as the social fund. 2.13.9 AIP Requirements. The respective AIP systems run by Pension Credit and housing benefit/ council tax benefit are a mess. For example, in a savings credit only case, a person does not have to tell Pension Credit if their capital exceeds £16,000, but does need to tell the local authority, even though an AIP exists from the local authority. This is very confusing, especially since the Pension Service and local authorities are supposed to be sharing information (as the housing benefit/council tax benefit Pension Credit Guide stresses). There is a lesson to be learned from the Tax Credits fiasco, that making complex reporting requirements is a recipe for disaster. Simple and consistent requirements for reporting changes of circumstances during an AIP need to be put in place. 2.13.10 Overpayments. The position on overpayments arising from the failure of the Pension Service to report facts to the local authority is unclear. We consider that they should always be non-recoverable, so that people do not face demands to repay housing benefit or pay back payments of council tax when the Pension Service has failed to inform the local authority of a revised Pension Credit assessment that reduces the person’s housing benefit/council tax benefit entitlement. 2.13.11 When a couple separate. If a couple receiving Pension Credit separate, and one continues to live in their jointly owned home, the other may claim Pension Credit. The value of the property should be disregarded for six months from the date s/he left the property as this was due to relationship breakdown. Additionally, if the Pension Credit claimant is taking “reasonable steps” to dispose of the property, its value can be disregarded for as long as it is considered reasonable to do so. If s/he’s taking no steps to dispose of the property, then half of its capital value will be taken into account for means tested benefits. This is likely to leave the partner who has moved out with insuYcient income to live and unable to pay rent and council tax.

3. Take Up

3.1 We very much welcome the commitment of the Pension Service to try to maximise take-up of Pension Credit, and the introduction of take-up targets, which are a desirable innovation in social security practice. However, we believe that the targets, which envisage take-up reaching 75%, are unduly modest. They do not appear to be higher than the take-up levels of MIG which the Government found unsatisfactory (see paragraph 1.1 above). We do not find it acceptable that, by 2008, over a million eligible households, around 1.3 million pensioners should not be receiving Pension Credit. DWP and some local authorities now have sophisticated data matching capabilities to identify people who are claiming, for example, housing benefit and/or council tax benefit but not Pension Credit. Some local authorities have run systematic take-up campaigns using data that they hold, and have achieved high take-up rates. For example, Tameside Council have achieved guarantee credit take-up above 91%. We consider that the Government should be seeking take-up of Pension Credit of at least 90% or higher. Work and Pensions Committee: Evidence Ev 195

3.2 Initially, the Pension Service adopted a cautious approach to the promotion of Pension Credit, concentrating on transferring people on Minimum Income Guarantee in the period before Pension Credit came into being on 6 October 2003. Some 1.8 million households were transferred automatically. Mostly this operation went smoothly, with few people not receiving their first payment of Pension Credit on time. There were, however, three areas of diYculty: — Many people found the notification letters incomprehensible and were worried that they would get less money, when in fact they were going to get the same or more. — Pension Credit is not paid for dependent children, and the 27,000 Minimum Income Guarantee recipients who had dependent children were also automatically transferred to Child Tax Credit in October 2003. This was poorly communicated. As a consequence people were getting letters that appeared to show huge reductions in their income—over £100 a week for bigger families. Many of these people consulted Citizens Advice Bureaux and we had the impression that a disproportionate number of people from ethnic minorities were aVected. — Many local authority sponsored residents in care homes received an addition to their Minimum Income Guarantee in the form of the Residential Allowance of £65.50 a week. They did not see any of this money as it was fully transferred as part of their contribution to the care home fees. With the introduction of Pension Credit the Residential Allowance was abolished, and the money paid directly to local authorities. Again the change was poorly communicated. Both by DWP to customers and by many local authorities to care home owners. As a consequence many care home residents were unnecessarily worried that they would no longer be able to aVord their contribution to care home fees, with some fearing that they would be evicted. Many of these people and their relatives consulted Citizens Advice Bureaux about their worries. 3.3 At the start of 2003, about 1.8 million households were receiving Minimum Income Guarantee. A further two million households were reckoned to be eligible for Pension Credit. The Pension Service sought to manage the take up of these extra households by phasing publicity for Pension Credit so that it did not get swamped with more claims than it could process. A major part of the Pension Service’s take-up eVort was to write to every pensioner household to inform them about Pension Credit and invite them to apply if they thought that they might qualify. The letters were phased over the period from April 2003 to June 2004, with less than 20% being sent out in advance of the introduction of Pension Credit. All awards for applications made before 5 October 2004 will be backdated to 6 October 2003 or the date the person qualified, if later. 3.4 It is very welcome that DWP has published monthly take-up figures for Pension Credit. Unfortunately however, the figures themselves are not all easy to interpret since they are a mixture of activity figures (calls to claim-line, applications returned to the Pension Service) and to-date totals (household and persons receiving Pension Credit, average award). This is illustrated by the following table:

Month Total Applications Returned (monthly Households Receiving (monthly applications)(thousands, totals rounded) addition)(thousands, totals rounded)

October 2003 370 1970 (82) November 490 (120) 2060 (90) December 590 (100) 2120 (60) January 2004 700 (110) 2180 (62) February 840 (140) 2260 (83) March 1030 (190) 2400 (138) April 1130 (100) 2450 (44) May 1230 (100) 2500 (51) June 1320 (90) 2550 (52) July 1400 (80) 2580 (33) August 1450 (50) 2610 (25)

3.5 The figures in the first column indicate the workload for pensions centres in processing Pension Credit applications, with the February and March figures presumably reflecting a push by the Pension Service to meet the target of 2.4 million households receiving Pension Credit by the end of March. The figures in the second column are less easy to interpret, as they are net figures of awards made minus households leaving Pension Credit (presumably mainly through death). In our view it would be preferable for DWP to publish the number of new Pension Credit awards made every month and the number of awards ending. 3.6 The total number of households receiving Pension Credit is disappointing. 3.75 million households are estimated to be eligible, so that 1.14 million eligible households (1.68 million pensioners) were not receiving their entitlement at the end of August 2004. The number of households being added each month is in decline, with only 25,000 added in August 2004. The numbers of eligible households is set to increase Ev 196 Work and Pensions Committee: Evidence

by 350,000 to 4.10 million over the next three years,85 so that a net 10,000 households need to be added each month just to keep up with the newly eligible. It is clear that large numbers of eligible pensioners have not been persuaded to apply for Pension Credit by the Government’s direct mail campaign. 3.7 Belatedly the Pension Service has recognised that much more focused work is required to attract applications from many of the pensioners who are entitled to Pension Credit. We welcome the establishment of the Partnership Fund to provide financial support for local take up work by voluntary agencies and local authorities.86 We also hope that the introduction of Joint Teams of local authority and the Pension Service staV will increase take-up of Pension Credit, and also attendance allowance, housing benefit and council tax benefit by older people. Work by the Pension Service to use its databases to identify people who are likely to be eligible for Pension Credit, to send them further material about Pension Credit and, in some cases to visit them, has the potential to be valuable. 3.8 Citizens Advice Bureaux have a long history of encouraging people to take up benefits to which they are entitled. The Citizens Advice research report “CAB campaigns for benefit take-up among older people” (December 2002) drew together the experience of over 100 bureaux in carrying out targeted benefit take up campaigns with older people. Successful targeting involves advisers going to places where older people live or gather regularly, such as pensioner groups, sheltered housing and GP surgeries. Targeting is often most successful when it involves face-to-face contact to help overcome the perceived stigma of claiming. The average benefit gain from these campaigns was £85 for every £1 spent. 3.9 We consider that DWP should fund research to show what interventions with potential Pension Credit recipients are most cost eVective. This research will need to identify the characteristics of the pensioners who are not applying, so that take-up strategies can be devised for these “hard to reach” people. We are concerned that the capability of local Pension Service staV to promote take-up will be adversely aVected by the proposed staV cuts at the Pension Service—see Sections 6 and 7.

4. The Claiming Process

4.1 The Initial Claim 4.1.1 Citizens Advice has already documented the poor performance of telephone services in the delivery of services.87 This report details some of the reservations we have about the use of telephone based services for the delivery of Pension Credit. DWP has decided that telephone claiming for Pension Credit is its preferred method and has retained Ventura to provide a free application line. We welcome the extended hours oVered and provision of this as a free service— unlike calls to pension centres that are charged at local rates, which can prove very expensive. Along with other organisations, we have been concerned that some of the staV taking claims are inadequately trained. Key areas of concern are: — Poor knowledge of Pension Credit premiums, leading to applicants being told that they do not qualify for Pension Credit because their income is too high, when in fact they do qualify. A bureau in Lincolnshire reported that the telephone operator who dealt with their client’s claim had no understanding of the Severe Disability Premium. The client had not received the money, two months after it was due, and an adviser had to spend 15 minutes explaining the entitlement to the call centre operator who had no idea how it worked. — Poor knowledge of the rules for savings credit, with applicants whose income qualifies them for savings credit by virtue of their income being told that they do not qualify because they have insuYcient savings. A client of a bureau in Surrey was told on the phone that she would not qualify for savings credit because her savings are less than £6,000. But she does qualify because of her income— she would have missed out on £7 a week if she had followed the advice from the Pension Service. — Poor understanding of the diVerent eVects that guarantee and savings credits have on the capital limit for claiming housing benefit/council tax benefit, resulting in poor advice. — A bureau in the Midlands was concerned that the claim line agent insisted that a couple with savings of over £40,000, who qualified for savings credit, but not guarantee credit would be able to get Council Tax Benefit. In fact they do not qualify because their savings are more than £16,000. —StaV who appear not to have been trained to quickly identify applicants who are struggling with the telephone claims process, so that they can oVer them an alternative means of applying. This lack of knowledge has caused many clients to experience diYculties in getting the money to which they are entitled.

85 Reply to Parliamentary Question, 14 June 2004. 86 DWP Touchbase Magazine, March 2004. 87 Hanging on the Telephone, Citizens Advice, September 2004. Work and Pensions Committee: Evidence Ev 197

4.1.2 The Pension Service says that the average claim call only takes 20 minutes. We find this surprising, given the large amount of information that the applicant must supply, especially with respect to savings. Citizens Advice Bureaux that have made claims for clients have often found the process straightforward, but there are also reports of claim calls taking one hour or more. Many frail older people would find such a long call a great strain. 4.1.3 Using the telephone is obviously not a feasible way to claim Pension Credit for those who are hard of hearing. Whilst a textphone number is provided, not all older people will be able to use this either. The clients of a bureau in Surrey both had hearing diYculties and could not use a text phone. They had tried to submit an application for Pension Credit over the phone but had given up as they found that “the girl spoke too fast”. With the help of the bureau they made a successful claim, but would have been unable to do this on their own. 4.1.4 Once a telephone claim has been made, the applicant is sent a completed claim form to check and sign. Problems at this stage include: — Totally blank forms. — Incorrectly completed forms, including in cases where advisers have made the claim and are certain that correct information was supplied. — Long delays in forms being sent out, or no form being sent out at all. 4.1.5 No written claims were allowed before Pension Credit started in October 2003, which caused frustration to people who wished to apply early but were unable or unwilling to claim by phone. Citizens Advice Bureaux were not able to obtain claim forms during this period, although this would have been helpful in assisting some clients. For a number of months after October 2003, some Citizens Advice Bureaux reported continuing diYculties in obtaining paper claim forms. These diYculties have now been sorted out.

4.2 Submission of Financial Documents to Pension Centres 4.2.1 Applicants have to sign a claim form whether this has been generated by a telephone claim, or as a written claim by the applicant or an adviser. They must then submit the signed form to the pension centre that deals with their area. The Pension Service ask applicants to submit a whole range of original documents concerning income and savings to support the claim. Many people are understandably reluctant to do this, as they fear, with some justification, that the documents may be lost at the pension centre or in the post. People are also reluctant to part with items such as passbooks, even for a short time, because they will be unable to access any money without the passbook. A client of a bureau in Devon visited the bureau after making an application for Pension Credit. She had been asked to forward financial information, including savings books, to the pension service. The client was worried about how safe this would be but was unaware that she could have visited her local Jobcentre to have these processed—had she not visited the bureau she may not have proceeded with her claim. This is likely to be an increasing problem as the move towards the direct payment of benefits into bank accounts is completed early in 2005. These problems are likely to be a major reason why large numbers of pensioners fail to return telephone completed claim forms even though they appear to be eligible for Pension Credit. DWP has not published information on the numbers involved. It would be helpful if DWP did so, and also set out what action is being taken to help these pensioners complete the application process. 4.2.2 In order to meet its take-up targets, the Pension Service does oVer alternative document verification procedures, but it only tells people about them if they object to sending valuable documents through the post. A statement that we received from the Pension Service about verification is reproduced in the Annex. We find the Pension Service’s current policy and practice on document verification is obscure and unhelpful. We consider that there should be simple and accessible local document verification arrangements available to all pensioners, and that these procedures should be open and clearly publicised. 4.2.3 The CAB service is keen to assist clients who have concerns about document verification. We have agreed that bureaux will not be required to act as agents for the Pension Service, and will not verify the legality and authenticity of documents. However, they will continue to certify copies of documents and will gather the appropriate information about the client necessary to make the claim.

4.3 Assessing the Award 4.3.1 At pension centres, the details from the claim form have to be input to a computer system to calculate if the applicant qualifies for Pension Credit, and if so to calculate the award. This process has thrown up a lot of problems: Ev 198 Work and Pensions Committee: Evidence

— Loss of forms. — Claims classified as dormant or closed when they are not. — Delays of weeks or sometimes months, and advisers told by pension centre staV that they have huge backlogs and several weeks of unopened mail. — Long delays when the pension centre requires additional information or documents from the applicant. — Incorrect entry of financial details leading to incorrect awards. —DiYculty for clients and Citizens Advice Bureaux in finding out why a claim is delayed. Initially pension centres were often engaged. This is unusual now, but Citizens Advice Bureaux often find that a simple enquiry involves a lot of holding on the phone, and can take up to 20 minutes. The Pension Service told a client of a London bureau early in 2004 that he did not qualify for Pension Credit. When the bureau followed this up, Glasgow pension centre said that the claim was still open but they were awaiting proof of the date of birth of the client’s wife. The client had sent the information twice by registered post. Two months later the claim had still not been processed. Glasgow admitted that they could not locate the file, and said that they would arrange a home visit to complete another claim. This was only arranged when the bureau chased up two weeks later. Ten days after the visit the client received acknowledgement of his application, but he then received another set of claim forms. Glasgow told the bureau that the client would have to complete the third application as they could not locate the set of forms completed at the visit. This meant that this man was still without pension credit more than four months after his initial application, and he and his wife are forced to live on a small occupational pension and DLA, as he is not yet old enough to receive the state pension.

4.4 The Award Letter 4.4.1 People should not receive letters that are so poorly drafted and presented that they find the contents worrying and have to bring them to Citizens Advice Bureaux for an explanation. Yet many recipients of the Pension Credit award letter, generated by the DWP’s “legacy” computer system, find the letters incomprehensible, confusing or just plain wrong. Common problems are: — An inconsistent approach to informing the client of their total income from DWP after the Pension Credit award. Some letters simply show how much Pension Credit they will get, leaving the recipient worried that their State Retirement Pension has stopped. Other letters show the total of pension and pension credit payments. — Internal inconsistencies, with the letter and calculation sheet showing diVerent amounts. — More than one award letter sent out on the same day presenting information diVerently. — Clearly incorrect references to payments going back to the 19th century, for example—“from 22 January 1811 you will get £163,168.66 a week.” A bureau in the South West reported that their client, who they described as “very numerate” was left unsure of how much Pension Credit she would get after receiving an award letter. The client felt that phrases such as “we reward 60 pence of the pound of the qualifying income” were unclear and that less jargon should be used if the letter was to be comprehensible to claimants. 4.4.2. We have drawn these problems to the attention of DWP, and some of the problems have been addressed, but we are very concerned that DWP appears to give low priority to ensuring that these important letters are as well presented and comprehensible as possible.

4.5 Urgent Claims 4.5.1 It is regrettable that the old arrangement whereby Income Support recipients transferred automatically to Minimum Income Guarantee at the age of 60, no longer applies for Pension Credit. These benefit recipients, whose circumstances Jobcentre Plus is fully informed about, are obliged to claim Pension Credit from the Pension Service in order to continue to receive any income. This is a nonsense and we consider that an automatic flow through from IS (and when appropriate JSA and Incapacity Benefit) should be instituted. 4.5.2 The DWP foresaw that the current arrangements have the potential to cause client hardship and instituted a procedure for Jobcentre Plus to alert benefit recipients approaching their 60th birthday that they need to claim Pension Credit. In a number of places this procedure has not worked well. Citizens Advice Bureaux report clients in many parts of the country who have had their IS stopped when they reach 60 without receiving any advice to apply for Pension Credit. Most simply received a letter from Jobcentre Plus to say that their IS had stopped or would stop next week, with no reference to applying for Pension Credit. Some just discovered that there was no new order book when they went to collect it at the post oYce. In some cases this meant that disability benefits that were on the same order book also stopped being paid, leaving the client in severe financial hardship because of the incompetence of DWP. Work and Pensions Committee: Evidence Ev 199

A bureau in the North East reports the extreme hardship that a disabled couple suVered. Mr P is in his late 60s and receiving State Retirement Pension and DLA. Mrs P is in her 40s and, prior to the introduction of Pension Credit in October 2003, she was claiming IS for both of them and receiving DLA on the same order book. When Mrs P went to get a new order book at the beginning of October, she found that the post oYce did not have one. Jobcentre Plus said that Mr P had to apply to the Pension Service for Pension Credit for both of them. He did so quickly but the Pension Service failed to make regular payments and the couple’s income fell by £115 a week. The bureau had great diYculty sorting the correct payments out because they had to deal with three delivery arms of DWP, none of which was keen to accept ownership of the couple’s benefit problems. A client of a bureau in Surrey had been in receipt of income support and disability living allowance, which were paid together. When she reached her 60th birthday her DLA stopped along with her IS. There was a delay in processing her Pension Credit claim, and due to this and other administrative errors there was a three-month delay between her income support ending and the client receiving all the benefit to which she was entitled. 4.5.3 In response to this situation the Pension Service has instituted a fast track procedure for people with an urgent need for Pension Credit payments. This aims to get Pension Credit into payment within about three weeks, rather than two months or more for a normal claim. This will still leave some people who have been let down by Jobcentre Plus forced to seek a crisis loan from the social fund.

4.6 Correcting Awards 4.6.1 When a Pension Credit award is incorrect, Citizens Advice Bureaux find that this can involve a need for lengthy phone calls to the relevant pension centre and substantial delay for clients in receiving a correct award. A disabled widower who receives Attendance Allowance, Housing Benefit and Council Tax Benefit, in addition to Pension Credit consulted a Kent bureau. His pension credit award had not taken account of a private pension of £116 per month. This was pointed out to Liverpool pension centre, who then put in a figure of £355.12 per week as his private pension. They then informed him that he no longer qualified for pension credit and his housing and council tax benefits stopped as a consequence. The bureau is seeking to get the error corrected but was concerned to be told that the client’s file has now been sent to Wolverhampton pension centre as part of the reorganisation of the Pension Service to deliver the staYng cuts. 4.6.2 Citizens Advice Bureaux have seen a number of overpayments of Pension Credit caused by errors by the Pension Service. Such overpayments are not recoverable, but many older people find the situation of receiving money that they are not entitled to extremely worrying and are concerned that they will get into trouble if they have spent this money. A bureau in the South West reports that a woman who had been receiving her State Retirement Pension paid into her bank, started to receive further payments of Pension Credit plus State Retirement Pension. By the time she realised the mistake she had been overpaid by over £1,000. She was very perplexed about what to do when the Pension Service told her that it was “up to her conscience” whether to repay this. A man in Wales was upset when deductions of £8.10 a week were made from his benefits for an alleged overpayment, and was then bemused to receive a giro for £324 from the Pension Service for an underpayment while the deductions were still being made. 4.7 The Pension Service has done much to make claiming Pension Credit as simple as possible. The free telephone claim-line is convenient for many applicants, and in many places the willingness of the local staV of the Pension Service to make home visits is helpful for people who cannot use the phone. But, inevitably with an elderly customer group, there will continue to be significant numbers of people who need an alternative to the phone when dealing with the Pension Service. We would like to see telephone staV at Ventura and the Pension Service much better trained to spot clients who are having diYculty with a telephone claim or enquiry, so that these people can be oVered an alternative service. 4.8 It is also essential that staV who deal with the public are equipped to give accurate advice about all aspects of Pension Credit, including issues such as premiums, and the treatment of savings. The Pension Service attempts to monitor the accuracy of Pension Credit awards, and reports accuracy levels of over 93%. We are concerned that the checking systems may not identify all mistakes as we continue to deal with significant numbers of clients with incorrect Pension Credit awards. We suggest that the Pension Service seeks an independent audit of its arrangements for checking the accuracy of Pension Credit awards.

5. Direct Payments 5.1 The introduction of direct payments of benefits into bank accounts as order books are phased out on a timetable that overlaps with the introduction of Pension Credit has subjected both the Pension Service and its clients to stresses that it would have been better to avoid. Many pensioners are happy to have their state retirement pension and Pension Credit paid into a bank account. There are also a substantial number who Ev 200 Work and Pensions Committee: Evidence

like the order-book system because it allows them to collect cash at their local post oYce. Pensioners who find it diYcult to get to the post oYce often rely on someone else to collect the money for him or her. Those who live alone may have to rely on a paid carer, who may not be the same person from week to week, to collect their money. For example: A CAB in Yorkshire reported that a client who had contacted her local Pension Service oYce about continuing to be paid by order book had been told that there was no option but to be paid by direct payment. The client currently had home-helps from Social Services to collect her pension and get her shopping every week, but there was no guarantee that she would get the same person twice, so a second card on a card account would not be suitable for her. When the CAB phoned, the Pension Service agreed she could continue with her book for the present, if she wrote in to request it. 5.2 Many older people find it diYcult to understand why the order book system, with which they are familiar, is being abandoned. Those without suitable bank accounts for direct payments may resent having to set up an account at such a late stage in life, and will need to have time taken with them to explain the pros and cons of their banking options, and of the post oYce card account. They may find having to make these changes worrying and stressful: A CAB in Sussex reported that a woman in her 80s sought advice about the letters she had received from the Pensions Service about direct payment. She told the CAB that she wanted to continue with her order book, and not have to change. Occasionally the client needed someone else to go to the Post OYce to cash her state pension for her. 5.3 The process for opening an account, especially the Post OYce card account seems complicated to many people, adding to the stress of the situation. A CAB in Cumbria reported that an elderly couple, both of whom were disabled, both needed to open a Post OYce card account with a second card so that either could withdraw cash on behalf of the other. The clients were worried about being able to remember two PINs, and were concerned that joint Post OYce card accounts were not possible. The husband came to the CAB for help phoning the Conversion Centre to set up his card account. The Conversion Centre insisted that he give security details before they could speak to the CAB. However, the client found it diYcult to hear them due to deafness, and the stress caused him to have an asthma attack. 5.4 For some older people the problems are more acute. People with sight, dexterity or memory problems will find it diYcult to key in a PIN number to get their money at the post oYce or from a cash machine. 5.5 The DWP has always acknowledged that there needs to be an alternative method of payment for those who genuinely cannot open or cope with any sort of account and for urgent payments of benefits which cannot wait to go through the bank clearing system. They delayed working on the details for some time to concentrate on the implementation of direct payment itself, and, in any case, the payment system would not need to be in place until October 2004 when the last order book will be printed. The DWP also wanted to use the time to consult groups working directly with benefit claimants so that their views could be taken into account in the design of the service. 5.6 The DWP has never intended that the alternative method of payment would be a payment option for all claimants, and so initially omitted any mention of it in their direct payment leaflets. As a result, advisers reported a large number of vulnerable and disabled clients worried about how they would cope with direct payment. Following representations from Citizens Advice and others, DWP has changed the text of the leaflet to encourage those who cannot cope with any kind of account to ring the Conversion Centre. 5.7 Following consultation with consumer and welfare groups, the DWP has recently announced the details of cheque payment. They have concluded that cheques will provide the flexibility needed, particularly for third party encashment. Cheques will be issued to the claimant at the same frequency as they used to receive their order book or giro payments. They have also announced that there will be no formal application process for cheque payment. 5.8 However, a purely cheque-based system will disadvantage those housebound benefit claimants who needed third parties, such as neighbours or home-helps, to collect their benefit for them. There is no guarantee that the cheque would arrive on the same day of the week and the third party might not be available to collect the money if the cheque was late one week. Several consumer groups, including Citizens Advice, have called on the DWP to continue to oVer order books, or make advance cheque payments to those people who need their benefit to be collected by third parties. The DWP has rejected these suggestions as costly and have expressed concerns about security. 5.9 It is welcome that the DWP has clarified that all those who have not provided account details by April 2005 will be automatically transferred to cheque payment. However, the DWP have also pointed out that they want to restrict access to the cheque payment system only to those who genuinely need it. 5.10 It remains to be seen how cheque payment works out in practice. There will need to be rapid and straightforward arrangements to enable clients to obtain money urgently if the cheque fails to arrive, for example because of postal delays, or because the cheque has been intercepted and stolen. There will also need to be contingency plans for the eventuality of postal strikes. Work and Pensions Committee: Evidence Ev 201

6. Locally Based Services 6.1 StaV of the local pension service have a vital role in promoting the take-up of Pension Credit, through: — Working with local partner organisations in voluntary and community agencies and local authorities. — Carrying out face-to-face work to promote an awareness of Pension Credit, and to facilitate take-up. — Carrying out home visits to take claims from people who cannot claim by telephone. 6.2 Most local service staV appear to have been energised and motivated by the positive focus of their work. They find it fulfilling to help older people to obtain all the benefits and services to which they are entitled. This is a very positive development. 6.3 We have received reports that some local pension service staV are not fully conversant with all the issues on which they are expected to advise. For example, that an older disabled person must have care needs in order to qualify for attendance allowance. We suggest that the Pension Service should review the training that these staV receive. 6.4 Local service was in the vanguard in establishing relationships with local partner organisations such as Citizens Advice Bureaux. As far as we are aware, these staV received no training in what partnership involves, or how to work constructively and sensitively with other agencies with important values and agendas of their own. Consequently they got oV to a mixed start as far as their relationships with Citizens Advice Bureaux were concerned. Some initiated a constructive relationship from the start, but others came across as rigid and overbearing—taking the line—“you are now partners of the pension service and this is what you must do”. Local relations now appear to be mostly good, and the CAB service is pleased to have signed a Partnership Accord with the Pension Service. This is underpinned by a “Code of practice for Citizens Advice Bureaux and The Pension Service” (October 2004). 6.5 As part of the staV reduction programme in DWP, the local pension service is being reorganised into a smaller number of clusters. There have been rumours that this will involve staV reductions of 10-15% in the local service. In view of the huge job that remains to be done to increase take-up of Pension Credit, especially amongst harder to reach pensioners, we consider that any cutbacks in the local service would be a breach of faith. 6.6 DWP has recently informed the Partners Against Poverty England and Wales group about the way in which it is reviewing local pension service activity. This will include a critical look at surgery sessions. It is disappointing that these plans were not discussed with national partner organisations at an earlier stage. We have been assured that decisions to close particular local surgery sessions will not be taken before there has been consultation with local partners.

7. DWP Staff Cuts 7.1 Citizens Advice is very concerned that the planned staV cuts at the Pension Service will have an adverse eVect on take-up of Pension Credit and on the standard of service provided to pensioners on all their benefits.88 At the end of June, the then Secretary of State announced that 10 pension centres would be transferred to non-pension work or closed, as part of DWP’s programme to cut 30,000 jobs by 2008. He suggested that this reduction could be achieved because the bulk of the work of introducing Pension Credit had been completed. 7.2 This is not, in our view, a correct analysis of the position. At the time of the announcement, 1.2 million pensioner households who are eligible for Pension Credit were not receiving it. This shows that there is still a great deal more for the Pension Service to do in promoting take-up of Pension Credit. Also, we believe that there are significant numbers of incorrect awards that need to be corrected, and delays in the system— for both State Retirement Pension and Pension Credit also need to be addressed. We are concerned that the further reorganisation to which the Pension Service will be subjected is likely to lead to a repeat of the problems when pension centres were first set up—inexperienced and poorly trained staV, confusion about where a particular client’s work is being done, and a loss of papers as they are sent around the country. We consider that the Pension Service should consult stakeholders on its reorganisation plans and then publicise those plans when they have been agreed. 7.3 The local pension service has a vital role to play in encouraging take up of Pension Credit and other benefits to which older people are entitled. The service can do this both through face to face work with pensioners at surgeries and at home visits, and through developing local partnerships with local authorities and voluntary agencies such as Citizens Advice Bureaux. It is clear that, as take-up work moves to harder to reach pensioners, targeted local work based on local knowledge and face-to-face activities will become increasingly important.

88 Citizens Advice Press Release 29 June 2004. Ev 202 Work and Pensions Committee: Evidence

7.4 In our view it is essential that the capacity of the local pension service to contribute to this work is maintained and enhanced. Any move to reduce the number of staV working in the local service will call into question the government’s undertaking that the civil service cuts will not aVect front-line services. We consider that DWP needs to give an undertaking not to cut the local pension service.

Annex

STATEMENT FROM THE PENSION SERVICE ABOUT DOCUMENT VERIFICATION 5 May 2004 We recognise that some customers are not prepared to send personal documents to The Pension Service through the post. Therefore they can be seen on a face-to-face basis by The Pension Service local service. However, once all other avenues have been exhausted photocopies of general documents may be accepted. Customers will continue to be encouraged to send original documents for verification at the application stage. If it is clear that the customer does not wish to do this they will be given the option of a local service referral. PCAL agents will continue to ask customer for original documentation until further notice. When an Electronic Application Form is received at the pension centre without supporting verification documents, a member of staV will contact the customer to request them. If it becomes apparent that the customer is unwilling to send them in, a local service referral will be oVered. If this is declined the member of staV will advise that photocopies will be accepted. This is a discretionary ruling and only applies to photocopies of general documents. Copies of certificates of life events (eg births/marriages) will not be accepted. The acceptance of photocopies is not being promoted as an immediate option but rather when all other avenues of verification have been exhausted. We do not want customers to lose out on any potential entitlement because they are unable or unwilling to provide original documents. StaV have been advised to telephone customers to request written evidence rather than delay their application by writing to them. We still need to see documentation of certain savings and investments. StaV have been advised that if we are having diYculties in obtaining verification, in some circumstances we can accept photocopied evidence. For example, we know from customer feedback that some customers may be experiencing problems in providing all the details of their occupational pensions. In these instances, we can assist customers by obtaining them from a bank statement. Our aim is to ensure Pension Credit is easy to apply for and we continually review our processes to ensure this is the case. DWP are looking at options publicising guidance on verification. Citizens Advice Bureau 14 October 2004

Supplementary memorandum submitted by Citizens Advice (PC 14A) Thanks for asking if Citizens Advice has any comments on the additional information about developments in the local pension service set out in the extracts of Malcolm Wicks’ letter of 20 January that you sent to me. The reduction in the number of Local Service Information Points from 2566 in April 2004 to 1598 in December 2004 is striking. From Table B of Annex B to the letter, it appears that the number of customers seen at drop-in LIPs has fallen sharply as well, but the number of “eVective appointments” at LIPs has actually risen since April 2004, although it is well below the peak in August 2004. These figures raise 2 issues: — What detriments are being suVered by the 10,000 pensioners a month who are no longer attending LIPs because those LIPs have been abolished? — What consultations have there been with local partners about the changes that have been made? On the first point, one would expect that a proportion of these people will have serious problems with their benefits that they find diYcult to resolve by other routes. It is up to TPS to provide evidence that these clients are not suVering as a result of the closures. On the second point, we still consider that TPS has a long way to go in thinking through what partnership working really means both at a national and a local level. The restructuring of the local service is a case in point. At a national level, there was no consultation about reducing to 133 clusters and we have had to ask to be informed of which areas the 133 clusters cover. As for the local level, I was alerted to the impact of the changes when the manager of Rickmansworth CAB, where I am an adviser, received a letter from the local Partner Liaison Manager for South Hertfordshire to say that she was leaving and her job was being merged with the post in North Hertfordshire, which was in the process of being filled. I am faxing you an Work and Pensions Committee: Evidence Ev 203

exchange of correspondence with Graham Carter, Local Service and Partnership Director at TPS. This shows that TPS is cutting the number of local Partner Liaison Managers but describing this as ”rightsizing”. Partners have not been asked nationally or locally if they find this acceptable—we have just been presented with TPS’s decisions. Another example of the need to develop real partnership working is in how TPS sets priorities for the local pension service. It emerged at the Partnerships Against Poverty, England and Wales last week that the local service has been told to give top priority to using information from the IT scans referred to Malcolm Wicks’ letter to promote take up of pension credit. This is to try to ensure that TPS meets its March 2005 take-up target. This is highly desirable in itself but is likely to have opportunity costs of other important work not done. For example, it may explain why a CAB client couple in the midlands who cannot use the phone, were refused an early home visit to sort out non-payment of their pension and pension credit after they moved home and TPS lost their notification of this. They were told that a visit for this purpose was not a priority, although it clearly was a priority for the couple concerned who had no income. Our view is that it is inappropriate for TPS management to send down orders to local service managers that they must devote their resources to a particular activity. In a partnership, what they should do is tell the local managers that they want to increase PC take-up using the IT scan information, and ask them to discuss with local partners how this can best be achieved, using all the resources(TPS’s and partners’), available locally, taking into account the particular needs and priorities locally. You cannot operate a partnership by command and control. In short, we fail to see how TPS can develop local partnerships properly by cutting the number of local Partner Liaison Managers. And TPS still has along way to go in order to operate in true partnership with local authorities and local voluntary and community agencies. Citizens Advice

Memorandum submitted by Fawcett Society (PC 15) 1. The Pension Credit has put more money into the pension system, and into the pockets of poor women, but it remains a sticking plaster for a flawed system in need of more fundamental change. The Pension Credit meets the symptoms of women’s poverty in old age, but a sustainable solution requires that the underlying causes are addressed. 2. The current British pension system, including state and private pensions, is grossly inadequate for most women. Designed on a post-war male breadwinner and female carer model it does not meet women’s needs or take account of their diVerent life experiences. We argue therefore that the British pension system, as well as the Pension Credit, is due for a radical overhaul. As long as pension acquisition continues to depend on full-time, continuous, well paid work, it cannot meet the needs of women. 3. Women lose out because: — 3.1 They spend fewer years in the labour market and all parts of the pension system reward long working lives — 3.2 Many are in part-time employment in order to meet their various caring commitments thus having less access to pension schemes, or insuYcient earnings to accrue pensions. — 3.3 Even when they work full time, women earn less than men (over their lifetimes women will earn on average £241 000 less than men)89 and all parts of the pension system either operate an earnings requirement and/or pay out earnings related pensions. —3.4DuetodiVerences in sector and type of employment women have less access to occupational schemes whilst these schemes continue to oVer the best value for money second tier provision. — 3.5 To compound all these problems, women live longer than men. Sex discrimination in annuity rates, inadequate incomes for surviving spouses and inadequate inflation proofing of pensions aVect the oldest old the most. 4. There are also problems inherent to the Pension Credit system that mean it is not even working as an eVective “sticking plaster” for many women.

5. Too few Women Claim their Entitlements Take up of the Pension Credit is even lower than for its predecessor the Minimum Income Guarantee at under 50%,90 leaving many poor pensioners living in poverty. The pension credit adds an additional layer of complexity to what is already a confusing and oV-putting framework of pension provision in the UK. This complexity, coupled with the stigma attached to means- tested benefits, particularly among older generations, means that take up is low.

89 Women’s Incomes over the Lifetime, A Report to the Women’s Unit, Cabinet OYce, Ed. Katherine Rake, 2000. 90 DWP, May 2004. Ev 204 Work and Pensions Committee: Evidence

6. Women’s Entitlement is Lower Because they are Poor The Savings Credit element of the Pension Credit is not working for women. Women cannot benefit from a reward to savings that they are unable to accumulate in the first place due to their lower lifetime earnings and a pension system that does not meet their needs. Therefore men benefit from the Pension Credit more than women despite already receiving a higher income in retirement. DWP data shows that despite being the majority of claimants, women get paid less Pension Credit across all age groups.91

7. Pension Credit Does not Act as a Reward to Women’s Individual Saving As the Pension Credit is assessed on a household basis it does not act as a reward to individual savings. This system will not encourage women to make their own savings for retirement as long as their partners are able to make more substantial savings which tip the balance of household income over the qualifying limit. Thus women’s financial autonomy in retirement is reduced and they are at risk of poverty upon divorce. 8. These problems inherent to the Pension Credit system add to the case for more fundamental reform of the pension system. Fawcett Society, in partnership with Age Concern, has identified four initial key reforms that will help tackle the pensions problem for women and we call upon the Work and Pensions Committee to play a role in making these happen.92 — 8.1 Reduce the Lower Earnings Limit to bring more low-paid workers into the national Insurance System. — 8.2 Introduce a fairer, more accessible system of credits for carers. Home Responsibilities Protection covers too few women and is confusing and inflexible. It should be replaced by a weekly credit for all carers that can be paid into the individual’s pension. — 8.3 Pay pensions to everyone who pays into the National Insurance System—abolish the 25% rule. — 8.4 Make second pensions work for women. The State Second Pension should be made more flexible to become a better option for women trying to build a second pension. Fawcett Society October 2004

Supplementary memorandum submitted by Fawcett Society (PC 15A) As requested, in order to follow up the oral evidence I presented to the DWP Select Committee with regards womens pension entitlement, I would like to make the following points about including carers in the contributory pension system and ensuring the changes proposed by the Fawcett Society benefit the pensioners of today.

Including Carers The option of introducing a citizens pension may seem attractive as it could carers in the state pension system. However, the current contributory system could also be adjusted to include more carers by making the changes proposed below. The current contributory system does not cover all those caring for children and/or disabled or elderly. A fairer and more accessible system of credits for carers should be introduced as part of the contributory system. We propose: — Replacing Home Responsibilities Protection (HRP) with a weekly credit for all carers (those caring for children and all other carers) that can be paid into the individual’s pension, at the same time allowing people to combine carer’s credits with NI contributions within the same financial year in order to receive a full year of cover. — Making the system work better for the increasing number of people who are caring for adults or people with disabilities. Under the current system, carer’s credits—if they are caring for disabled people and not for children—are tied to Disability Living Allowance or Invalid Care Allowance (DLA and ICA respectively) which require a carer to spend more than 35 hours per week caring in order to qualify. As care is not so intense in all the cases that carers would need to spend 35 hours per week or more caring (72% of all carers currently care for less than 20 hours per week), 1 we propose that the 35 hours requirement should be reduced to 16 hours to bring it in line with tax credit requirements. This would then allow those carers who currently work part time and earn under the Lower Earnings Limit to build up pension entitlement, and reward their valuable care work which is currently unrecognised by the benefit system.

91 DWP, May 2004. 92 One in Four, Fawcett and Age Concern Women’s Pensions report, 2003. Work and Pensions Committee: Evidence Ev 205

Ensuring Changes Help Current Pensioners The major advantage of the proposals put forward by the Fawcett Society would be that they could benefit today’s pensioners as well as people approaching retirement age, as the above listed changes to the contributory system could be applied retrospectively. For example: — Abolishing the 25% would benefit tomorrow’s pensioners and also have the added advantage of having immediate impact on today’s women pensioners. — It is possible to apply changes to HRP retrospectively. In order to ease retrospective application we suggest that: Child Benefit receipt records could be used to calculate new amounts of pension benefits for people who were caring for children. Prior to 1978, and for those who were caring for elderly and/or disabled, some form of retrospective self-declaration could be used to gain access to carers credits These reforms would make the contributory pension system more inclusive by recognising a broad base of contributions—both paid employment and unpaid care work—so enabling many more women to build up entitlement to a state pension. They could be introduced within the current pensions framework so benefiting women immediately, and pave the way for future more radical pensions reform such as the introduction of a universal pension. Dr Katherine Rake 19 November 2004

Memorandum submitted by B&CE (PC 16)

Background 1.1 B&CE, formed in 1942, provides benefits and financial services tailored to employers and employees in the construction industry. It has a membership of 7,000 employers, provides benefits for over 300,000 individuals and has over £1 billion in funds under management. B&CE has one of the largest stakeholder pensions schemes in the UK, particularly targeting lower to middle income earners.

The B&CE View of the Current State of Retirement Savings and B&CE’s Experience 2.1 B&CE shares the prevailing view that there is a severe and growing crisis in UK pension provision.93 2.2 We agree its root cause lies in the shifting balance between those retired and those in work over the next two decades, with fewer employed people having to fund pensions for a larger number of retirees. 2.3 It is not though simply a function of an ageing population. The inability of individuals to save suYcient money for retirement, particularly amongst lower to middle income groups, is a major contributory factor to the growing crisis. 2.4 The problem has been compounded by the complexity of the current rules and regulations governing the sale of pensions miss-trust engendered by the Maxwell saga and other high profile pensions failures, and the payment of large commissions to financial advisors of all types. 2.5 The problem is not insurmountable. Indeed, B&CE’s success in driving the take-up of stakeholder pensions (SHP) within the construction industry provides a good model on which to build. 2.6 We believe engendering a widespread commitment to long-term savings amongst those on lower to moderate incomes will, however, require: — more extensive partnership between employers and individuals; — a shift in the prevailing sales “model” in a commercial life market; — government action to incentivise employees and employers; and — commitment to tackle the complexity of the current rules and regulations governing the sale of pensions that disproportionately impact on lower to moderate earners.

The Negative Effect Of Pension Credit On Would-Be Stakeholder Savers 3.1 The Government announced that, from October 2003, pensioners would become eligible for a means tested addition to their State pension, which would ensure that all single pensioners without high incomes, would be entitled to claim at least £105 per week and £160 per married couple. This replaced the previous system of means tested benefits under the Minimum Income Guarantee.

93 Evidence submitted to the Treasury Select Committee in their Enquiry on Restoring Confidence in Long-Term Savings, House of Commons, published in 26 February 2004. Publication HC 275, EV 70. Ev 206 Work and Pensions Committee: Evidence

3.2 The new system was intended to reach far more pensioners, because it was more generous to those without significant extra sources of income, and would not penalise their private savings £ for £, as under the old system. Under this means tested Pension Credit (which well over half of pensioners are currently entitled to, and well over three quarters will be entitled to in the future) those who are entitled to it will eVectively lose at least 40% of their private pensions. If they had saved enough to give them a private pension of £20 per week, they would eVectively be allowed to keep only a maximum of £12 of this, although anyone who does not have entitlement to full basic state pension, will still be penalised by much more than 40% and could lose the entire £20 per week—or however much they saved. 3.3 Nevertheless, the Government claims this is a “reward for saving” because all of the private income was previously lost £ for £. Of course, this is only a “reward” relative to past policy, but future retirees will see this as a penalty. It is this pension credit policy, which has been extraordinarily damaging to the pension contribution incentives of the group for whom stakeholder pensions were designed.

The Broader Problems Of Pensions Credit

4.1 One of the biggest problems for pensions at the moment is the increase in the prominence of means testing in the State system. With the Pension Credit policy, well over half of all pensioners are now entitled to means tested benefits, and this proportion is expected to rise to over three quarters by around 2040. 4.2 Evidence shows that Pension Credit is considered a disincentive to save. Although the Government claims that the Pension Credit “rewards” saving, this is not the case. It just penalises saving less than the previous regime, but, since so many more pensioners are entitled to Pension Credit, it extends the disincentive eVects of means testing to a much larger proportion of the pensioner population. In practice, it can be argued that pensions are no longer a “suitable” product for the lower and middle-income earners, nor for older workers with modest means. Financial advisers are loath to try to sell pensions to those on average incomes. For the stakeholder target group, it may be the case that they are being entirely rational by not putting money into pensions. Under the means test, at least 40% of any private income is taken away when calculating the Pension Credit entitlement. For someone who received only basic rate tax relief (22%), the risk of being penalised by 40% on retirement is a major barrier to pension contributions. 4.3 The recently published Independent Pensions Commission Report notes of the disincentive to save created by the Pension Credit.94 The report states that continuation of the pensions credit would lead to, “more people seeing a reduced benefit to their net income from private savings.” It further states, “Despite the complexities however, there are clearly many people for whom the mean-tested benefits do create a significant disincentive to save individually: and these will tend to be people most likely to gain the benefit of the NI eYciencies of employers’ contributions.”95

Key Evidential Support

5.1 These arguments are borne out by empirical data collected by B&CE in nationwide tracking surveys of employees by Brahm Research undertaken in April and September 2004. Where Pension Credit was explained to respondents, two in three (61%) immediately recognised that the Pension Credit penalises those who proactively take measures for their retirement. When diVerent respondents were again asked in September 2004 if there was a disincentive to save created by means testing, nearly three in four (75%) responded in the aYrmative. This demonstrates, that by and large, the public perceives the Pension Credit as being a strong disincentive towards personal saving.

Conclusion

6.1 Pension Credit creates a disincentive to save. Penalties of up to 40% on private savings do not encourage people to provide for themselves. This especially aVects those in the lower income brackets-the very people at whom stakeholder pensions are targeted. The majority of those in the construction industry could make useful advantage of a savings vehicle like stakeholder pensions and because of this B&CE has made these a core element of its business practice. However, given the widespread understanding by employees of the disincentives to private savings in stakeholder pensions, B&CE is at loss to aggressively promote them to people who will be penalised by participating. 6.2 Furthermore, there is a near consensus that government policy is not joined up in mandating that employers establish stakeholder pensions to thereby encourage private savings amongst lower income earners while on the other hand oVering a Pension Credit that ensures participation in such a private savings

94 “Pensions: Challenges and Choices”, The Independent Pensions Commission, Adair Turner, Chairman, published 12 October 2004, TSO, p. 226. 95 Ibid, p. 231. Work and Pensions Committee: Evidence Ev 207

scheme will penalise them later. Across the financial services community and now clearly from the Pensions Commission, there is a consensus forming that means testing in its current format cannot continue without seriously detrimental consequences towards personal saving. B&CE maintains and supports that view. B&CE October 2004

Memorandum submitted by PCS (Public and Commercial Service Union) (PC 17)

Introduction 1. The Public and Commercial Service Union (PCS) is the largest trade union within both the Civil Service and the Department for Work and Pensions (DWP). PCS has over 315,000 members with 90,000 employed by DWP. 2. PCS welcomes the select committee’s timely enquiry, and is happy to supplement this brief written submission with oral evidence or further written evidence. 3. PCS believes the biggest single issue facing the DWP is the decision to reduce the workforce by 30,000 by 2008 and to cut the number of Pensions Centres. We are also concerned about the impact that this is having on our members and the eYcient delivery of public services by the Department. 4. PCS would also like the committee to note that progress has been made in the past through partnership working and we are disappointed that The Pension Service has now decided to pull back from this activity. 5. PCS is also concerned that 2.6 million households are now receiving Pension Credit, still far short of the target of 5 million. 6. PCS supports an across the board increase in pensions and its indexation to movements in wages rather than prices. PCS is against means testing because it makes the system complex and diYcult to understand. Means tested benefits always have rates of take-up significantly below universal benefits and Pension Credit is no exception. It is PCS’s view that income re-distribution is best achieved through universal benefits coupled with progressive personal taxation. 7. The submission covers the following issues, but mainly concentrates on the eVects of the Pension Centre closures and cuts in Department for Work and Pensions staYng: — the contribution played by Pension Credit to the incomes of current and future pensioners; — the consequences of the Department’s plans to reduce its workforce and the number of Pensions Centres; — the experience of claiming Pension Credit.

The Contribution Played by Pension Credit to the Incomes of Current and Future Pensioners 8. There are two aspects to Pension Credit: (i) The guarantee—similar to the old income support rules where a minimum income threshold is set dependent upon circumstances. (ii) Savings Credit—to reward individuals that have made modest provision for their retirement and is paid to over 65s. 9. In PCS members’ experience, customers are easily able to grasp the guarantee concept but the savings credit calculation causes considerable confusion amongst the client group and many do not pursue due to confusion. 10. The guarantee aspect does cause some resentment amongst pensioners who are either too proud to ask for help or find it intrusive to be asked for savings details. Because savings over £6,000 require verification pensioners are reluctant to surrender account details.

The Experience of Claiming Pension Credit 11. PCS accepts that there are some real success stories where customers have ended up doubling if not trebling their income after receiving Pension Credit. These are mainly disabled customers benefiting from Attendance Allowance and the higher rates of Pension Credit this attracts. However, it is clear two important facts have emerged: (i) Many harder to reach customers remain untouched. This is for many reasons, eg language diYculties, isolated without family or other support. Ev 208 Work and Pensions Committee: Evidence

(ii) The work arising from the scans indicates that many pensioners are a lot better oV than first thought. This may be due to capital or other income. However, these customers do not qualify for Pension Credit and many are aggrieved that their expectations were raised by the government and they are still being pestered to claim. 12. Rather than providing a holistic visiting service for vulnerable customers it is PCS’s view that the major change in local service is towards a cold-calling service working on scans listing potential Pension Credit recipients. In our members’ experience, this is soul-destroying work, can decimate staV morale and results for a reduced service for the user.

The Consequences of the Department’s Plans to Reduce its Workforce and the Number of Pensions Centres 13. PCS is opposed to the massive reduction of staV and Pensions Centres proposed by the DWP as we believe this will seriously damage the service the public receive and take up of Pension Credits. 14. PCS is concerned at The Pension Service’s announcement in June 2004 to close two sites in Liverpool and York with a further eight to be transferred to other parts of the DWP and believes that this will not be the end of announcements of such closures. 15. Pension Centre closures are also combined with proposed reductions in the numbers of people delivering local services, which will impact on the services received in local communities. Two practical examples are: — Reclustering will mean some Higher Executive OYcers (HEOs) having a greater responsibility in terms of geography and headcount. 55 HEOs have already lost their jobs, which is 30% of the HEO strength. PCS believes this will have the inevitable eVect of reducing the time HEOs can spend with staV and partners, and that it will reduce the quality of line management. PCS is concerned that this will lead to partners’ perception that The Pension Service is not committed to outreach work; and — PCS is also concerned about the proposal to drastically reduce the number of Partner Liaison Managers (PLMs). [What impact will this have?] 16. PCS is concerned that plans to close pension centres will further reduce the standard of service to customers. While some pensioners can use the telephone to progress their claim, the majority of customers that local services deal with via either surgeries, PLM events or cold calling, express the view that they do not like discussing important personal details over the telephone. 17. PCS also believes that there is a mistrust of sending information via the post to pension centres. In some cases pensioners will not let their savings books leave the house and this can cause additional diYculties for local service.

Conclusion 18. PCS concludes that cutting pension centres and the workforce will lead to a poorer service received by pensions and will have an adverse eVect on the department’s targets. It is PCS’s view the capacity to deliver is being oversold and that to proceed on this basis will result in major service delivery problems potentially aVecting millions of service users. PCS October 2004

Memorandum submitted by PCS (Public and Commercial Service Union) (PC 17A)

IMPACT OF THE CUTS ON LOCAL SERVICE: Supplementary Note Local Pension Service (LPS) began life as the public face of The Pension Service. It was charged with helping vulnerable customers and those who could not conduct their business by the telephone. LPS was given the opportunity of re-inventing outreach activity through advice surgeries. Home visits were the staple business but there was plenty of other outreach activity including joint events with partner organisations such as Age Concern, Primary Health Care Trusts and Carer’s Organisations. The LPS has established a reputation for true Partnership working with voluntary sector and other local authority partners in the two years since its inception. The LPS have been the ambassadors for the Pension Service, filling the gap left when local oYce access was removed from former Social Security OYces for pensioners. The staV that transferred to this work had genuine job satisfaction from their roles in assisting pensioners in claiming their entitlements. Work and Pensions Committee: Evidence Ev 209

Over the past six months all this has changed with the priorities now being Pension Credit take-up and the service is now being compromised by the drive to end local surgeries, and outreach work in the drive to squeeze more Pension Credit claims out of the reluctant core of Pensioners who have not yet claimed. Surgeries have been slashed and the visiting oYcers are now desk bound cold calling potential Pension Credit customers using a scan. This has resulted in complaints of harassment, via the Police, against the LPS who engage in much maligned “cold calling” techniques. Middle management has been decimated. 55 (30%) of the 187 Local Service Delivery Managers (HEOs) have been cut from the organisation in a very quick selection exercise. These people are now in the Redeployment Unit and facing a very bleak future. The result is that the reputation of the LPS amongst pensioners and the Partner organisations has been tarnished and there are widespread reports of a demoralised staV. They are not doing what they applied for and realise that the scan work is not EO work and they too will soon be facing a selection exercise. We now know that Partner Liaison Manager posts are to be cut by approximately two-thirds. PCS November 2004

Memorandum submitted by the Pensions Commission (PC 18)

Summary

1. The evidence presented by the Pensions Commission is drawn from the Pensions: Challenges and Choices. The First Report of the Pensions Commission. This memorandum outlines the operation and structure of the Pension Credit and how Pension Credit would evolve over time if current indexation arrangements were continued indefinitely. 2. Means-testing has grown as the by-product of government policies for which there was a clear logic. The present Government believed in 1997 that the biggest immediate problem with the UK pension system was high levels of pensioner poverty. It aimed to fix this problem but within tight public expenditure constraints. The way chosen to do this was to target resources via means-tested benefits. 3. But means-testing within the state system both increases complexity and reduces, and in some cases reverses, the incentives to save via pensions which the tax system creates. 4. The scope of this means-testing would grow over time if current indexation approaches, to both means- tested benefits and state pensions, were continued indefinitely.

1. The operation of the Pension Credit

1.1 Pension Credit is a means-tested benefit available to people over 60. It has two elements: the “Guarantee Credit” and a “Savings Credit” which is only available to people aged 65 plus. These two components add up to a benefit which tops people’s income up to a level of income and then is tapered away at 40p for every extra pound of pre-benefit income above a particular level. The impact of the Pension Credit is therefore to make many people better oV, but to reduce the incentive to save for some of them.

Structure of the Pension Credit

1.2 The impact of the Guarantee Credit is shown in Figure 6.1696. It simply tops people’s income up to a particular level (£105.45 per week for a single person in 2003–04) with a pound for pound withdrawal rate for any pre-benefit income. For example, someone with £90 pre-benefit income (including BSP, SERPS/S2P and private pension income) ends up with £105.45 post-benefit income, as does someone with £100 in pre- benefit income. Since people aged 60–64 can receive the Guarantee Credit but not the Savings Credit, this is the situation they face. This was also roughly the situation faced by all people over 60 before Pension Credit was introduced in 2003, that is under what was then called the Minimum Income Guarantee (MIG).

96 For ease of reference figure numbers used in this memorandum are the same as those used in Pensions: Challenges and Choices. The First Report of the Pensions Commission. Ev 210 Work and Pensions Committee: Evidence

Figure 6.16

GUARANTEE COMPONENT OF THE PENSION CREDIT

250

200

150 Guarantee Credit

100 Pre Pension Credit Income

50 Post Pension Credit income (£ per week)

0

Pre Pension Credit income (£ per w eek)

Source: DWP

1.3 The Savings Credit is an additional means-tested benefit relating to income above the level of the BSP. Its value is calculated in such a way as to mean that the eVective withdrawal rate of the Pension Credit (Guarantee Credit and Savings Credit) is 40% if pre-benefit income is above the BSP (while withdrawing 100% if income is below the level of the BSP) [Figure 6.17].

Figure 6.17 GUARANTEE AND SAVINGS CREDIT COMPONENTS OF THE PENSION CREDIT

250

Guarantee Credit 200 End BSP in 2004 point

150 Savings Credit

100 Guarantee Credit

Pre Pension Credit 50 Income Post Pension Credit income (£ per week) per (£ income Credit Pension Post 0 0 50 100 150 200 250

Pre Pension Credit income (£ per week)

Source: DWP Work and Pensions Committee: Evidence Ev 211

2. Evolution of State Benefits Under Current Indexing Arrangements 2.1 Present government plans will keep public expenditure on pensions roughly flat as a percentage of GDP. Faced with the demographic challenge, and if the state pension age does not rise further after equalisation at 65 in 2020, this must inevitably mean a declining per person provision relative to average earnings, and thus declining replacement rates. 2.1.1 Relative to GDP per person and average earnings, state spending per pensioner is currently planned to fall by 26% by 2043/44 [Figure 3.19].

Figure 3.19 PROJECTED STATE SPENDING PER PENSIONER INDEXED IN CONSTANT 2003–04 PRICE TERMS

10% 160% State 9% Spending as a 140% 8% percentage of 19% 26% 27% GDP (LHS) 120% 7% 9% 13% 6% 100% Number of pensioners, 5% 80% indexed 2003/04=100 4% % (RHS) 6.9% 6.9% 6.9% 60% 3% 6.1% 6.2% 6.2% 40% 2% Gap is the percentage decline 20% 1% in the proportion of 0% 0% GDP going to the average pensioner 2003/04 2013/14 2023/24 2033/34 2043/44 2053/54 Source: Pensions Commission analysis of data from DWP and GAD 2.1.2 The impact of this on the poorest pensioners will be oVset by the increasingly flat rate and redistributive nature of state pension spending. The migration from SERPS to S2P will over time reduce the importance of the earnings-related element within the UK’s state pension system. By 2050, under current plans, a maximum S2P pension will accrue at 108% of average earnings compared to 145% of average earnings in 2000 under SERPS. And between now and then the pension payable will rise in line with average earnings for someone on 27% of mean earnings or below, but will rise by less for anyone above this level [Figure 3.20]. Moreover while the BSP is projected to rise in line with prices, rather than average earnings, the eVect of this on the lowest earners will be oVset by the increasing role of means-tested income guarantee benefits, which on current indicative forecasts will rise in line with average earnings. As a result current indicative forecasts imply that an increasing percentage of UK state pension spending will be means-tested [Figure 3.21]. Ev 212 Work and Pensions Committee: Evidence

Figure 3.20

COMPOSITION OF INCOME FROM THE STATE PENSION FOR A SINGLE MAN RETIRING IN 2000 AND 2050 ASSUMING NO ADDITIONAL SAVING

2000

£250

£200

£150

£100

£50 Weekly income from state

£0 0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 200% Gross weekly earnings as a percentage of mean male full time earnings

BSP Graduated Retirement Benefit SERPS Income Support

2050

£250

£200

£150

£100

£50 Weekly income from state

£0 0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 200% Gross weekly earnings as a percentage of mean male full time earnings

BSP SERPS Extra from S2P Guarantee Credit Savings Credit

Source: DWP Work and Pensions Committee: Evidence Ev 213

Figure 3.21

BREAKDOWN OF FORECAST OF STATE SPENDING PER PENSIONER IF CURRENT INDEXATION PLANS CONTINUED INDEFINITELY

100% Pension Credit means- 80% tested Housing-related benefits

60% Attendance Allowance and Disability Living Allowance 40% Other Pension Benefits

20% State Second Pension / Contributory State Earnings Related Pension 0% Basic State Pension 2003/04 2013/14 2023/24 2033/34 2043/44 2053/54 Source: Pensions Commission analysis of data from DWP and GAD 2.1.3 But the unavoidable consequence of falling per person provision relative to average earnings, combinedwithgreaterredistribution,willbeasignificantreductioninthegenerosityofthestate system at middle and higher income levels. The percentage of earnings replaced by non-means- tested state pensions will on current plans remain roughly constant for lowest income earners, but will fall significantly between now and 2050 for moderate and high earners [Figure 3.22]. The biggest impact of this change will be felt by middle income earners (say £15,000 to £30,000 per year) simply because at high and very high income levels state benefits are already such a smallpercentageofincomeinretirementthatafurtherdeclineisoflittleimportance.Forpeople up to about average earnings who chose not to save the impact of this on income in retirement could be significantly oVset by means-tested Pension Credit payments, but with the disadvantage of creating disincentives to private saving [Figure 3.23]. Figure 3.22 GROSS REPLACEMENT RATE FROM THE STATE FOR AN EMPLOYEE, BY EARNINGS LEVEL: CONTRIBUTORY PENSIONS ONLY

100%

80%

60%

40%

20%

0% £9,000 £13,500 £21,250 £32,500 £50,000 Annual earnings

Age 60 today Age 21 today Source: DWP Ev 214 Work and Pensions Committee: Evidence

Figure 3.23 GROSS REPLACEMENT RATE FROM THE STATE INCLUDING MEANS-TESTED BENEFITS: FOR EMPLOYEES BY AGE TODAY AND INCOME LEVEL, ASSUMING NO PRIVATE SAVING 100%

80%

60%

40%

20%

0% 60 21 60 21 60 21 60 21 60 21 £9,000 £9,000 £13,500 £13,500 £21,250 £21,250 £32,500 £32,500 £50,000 £50,000 Age now and annual earnings BSP SERPS/S2P Pension Credit and Council Tax Benefit

Source: DWP and Pensions Commission analysis 3. Future Evolution of the Pension Credit 3.1 If current indexation approaches continued indefinitely, the Pension Credit would become more generous. This is because of the way the diVerent thresholds used to calculate it would be uprated. The key thresholds are the level of the Guarantee Credit, which under current policy is uprated in line with average earnings, and the start point of the Savings Credit, uprated in line with price inflation (it is actually the level of the BSP). This would mean that over time the gap between the Guarantee Credit and the start of the Savings Credit would widen. 3.2 Figure6.18illustratesthisby showingthepossibleshapeofthePensionCredit atdiVerentpointsintime on this basis. All figures are in constant earnings terms. Over time the starting point of the Savings Credit would fallin earnings terms,whilst thelevel of theGuarantee Credit isconstant. As aresult, theSavings Credit would extend over a wider range, which means more people would be entitled to it and many people would be entitled to more. Clearly this would represent a boost to people’s income and would mean more people’s net income kept pace with average earnings. However, it also would mean more people seeing a reduced benefit to their net income from private saving. Figure 6.18 EVOLUTION OF THE PENSION CREDIT 250 GC

BSP in BSP in 2048 2004 SC in 2048 200 SC in 2039

SC in 2029 150 SC in 2019 End End point SC in 2009 point in 100 in 2004 2048 SC in 2004 Guarantee Credit Post-pension credit income credit Post-pension 50 Pre-Pension Credit Income

0 0 50 100 150 200 250 Pre-pension credit income

Source: DWP Work and Pensions Committee: Evidence Ev 215

4. Incentive Effects of Pension Credit

4.1 Pension Credit aVects people’s incentives to save in a private pension because it changes the benefit to them of receiving this income as well as the need for it. However diVerent groups of people are aVected diVerently. Figure 6.19 and Tables 6.1 and 6.2 show the impact on incentives to save for the four diVerent groups aVected by the Pension Credit. The groups relate to diVerent levels of income, as illustrated in Figure 6.19.

Figure 6.19

INCENTIVE EFFECTS OF THE PENSION CREDIT IN 2019

250 Group Group Group Group A B C D

200

Savings Credit 150 Guarantee Credit 100 Pre-Pension Credit Income

Post-pension credit income 50

0 0 50 100 150 200 250 Pre-pension credit income

Source: DWP.

4.2 The tables demonstrate that, compared with the Minimum Income Guarantee, the Pension Credit improves incentives for some people (group B) but worsens them for others (group C). The evolution of the Pension Credit on the basis of current indicative plans would mean that over time these groups would become larger.

4.3 However, a change in incentives does not necessarily lead to a change in behaviour, particularly as incentive eVects are complex, vary from person to person and depend on the decision they face.

4.4 The impact of the Pension Credit on incentives, moreover, depends on whether we are comparing the Pension Credit with the MIG system, or with the system as it existed before the MIG. Thus for example: — Someone in group C who was considering saving a little extra into their pension has seen their gain from doing so reduced by the Pension Credit. — However, if they were considering whether to save or not save, their gain from doing so has been improved by the Pension Credit, that is by the addition of the Saving Credit to the Minimum Income Guarantee. — Compared with the situation in which there were no means-tested benefits at all, however, the introduction of the Pension Credit (the Savings Credit and the Guarantee Credit) has reduced incentives for individuals to save whatever decision they are making. Ev 216 Work and Pensions Committee: Evidence

Table 6.1

THE IMPACT OF THE PENSION CREDIT ON THE GAIN FROM SAVING PRIVATELY

Group Counterfactual Measure A B C D

Marginal gain UnaVected Increased from Reduced from UnaVected Compared with (remains 0) 0 to 60p £1 to 40p (remains £1) Minimum Income Guarantee Average gain UnaVected Increased from Increased from UnaVected (remains 0) 0 to 0 to 39p to (remains 0–26p 26–39p 39p–£1)

Marginal gain Reduced from Reduced from Reduced from UnaVected Compared with £1 to 0 £1 to 60p £1 to 40p (remains £1) no means-tested benefits Average gain Reduced from Reduced from Reduced from Reduced from £1 to 0 £1 to 0–26p £1 to 26–39p £1 to 39p–£1

Note: The marginal gain is the increase in post-benefit income from an increase in pre-benefit income of £1. The average gain is the average gain in post-benefit income from every £1 of pre benefit income. The average gain from voluntary saving would vary according to the amount of existing provision (eg from BSP and SERPS) a person has and this is explored in more detail in the rates of return appendix.

Table 6.2

THE IMPACT OF THE PENSION CREDIT ON THE NEED TO SAVE PRIVATELY

Group Counterfactual Measure A B C D

Compared with Overall income UnaVected Reduced Reduced UnaVected MIG Compared with no means-tested Overall income Would depend on policies UnaVected benefits

5. Impact of Means-Testing

5.1 The total impact of all tax, NI contributions and benefit policies which impact the return on saving are extremely complex. The vast majority of people are better oV saving via pension contributions than out of post-tax earnings. But for some people the economic incentives to save are reduced by the impact of means-testing within the UK state system, an impact which would increase over time if current indexation approaches were continued over the long-term. 5.1.1 Means-testing has grown as the by-product of government policies for which there was a clear logic. The present Government believed in 1997 that the biggest immediate problem with the UK pension system was high levels of pensioner poverty. It aimed to fix this problem but within tight public expenditure constraints. The way chosen to do this was to target resources via means-tested benefits to ensure that all pensioners can receive at least the Guarantee Credit currently £105.45. The only way then to avoid 100% withdrawal rates over the first £25.85 of private pension income (the diVerence between the Guarantee Credit and the BSP), was to apply a lower withdrawal rate over a wider band of income. The combination chosen, via the Pension Credit arrangements, was a 40% withdrawal rate over about £60 of income. As a result of the introduction of the Pension Credit therefore, a smaller proportion of pensioners face very high withdrawal rates, but 40% of all pensioners face combined tax and benefit withdrawal rates of over 50% [Figure 6.15]. Work and Pensions Committee: Evidence Ev 217

Figure 6.15

DISTRIBUTION OF MARGINAL DEDUCTION RATES FOR PENSIONERS BEFORE AND AFTER THE INTRODUCTION OF THE PENSION CREDIT

50 45 40 35 30 25 20 Percentage 15 10 5 0 0 - 25 26 - 50 51 - 75 75 and over Marginal deduction rate (per cent)

Pre Pension Credit Post Pension Credit

5.1.2 The number of people covered by means-testing would grow further if current indexation approaches were continued indefinitely. The Government wishes to avoid pensioner poverty, and has therefore been increasing the Guarantee Credit in line with average earnings. But it also wishes to contain public expenditure on pensions and has therefore been increasing the BSP in line with prices. While indicative long-term public spending forecasts reflect the continuation of this, the Government has no long-term commitment to any particular indexation approach. But if it and future governments did continue indefinitely a policy of Pension Credit indexation to average earnings but combined with a BSP linked to prices, by 2050 over 60% of pensioners would face the 40% withdrawal rate implicit in the Pension Credit, and many would face higher rates still due to the additional impact of tax.

5.2 These withdrawal rates can under some circumstances have a significant impact on the rational incentives to save. The overall impact of tax, NI and benefit policies on incentives to save is extremely complex. Some complexities to note are: 5.2.1 Most (but not all) people who can secure an employer’s contribution are better oV saving via pension contributions than being paid a higher salary at equivalent cost to their employers and saving out of post-tax earnings. This results from the combined impact of tax relief and the fact that additional pension contributions (up to certain limits) are not liable to employer’s NI contributions. 5.2.2 Some people on low to median earnings receive a high eVective rate of tax relief on pension contributions, (up to 59%) since pension contributions reduce the calculated income used in determining Child Tax Credit and Working Tax Credits, and thus increase the tax credits received. For some people therefore higher eVective tax relief on contributions will oVset means- testing eVects on pension income in retirement. However, for those on incomes low enough to receive the maximum Child Credit (ie below the earnings limit to which withdrawal begins) this increase in the eVective rate of tax relief will not apply. 5.2.3 While the Pension Credit reduces incentives to save relative to those which would pertain if there were no means-tested benefits, it has increased them for some people, though reduced them for others, when its impact is compared to that of the Minimum Income Guarantee [See Table 6.1].

5.3 Despite the complexities however, there are clearly many people for whom means-tested benefits do create a significant disincentive to save individually: and these will tend to be people least likely to gain the benefit of the NI eYciencies of employers’ contributions. And it is clear that the sheer complexity Ev 218 Work and Pensions Committee: Evidence

of the current pattern of incentives is a problem. Very few people understand even the simple income tax relief eVects [see Figure 6.6 in the First Report]. The number of people who understand the myriad variants illustrated in Table 6.1 and Table 6.4 is still less. 5.4 If therefore current indexation arrangements were continued indefinitely savings by low income individuals (and eventually by middle income individuals) would likely be depressed by the impact of means-testing. This would be for three reasons. (i) Because means-testing makes savings rationally less attractive for some people. (ii) Because IFAs and other pension sellers, for whom low income customers are in any case the least attractive segment of the market, will be wary of selling to people potentially aVected by Pension Credit withdrawal for fear of future mis-selling accusations. (iii) Because the complexity can in itself be an impediment to rational savings decisions. Thus for instance, while many IFAs are aware of the negative impact of means-testing, very few people understood that for some people this is oVset by the impact of Working Tax Credit and Child Tax Credit.

6. Incentives to Save:Rates of Return for Different Categories of Saver

6.1 Charges and means-testing can have significant influence on incentives to save for a pension. The other key influences are the degree of tax relief including the impact of Working Tax Credit and Child Tax Credit and the presence or absence of an employer contribution. Together these four factors result in hugely diVerent incentives to save for diVerent categories of saver. 6.2 Table 6.3 and Figures 6.20 to 6.23 present results from the Pensions Commission’s model of pension returns. These results are highly stylised, and rates of return achieved by specific individuals will reflect numerous complex factors not included here. [See Appendix C of the First Report for details.] But the results here illustrate some of the key drivers of returns achieved. In each case we assume that return on saving after implicit costs but before all other costs, ie the return the saver would receive in a world of no taxes, no benefits, no explicit selling and administration costs, and no employer contributions, would be 3.2% real. This 3.2% real return would result from the combination of a 4% real return during the pension fund accumulation stage (after implicit costs but before explicit costs), and a 1.3% return during the annuity phase (the rate implicit in annuity pricing today). 6.3 Starting with this pre-everything return, Table 6.3 shows how the post everything return varies for diVerent categories of saver.

Table 6.3

EFFECTIVE RATES OF RETURN FOR STYLISED INDIVIDUALS WITH AND WITHOUT AN EMPLOYER CONTRIBUTION: ASSUMING A 3.2% RETURN BEFORE ALL TAXES AND EXPLICIT COSTS

No employer Employer contributions contributions

Higher tax payer in both working life and retirement. Not means 3.9% 6.4% tested, 0.3% AMC Higher tax payer in working life, basic rate in retirement. Not means 4.1% 6.5% tested, 0.3% AMC Basic rate tax payer in working life and retirement. Not means tested 2.6% 5.2% 1% AMC Basic rate tax payer on Working Tax Credit in working life, and on 4.1% 5.2% means-tested benefit in retirement. 1.5% AMC Basic rate tax payer in working life and on means tested benefits in 0.7% 3.2% retirement 1.5% AMC

6.3.1 The most typical case is probably someone who is a basic rate taxpayer at the margin in working life and retirement and who faces a 1% AMC on his pension fund. He contributes 7.5% of his salary into his pension and this is matched by his employer. His pre-everything return translates into a post-everything return of 5.2%. How this builds up is shown in Figure 6.20. Work and Pensions Committee: Evidence Ev 219

Figure 6.20

EFFECTIVE RATE OF RETURN FOR STYLISED INDIVIDUAL WHO PAYS BASIC RATE TAX IN WORKING LIFE AND RETIREMENT

8%

6%

4%

2% Rate of return (per cent) 0% Own plus tax relief plus an minus admin minus taxes Net pension contributions employer charge of 1% and means contribution tested benefit effects

Note: The rate of return on individual saving across both accumulation and decumulation is 3.18%. We assume that he starts saving at 35 and makes a 7.5% contribution with a 7.5% employer contribution. To simplify the analysis we have assumed no earnings growth in real terms. He pays an annual management charge of 1%. 6.3.2 Figure 6.21 shows the return on saving for someone who was a 40% taxpayer during working life, but a 22% payer in retirement, who is above the Pension Credit, who receives an employer contribution equal in size to his own contribution, and who enjoys, from membership of a large occupational DC scheme, explicit costs of only 0.3%. For this person a pre-everything return of 3.2% real on their own contributions alone becomes a 6.5% real return after all eVects. The decision to participate in the employer’s scheme should for this saver be an obvious one.

Figure 6.21

EFFECTIVE RATE OF RETURN FOR STYLISED INDIVIDUAL WHO PAYS HIGHER RATE TAX IN WORKING LIFE AND BASIC RATE TAX IN RETIREMENT

8%

6%

4%

2% Rate of return (per cent) 0% Own plus tax relief plus an minus admin minus taxes Net pension contributions employer charge of and means contribution 0.3% tested benefit effects Ev 220 Work and Pensions Committee: Evidence

Note: The rate of return on individual saving across both accumulation and decumulation is 3.18%. We assume that he starts saving at 35 and makes a 7.5% contribution with a 7.5% employer contribution. To simplify the analysis we have assumed no earnings growth in real terms. He pays an annual management charge of 0.3%. 6.3.3 Figure 6.22 shows the position for someone who pays 22% tax in working life and is on the Pension Credit in retirement but was not on Working Tax Credit during working life. He receives no employer contribution and faces a RIY from explicit costs of 1.5%. For this person a pre- everything return of 3.2% becomes 0.7% after all eVects. A case can be made that this person should still save, given that the real value of contributions is, just, maintained and because people need to be able to defer income to cover consumption in retirement, even if the return is poor. But the incentives are hardly compelling, and look even worse once risk is taking into account. The example considered assumes a 50% equity weighting during the pension fund investment phase. But equity investment means that returns could diverge significantly, up or down, from the illustrated figures. Only 100% investment in real index-linked bonds would avoid that risk, but at the expense of a lower expected return of about 2.0% at the pre-everything level and "0.8% after all eVects.

Figure 6.22

EFFECTIVE RATE OF RETURN FOR STYLISED INDIVIDUAL WHO PAYS BASIC RATE TAX IN WORKING LIFE AND RECEIVES MEANS-TESTED BENEFITS IN RETIREMENT

8%

6%

4%

2% Rate of return (per cent) (per return of Rate

0% Own plus tax relief plus an minus admin minus taxes Net pension contributions employer charge of and means contribution 1.5% tested benefit effects

Note: The rate of return on individual saving across both accumulation and decumulation is 3.18%. We assume that he starts saving at 35 and makes an individual contribution of 15%. To simplify the analysis we have assumed no earnings growth in real terms. He pays an annual management charge of 1.5%. 6.3.4 Figure 6.23 however illustrates that if the person who was on Pension Credit during retirement [considered in Figure 6.22] had received Working Tax Credit throughout his working life, and if his earnings fell within the range at which the 37% withdrawal taper applies, his return could look significantly better. The 3.2% pre-everything return now becomes 4.1% after all eVects. Someone who is on means-tested benefits in retirement, but did not receive Working Tax Credit, but did at some stage in their working life receive Child Tax Credit on the taper, would receive a return somewhere between that illustrated in Figure 6.22 and Figure 6.23. This reflects the fact the Child Tax Credit would only apply for a proportion of total working life reflecting the smaller number of years with the increased eVective match rate. Finally it should be noted that some people with higher incomes in retirement may receive Child Tax Credit on the taper at some point during their working life and could therefore receive a better return than illustrated in Figure 6.20. Work and Pensions Committee: Evidence Ev 221

Figure 6.23

EFFECTIVE REAL RATE OF RETURN FOR STYLISED INDIVIDUAL WHO PAYS BASIC RATE TAX AND IS ON WORKING TAX CREDIT IN WORKING LIFE AND IS ON MEANS-TESTED BENEFITS IN RETIREMENT

8%

6% Impact of tax credits 4% Ordinary tax relief 2% real rate of return of rate real

0%

Own plus tax relief plus an minus admin minus taxes Net pension contributions employer charge of and means contribution 1.5% tested benefit effects Note: The rate of return on individual saving across both accumulation and decumulation is 3.18%. We assume that he starts saving at 35 and makes an individual contribution of 15%. To simplify the analysis we have assumed no earnings growth in real terms. He pays an annual management charge of 1.5%.

7. Significant Changes to the State System 7.1 The Pensions Commission’s primary focus is on the private funded pension system, rather than the details of the state Pay As You Go (PAYG) system. But options for reforming the private system cannot be assessed without considering both the implications of the state system for private saving, and possible state system changes as an alternative or complement to private system reforms. Three considerations suggest a potential role for state system changes: 7.1.1 Means-testing within the state system is already creating, and if current indexation approaches were continued indefinitely would increasingly create, disincentives to private saving, particularly for some low income savers. 7.1.2 The complexity of the current state system is an impediment to clear consumer understanding of what the state will deliver, and therefore what individuals need to save themselves. This further confuses incentives to save. 7.1.3 The contributory nature of the state system is a major driver of the inequality between men and women in pension provision. 7.2 Many proposals are therefore put forward for changes to the state system. Most of these involve a higher basic pension but less means-testing, aiming to reduce disincentive eVects. But if these proposals are made, the potential consequences and disadvantages need to be faced alongside the potential benefits. Thus as an illustration: 7.2.1 Under current Government projections, expenditure on pensioner benefits (BSP, S2P, Pension Credit, Winter Fuel Payments, over-75s TV Licences and Christmas Bonus) is expected to increase from around 5% of GDP in 2003–04 to around 5.7% of GDP in 2043–44. 7.2.2 If the state pension age is not raised, a non-contributory basic state pension set at the current level of the Guarantee Credit (ie at society’s current definition of the minimum income required for a dignified retirement), and maintained at this level relative to average earnings, would imply expenditure on pensioners rising to around 8.2% in 2043–44 if S2P and the Savings Credit were abolished. If S2P were retained, expenditure on pensions would be around 9.5% of GDP in 2043–44. 7.2.3 Alternatively, a basic non-contributory pension set at the current level of the Guarantee Credit (with no S2P or Savings Credit) but with public expenditure on pensions limited to today’s 5% of GDP would require the state pension age to rise to 74 by 2043–44 or to 72 if the aim was to keep Ev 222 Work and Pensions Committee: Evidence

expenditure at the 5.7% of GDP envisaged under current plans for 2043–44. The implications of this for diVerent socio-economic groups would need to be considered carefully, given the major diVerences in current life expectancy illustrated in Chapter 2. 7.3 A higher state pension would improve incentives to save for those on low incomes but would not in itself deliver pensions likely to be considered adequate for any except the bottom quartile of income earners. Even with radical changes to the Basic State Pension, therefore, two issues would remain: whether there should be government policies to ensure adequacy above the minimum level, and if so whether such adequacy should be achieved via a PAYG scheme or via funded savings. These issues are fundamental to any consideration of compulsory savings.

8. Women and the State System

8.1 Women have lower state pensions because the state system is contributory, has only partial mechanisms to compensate for caring responsibilities, and has several “cliV-edge” features, which mean that women who fall below particular earnings levels or who have a small number of years in employment not only accrue less pension benefits, but disproportionately less. 8.2 The UK state pension system is described in Appendix F of the First Report. The key characteristics relevant to the relative position to women are that (i) the Basic State Pension (BSP) and the Second State Pension (SERPS/S2P) are contributory systems, with the level of pension received dependent on the number of years of contributions made, and (ii) the accrual profile has a number of “cliV-edges” within it, the impact of which tends to aVect women far more than men. Specific problems are that: 8.2.1 If someone has worked for less than 10 years during their working life, they would not on the basis of their contributions, receive any BSP [Figure 8.9]. Home Responsibilities Protection (HRP), provides a partial oVset to this eVect for people with caring responsibilities. But the details of how HRP is calculated (the fact that it does not act as an accrual of years of contributions itself but as a multiplier of contributions of the years accrued as a result of employment) means that this oVset is less than total. As a result a woman with 20 years of home responsibilities and 10 years of employment would accrue only 50% of a BSP, while a man with a 30 year employment record would accrue 70%. HRP moreover works on whole years of caring, and therefore fails to accrue for many women taking partial year breaks to care.

Figure 8.9

ACCRUAL OF BASIC STATE PENSION

100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% retirement 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% Percentage Basic Pension received State of full in 0 5 10 15 20 25 30 35 40 45 No. qualifying years of contributions (or credits)

Man Woman Woman(10 years' HRP) Woman (20 years' HRP)

Source: Pensions Commission calculations based on state pension rules. Work and Pensions Committee: Evidence Ev 223

8.2.2 Someone earning below the Lower Earnings Limit (LEL) (currently £79 per week ie £4,108 per year) in any one job, will accrue no state pension rights, even if they work in several such jobs with combined earnings above the LEL. While this is matched by the fact that such a person will also be making no National Insurance (NI) contributions, the net eVect is that many women with several part-time jobs fail to accrue BSP rights.

8.3 A number of recent changes in the state system will improve the future position of female pensioners. The fact that rights can be accrued by someone earning above the LEL (£79 per week) but below the Primary Earning Threshold (£91 per week) at which NI contributions begin, will help many low-paid women. So too will the improved treatment of the low paid under the increasingly flat-rate S2P.

8.4 But the net eVect of the historic shape of the UK state pension system, combined with women’s past employment patterns, is that 69% of women aged 65–69 who receive BSP receive less than the full amount (compared with 15% of men). 40% of women who receive BSP based on their own contributions are entitled to less than 75% [Figure 8.10]. The impact of this on female pensioner poverty is more eVectively oVset following the introduction of Pension Credit than it was before. Two-thirds of Pension Credit beneficiaries are women. But the unavoidable consequence is that women’s pension income from the state includes a larger means-tested element [Figure 8.11].

Figure 8.10

PERCENTAGE OF BSP RECEIVED BY 65–69 YEAR OLDS: 2003

100%

80%

60%

40%

20%

0% Men Women Men Women

All recipients Category A recipients

25 to 50 % 51 to 75 % 76 to 99 % 100%

Source: Retirement Pension and Widows Benefit Administrative Data, 30 September 2003, DWP.

Note: Category A entitlement is based only on the individual’s contributions.

The figures for all women recipients show a much higher percentage of receipts because many women will receive 51–75% of the BSP as wives of fully paid-up men, and some will receive 100% as widows. Ev 224 Work and Pensions Committee: Evidence

Figure 8.11

COMPONENTS OF AVERAGE STATE PENSION AND BENEFIT INCOME: 2002–03

£150

£33 £100 £37

£ per week £ per £50 £91 £85

£0 Single male pensioner Single female pensioner

Contributory pensions Other state benefit Source: The Pensioners’ Incomes Series 2002–03. Notes: Other state benefit includes means-tested benefits and disability benefits. Pensions Commission 17 November 2004

Memorandum submitted by Child Poverty Action Group (CPAG) (PC 19)

PENSION CREDIT AND JOINT TEAMS We understand that the Committee are taking evidence on the introduction of Pension Credit and the administration of that benefit by the Pension Service. We also understand that this will include the issue of Joint Teams comprised of local authority and Pension Service staV. We are writing in order to give our views on that. Child Poverty Action Group is a national charity that campaigns for the abolition of poverty among children in the UK and for the improvement of the lives of low-income families. We conduct and publish research, lobby government, lead and support campaigns, provide up to date information and advice on social security and tax credits (for example, the Welfare Benefits and Tax Credits Handbook) and undertake test-cases to extend the interpretation of law in favour of claimants. We are a membership organisation and are a leading provider of second tier advice, training and support to welfare rights advisers throughout the country. As such, our work brings us into contact with large numbers of such workers in a variety of organisations. CPAG are primarily a second-tier organisation, and as such would have no direct involvement in Joint Teams. However, the advent of Joint Teams is of interest to CPAG because it relates to the delivery of welfare rights advice, and raises questions about take-up, advocacy and independence as part of such work, all of which are of direct interest to our work. In particular, although some recipients of pension credit have children, should Joint Teams be extended to other agencies of the Department then even more claimants, including more of those with children, would be aVected.

Summary CPAG would like to express serious concern about Joint Teams in their current form. We believe that there are some valuable principles underlying the work of such teams; but that current arrangements will not result in a satisfactory welfare benefits service to claimants. We believe that, in principle, co-working between local authorities and the Pension Service does have the potential significantly to increase the take up of welfare benefits and tax credits. We welcome that. We also endorse the principle of a “one-stop” service in which older people can get initial help with community care, benefits etc, in one visit and from one person. Work and Pensions Committee: Evidence Ev 225

However, we also believe that insuYcient attention has been paid to issues of welfare rights advocacy and independence in the work of Joint Teams. Further, we are concerned that, alongside that deficiency, the advent of Joint Teams could lead to the erosion of independent welfare rights advocacy from welfare rights advisers working outside the Joint Teams. As a result of these concerns, we are not satisfied that under current arrangements Joint Teams are able to provide a proper welfare rights service to claimants. We hope that the principle of closer working between the Pension Service and welfare rights agencies, which we endorse, can be implemented without impairment to the provision of such a service.

Take-up and a “One-Stop”Service CPAG welcome the attempt to increase take up of Pension Credit and of other benefits via home visits to older people, and provision of help with community care, benefits and other welfare services at that visit. However, we would add that, at least in terms of provision of a welfare rights service, such work can only be part of a wider service. In particular, some claimants are more likely to be attracted by take-up campaigns done outside the Joint Team, some claimants may need specialist advice (for example, where they have complicated care arrangements and/or an already complicated history of benefit claims), and some may want to appeal, question or otherwise dispute the resulting service and decision they get on their benefit claim. We do not believe that Joint Teams can deliver such a service. Firstly, they cannot deliver genuinely independent advocacy. We are concerned that the presence of the Department in the take-up process could deter some claimants who would be more attracted by a campaign by, for example, the local authority welfare rights unit or the local Citizens Advice Bureau. Also, such agencies may well be better place to potential claimants who are not likely to be targeted by Joint Teams at present, eg, those who do not have a referral for a community care assessment. We believe that there are likely to be many older people in that position. Secondly, social security and tax credit law is a complex field, and although Joint Teams staV may be competent in delivering an initial benefits check and assisting with the initial stages of a claim, complex issues, disputes and complaints will often need the attention of someone more specialized. Even basic, initial- stage work, such as completing a benefit claim form, can be diYcult and time consuming. With that in mind, we are concerned at reports from some welfare rights advisers that some Joint Teams are already withdrawing from the task of form completion for Attendance Allowance/Disability Living Allowance claims. In summary, we believe that although Joint Teams have the capacity to increase take-up, it would not be satisfactory to assign all responsibility for such work to them. They should act as a complement to existing welfare rights services, not a replacement.

Independence and Advocacy One of our most serious concerns is that the Joint Teams cannot deliver genuinely independent advice and advocacy. This is particularly so in cases of dispute. Whatever the goodwill of the individuals involved, the fact remains that the Department have a significant presence in the Joint Team. In our view, that alone is enough to create a reasonable apprehension that the Team could not provide independent advocacy. In our view, it would be reasonable for any claimant who seeks to appeal against or otherwise dispute their benefit decision not to want to seek further advice or help from the Joint Team. At the very least, they might reasonably wonder how it is that a team in which the organisation that made the decision with which they are unhappy is actively involved can advocate for them in an independent way. It strains credibility, for example, that a case in which the Departmental interpretation of the meaning or purpose of the legislation was disputed could be advocated by a member of a Joint Team. Such cases occur frequently, especially regarding benefits like Disability Living Allowance where decision-making is notoriously inconsistent, there is a body of diYcult case-law and appeal success rates are very high. We are very concerned that little or no thought seems to have been given to this problem. The “Link-Age” document contains no proposals on it, and we understand the Pension Service view to be that as the Joint Teams do not make decisions then there is no diYculty. We do not agree. We believe that the only way to protect independence is to ensure that, alongside and outside of the Joint Teams, there is a separate and independent welfare rights service that can deal with complex cases, complaints and disputes. To ensure such a service would necessarily involve ensuring that it is adequately staVed and funded, and that claimants contacted by the Joint Teams were made aware of seeking advice from it. With that in mind, we are concerned at the possibility that the growth of Joint Teams could lead to the erosion of independent welfare rights services. Some welfare rights advisors in Joint Team areas have expressed concern to us that their service is under review. There is a possibility that fund-holders, overly- impressed by figures showing an increase in take-up, might conclude that Joint Teams diminished the need Ev 226 Work and Pensions Committee: Evidence

for independent welfare rights provision by local authority welfare rights units and voluntary sector organisations. That would be to mistake increased take-up from one part of the potential claimant group (ie, those referred for a community care assessment) with a proper welfare rights service that can oVer independent specialized advice and advocacy. Those roles can only be carried out by oYces and organisations completely distinct from Joint Teams. Child Poverty Action Group 30 November 2004

Memorandum submitted by Neil Bateman and Company (PC 20)

Pension Credit Take-up and Joint Teams I understand that the Committee is taking evidence about the take-up of Pension Credit. A key part of the government’s strategy for improving take-up of benefits by older people is to develop joint teams with local authorities and voluntary bodies. I’ve been approached by many advice workers who are very concerned about these proposals and I’ve sent a formal response to the Department for Work and Pensions about these proposals (which were contained in a DWP/Local Government Association Consultation document “Link-Age”). I hope that you can accept the following pages (which are based on my formal response to the DWP) as evidence for your current enquiry. My work as an author, trainer and consultant on welfare rights issues brings me into contact with many practitioners and advice workers in a variety of organisations and this submission has been informed by that contact. I wish to focus on the cornerstone of the consultation document; the proposals for joint teams between the Pension Service and local authorities. The proposals for joint teams are poorly thought through and will depress the take-up of Pension Credit because the concept of joint work between the Pension Service and local authorities in order to improve take-up of benefits for older people has become hijacked by the concept of joint teams. It is possible to have very eVective joint work without the expense and bureaucracy of joint teams—indeed; local authority welfare rights staV were pressing for more eVective joint work before the Pension Service was established. It is surprising how little public debate there has been about these proposals, but many local authority welfare rights staV feel constrained about making public criticisms in the current political climate and the sensitive relationship between central and local government. I also note the ambitions in the consultation paper to make the joint team approach far wider than just local authorities. Joint teams are superficially attractive, particularly to people who are unfamiliar with advice work and it is particularly surprising that the paper does not mention the place or the need for independent advice about benefit rights (whether provided by an in-house or external team)—particularly as DWP policy is to engage in a dialogue with the welfare rights movement. This fails to understand the history of the welfare rights movement in the UK and other countries, which grew up because the limitations on both the quality and partiality of DWP provided advice (as well as the need or a second opinion and advocacy) mean that claimants’ advice needs have not been met by DWP sources, no matter how well intentioned or carefully planned.

Pension Credit Take-up As you know Pension Credit take-up rates are behind target and even when on target, almost a third of older people who are entitled to it will fail to claim. However, less than 4% of people over 60 receive a care service from local authorities and even among the over 75s it is less than 10%. The proportion has fallen by over a quarter since 1997 and at the same time there are declining numbers of beds in residential care homes. To focus so many DWP and local authority resources on the small minority of older people who receive a care service inevitably means that older people who do not meet local authority eligibility criteria will either be excluded or receive a lesser service. Instead of the Pension Service local service being a universal service for all older people, it will incline towards being a service for a small minority while the really hard to reach (older people not in contact with any service) are further marginalised. If the access criteria for joint teams were to be widened that would have implications for local authority social care eligibility criteria and resources. Long experience within the welfare rights movement shows that it is possible to do successful take-up work with older people if (a) the service is perceived as being independent from the DWP; and (b) the correct approaches are deployed using a mixture of both targeted data matching (eg via HB/ CTB records) and wider public access. Work and Pensions Committee: Evidence Ev 227

Yet the Link-Age document does not suggest how such approaches would be improved by having a joint team. We are yet to see any robust and independently audited benefit gain data from existing joint teams so it is not possible to examine the claims made for their success. One must also bear in mind that given the tight eligibility criteria used by most local authorities; most service users will easily qualify for benefits such as Attendance Allowance and would frequently have succeeded in making a successful claim with little external help. It is not exactly a group to benchmark against welfare rights skills. What would make a significant diVerence to pensioner poverty is improved benefit take-up among the wider group of older people who are underclaiming, This includes those with disabilities or health needs but who either don’t meet the criteria for local authority services or who are equally likely to qualify but who are not in receipt of home care services through choice, ignorance or use of alternative sources of help such as informal carers. The DWP appear to view home care clients as a “hard to reach” group because they are (generally) frail, housebound and elderly. Although this is true, and it is also true that people with the same characteristics are indeed “hard to reach” through traditional DWP approaches to benefit take-up, home care clients as a small sub-group of the frail, housebound elderly “set” are relatively well-placed to receive benefits advice already. Indeed, most local authorities (either through welfare rights teams or finance section staV) routinely make significant benefit gains for home care clients. There is no evidence that joint teams are any more successful in promoting take-up than the existing methods used to ensure home care clients are fully informed, advised and assisted. It is a discredit to local authorities, and an indication of the relative inexperience of DWP oYcials when it comes to take-up, that existing take-up work amongst home care clients has been eVectively ignored. In addition, and despite the impact of Fairer Charging, where there are gains for older people using care services, much of any benefit gain from disability benefits will simply be clawed back in additional social services charges, so the pensioners’ real net income gain is actually far less than the headline figure. There is no evidence that joint teams produce better returns for the customer compared to other tried and tested models of advice provision, so it is most surprising that the DWP is pressing ahead with these proposals without such evidence. There also seems to be real confusion about what level of work will be done by both Pension Service local staV and joint teams on Attendance Allowance and Disability Living Allowance. Feedback I have received shows a massively variable picture and generally little or no follow up work being done on claims—a particularly poor practice given the variability of indecision making on disability benefit claims.

Advocacy The separation of income maintenance and care services in 1948 arose largely because local authorities social work professionals in that era found their association with income maintenance a barrier to eVective work with service users. It not only stigmatised social work practice but also led to value-based decisions about who could have additional income and it prevented staV from being eVective advocates. So local authorities were pleased that central government took on full responsibility having gradually been relieving local authorities of that burden since the 1930s. Consequently social work practitioners have been able to act as independent advocates on benefit issues for their customers, establishing empathy and building trust with some of the most marginalised and vulnerable people in society and making a real diVerence to their lives. The role of social workers as advocates on benefits issues goes back to the very origins of social work in the Charity Organisation Society in 1896 and the writings of pioneers such as Mary Richmond in 1917. Welfare rights advocacy by social workers and others in social care settings, has led to significant improvements in social security services and specific benefit rights (eg the Mallinson test case on DLA/AA started life in a Social Services Department). Social workers were also instrumental in establishing the modern welfare rights and anti-poverty movement in the 1960s. None of this would have occurred if it had been done by joint teams. To see the eVects of associating social care practice to income maintenance, one only has to look at the poor quality of public care services in the USA and the dreadful social exclusion which results for service users. Similar problems are experienced in Ireland where social workers employed by Health Boards have income maintenance functions around Supplementary Social Welfare payments. So it is very surprising that these lessons from the history of the welfare state appear to have been forgotten. StaV within a joint team will (and are) constrained in their ability to act as advocates on benefits issues. This may suit the DWP; we all know that some DWP ministers and staV do not welcome advocacy and I’ve personally witnessed a former Secretary of State make this point during a meeting. But it is not in the customers’ best interests to reduce access to advocacy. Ev 228 Work and Pensions Committee: Evidence

However, this concern does not just extend to staV in joint teams. If there is a formal partnership between a local authority and the DWP, local authority staV generally will find it diYcult to act as independent advocates, particularly if this involves challenging inter-agency protocols or sensibilities and either they will be instructed not to do so by their managers or they will self-censor. The proposals for Associated OYces are also of concern. It is proposed that staV in these “should not act as the customer’s representative on appeal if they received and/or verified that particular claim or application” (Link Age website: pages about Associated OYces). While one could agree that an Associated OYce which has, say, verified someone’s income, should not represent them in an appeal about the validity of that particular verification, the proposals go much further by limiting appeals on anything involving the whole benefit.

Advice is Partial Advice giving is not a value-free activity and there is a great diVerence in both the content and style of advice oVered by “oYcial” sources and welfare rights advisers. The latter will be approaching matters from the perspective of acting in the customers’ best interests and acting on their instructions. The oYcial advice (no matter how well presented and intended), will always be based on the employing agency’s interpretation of entitlement rather than one which while legally credible, possibly challenges accepted views and which also seeks to maximise a customer’s income. One only has to observe interviews by welfare rights advisers and Pension Service local staV to see how the approach diVers. Rather than local authorities being able to be a source of customer-centred advice on benefit rights, the Link-Age proposals pull local authorities in another direction. The content of training materials on benefits delivered by the DWP to joint teams clearly shows that the DWP’s view about interpretation of entitlement is the model being promoted rather than a welfare rights perspective.

More Bureaucracy and Less Freedom The need for twin accountability and joint management boards appears to be yet another layer of bureaucracy on strategic decision-making and such arrangement inevitably involve additional costs for partner organisations. And as with all such joint management arrangements, it represents yet another step in the gradually reduction in local authority independence.

Not a One-Stop Service Joint teams are not a one-stop advice service for older people. Not only would someone who needed to appeal have to go elsewhere but also documents (such as the Concordat between the DWP and the LGA) show that joint teams only provide advice and limited help with a minority of the benefits which older people may need to claim. An older person may well have to deal with at least four diVerent oYces about their benefits and as the joint teams don’t actually process benefits, the need to communicate with multiple oYces is not removed. As the Pension Service moves to reduce its staV by 10,000 it is rationalising its pension centres: not only will an older person have to deal with several oYces but the chances are that more will be remote as the service becomes further based on call-centre type services. It is a particular pity that the Pension Service rushed to shut local direct access by older people despite objections from older peoples’ groups and welfare rights interests. Retaining and regenerating local access (eg with dedicated high street oYces for pensioners) would have provided universal access for all older people and could have made the Pension Service into a user-friendly support service. It is not too late to reverse these decisions and joint teams are a poor substitute for such direct access. Finally, welfare rights services within local authorities have often succeeded in engaging social work staV in welfare rights work and supporting them to do this work eVectively, oVer one stop integrated care and welfare rights service to the client. The joint teams proposals in Link-Age do not seek to empower and support social workers’ skills in this area and the model proposed means that the customer will require at least two visits—social worker and joint team member with financial matters not being looked at until further down the line. Good practice would dictate that financial needs are considered sooner.

Loss of Advice Resources In some areas welfare rights resources have already been lost by being absorbed into joint teams. In others, reviews of grants to welfare rights services have been reviewed because of the perception that joint teams have replaced the need for welfare rights services. While the DWP may not intend this to occur, it is an inevitable result given the resource pressures facing local authorities. Work and Pensions Committee: Evidence Ev 229

Within local authorities the awareness that another body will do for free what they have previously had to pay for, or the perception that one must “stop duplication” is already used as a rationale by decision makers to cut spending in many areas.

Association with Failure There are major operational problems within the Pension Service. This is evidenced by a very critical press release from Citizens Advice last July stating that they had a “catalogue” of failures by the Pension Service— delays, basic errors and instances of misinformation. Welfare rights advisers have also repeatedly complained about the frequency of errors in Pension Credit assessments for carers and disabled pensioners. The vast majority of older people need to have very little contact with the Pension Service, so customer satisfaction scores therefore appear to be positive. However, there clearly are major problems with some of the pension centres ability to consistently and accurately deliver Pension Credit to some of the groups of older people who are more likely to use local authority services. One must question whether it is wise for local authorities to be so closely associated with a service which still appears to have such diYculties more than two years after it was established. It is unlikely to help the local government improvement agenda.

Practical Problems Aside from the major philosophical problems with joint teams, there are a host of practical problems: StaV in the DWP and local government have very diVerent salaries, leave and pension entitlements, computer systems are not compatible, the Pension Service is often reported as being reluctant or unable to pay for accommodation and DWP staV are not subject to Criminal Record Bureau checks.

Joint Work, not Joint Teams Local authorities and welfare rights groups have long pressed for better support and cooperation from the DWP with take-up work aimed at older people. So there was hope that a historical desire for eVective data sharing and support for take-up work would be met. It is not necessary to have the expense and disruption of a joint team in order to do have eVective joint work. Indeed, the energy involved in establishing and managing a joint team may well distract from such work and also reduce joint work with those bodies which are not signed up to joint teams. Unfortunately, the debate has become obscured by the introduction of the intellectually barren concept of joint teams so that the only model proposed by the DWP and others to be to have a joint team. The Social Security (Claims and Payments and Miscellaneous Amendments) Regulations 2003 are broad enough to allow partner organisations to be authorised to take claims for benefits without having to be part of a joint team. However feedback indicates that local authorities which are not signed-up to joint teams have been refused the power to take claims. If the DWP administered the Regulations in accordance with their actual wording, by now there would be many more such arrangements. In some areas joint work has been severely undermined by the DWP’s deep-rooted introspective management culture and inability to understand partnership work, with “their” staV being unilaterally removed from take-up work to fill gaps in DWP services elsewhere or to do ancillary work such as visits to persuade people to have their benefit paid into bank accounts. It does not inspire confidence that the DWP is capable of being a reliable partner even if joint teams were desirable. Further problems have been caused by the Pension Service initially stating that they wished to work as equals with local authorities, but then proposing a compulsory performance indicator for local authorities in the summer of 2004 (this is not now going to proceed but only because the ODPM decided so). And problems have also arisen because of the Pension Service’s approach to developing local advice surgeries. Despite the advice of welfare rights advisers that the returns do not justify the eVorts invested, Pension Service advice surgeries were set up with little or no consultation with local advice agencies or Community Legal Service Partnerships, only to be unilaterally curtailed by senior management dictat following a change in national policy. I am also aware of instances when local authorities have oVered access to data matched Housing Benefit information (a rich source of information about underclaimed Income Support and Pension Credit) but this has not always taken up. Yet we are repeatedly told that the best way to tackle pensioner poverty is through a joint team. This is a particular shame given the commitment of many local staV in the Pension Service who feel equally frustrated by shifts in national priorities and who have developed eVective local working arrangements with welfare rights services. Ev 230 Work and Pensions Committee: Evidence

Despite more than two years of senior Pension Service staV visiting local authorities to promote joint teams and a host of other activity on this front, only a minority of local authorities have joint teams and close examination reveals that many of the 30 or so alleged joint teams are not quite so joint as may first appear. I hope that these points will provide food for thought and will assist the Committee to make a conclusion. Neil Bateman 30 November 2004

Notes of the Committee’s Visits to Blackpool and Glasgow

BLACKPOOL, 1 DECEMBER 2004

Disability and Carers Service

A. Terry Moran, Chief Executive 1. The following summary is based on the Powerpoint presentations given during the meeting. 2. Why a new agency? — DCS assumed Executive Agency status from 1 November 2004. — DCS was the only area of operations in the Department not an Agency. — Now included in the DWP structure alongside the Pension Service, Jobcentre Plus, Child Support Agency and The Appeals Service. — Agency status raises its importance. 3. Delivery vision “Supporting disabled people, enabling independence” The new agency will transform its current services by improving the experience of: — Customers. —StaV. — Partners and Stakeholders. And in doing so be an eYcient public service. 4. Current Assessment — All reported targets (except attendance) are being met. — DCS makes 1.4 million decisions on DLA/AA new claims and renewals each year. — DCS made 232k decisions on Carers Allowance claims during 2003–04. — Helpline: — 100,000 people want to use it each week (only 80% achieve it). — 250,000 calls get engaged tone. — Less than 40% of calls answered within standard 30 seconds.

WORKLOADS

2003–04 2004–05 2005–06 2006–07 2007–08 New Claims 000’s 000’s 000’s 000’s 000’s Disability Living Allowance 441 464 482 500 518 Attendance Allowance 424 435 449 465 481 Carers Allowance 228 262 279 290 302 Total New Claims 1,093 1,161 1,210 1,255 1,301 Increase Year on Year 6% 4% 4% 4% Increase Year on Base Year 6% 11% 15% 19%

Source: IAD Forecast. Work and Pensions Committee: Evidence Ev 231

5. Challenges — New Agency established to transform the experience of customers, deliver improved eYciency and improve external reputation. — Reduction in headcount of 1,650 (–23%) NB—did they ask us not to publicise this? — Absorb workload growth (!19%). — Overall eYciency of 35% needed. — Relocation of work from Sutton DBC. — Developing staV to meet the challenge. — Anxiety about jobs. Morale is low following the recent pay dispute. Some disability groups do not think the organisation is eYcient. There had been a lack of investment in IT. A key DCS priority for the coming months is to increase knowledge of disability benefits among other DWP staV. 6. Risks — DWP Integrated Delivery approach fails to deliver investment and required modernisation to expected DCS timescales. — Unacceptable pressure on staV results in further worsening in quality of decisions: — Increasing pressure externally from NAO/PAC/Lobby Groups. — Growth in AME and MVFE—easier to pay than reject claims. — Becoming more visible externally. — Required cultural changes are not possible. 7. Opportunities Short/medium term. — Improvements in productivity to bring all units up to the current best, and then improve further by sharing and adopting best practice, and development of a standard operating model. — Improve quality of decision-making at the outset to avoid costs down the line. — Zero-based review of all costs not directly associated with front-line delivery—current ratio not sustainable. — Reinvest more in front line delivery to increase output. Medium/long term. — External Accreditation system. —DiVerent levels and specialisms—link to job families/pay. — Award Management/Decision Support. — Quality and consistency improved. — Supports scripted telephone Contact Centre claiming, web and e-enabled claiming and enables authorised intermediary access. — Results in most of the data entry work to be “outsourced”. — Provides independent assurance—respected University. — Well received by lobby during informal discussions. 8. Planned next steps 2004–05 — Deliver early eYciencies and tactical improvements through a rapid action team. — Establishment of Experimental OYce. 2005–06 — Delivery of early Award Management Guidance capability. — Closure of Sutton DBC. 2006–07 — New technology first rollout to CA. — New technology first rollout to DLA/AA. — Establishment of DM Accreditation. 2007–08 — Integration with partner agencies and selected intermediaries. — Multi-channel capability. Ev 232 Work and Pensions Committee: Evidence

9. Summary — Significant challenges and opportunities ahead which require: — Supportive and relevant IT development. — Closer working with colleagues across DWP. — Significant cultural change. — Commitment from all DCS staV. — Leadership.

Extracts from letter from Terry Moran to Committee Chairman following visit, 28 January 2005 10. Thank you for visiting the DCS at Warbreck House. It was good to meet you again and to meet newer members of the Committee. I was grateful for your positive feedback at the end of the visit. I promised to follow-up our discussions with a written response to several points raised during your visit. 11. Against the backdrop of a discussion about the Department’s eYciency programme and the challenges facing DCS, there was some discussion about the projected future increase in our workloads. I undertook to let you know the reasons for the growth. Overall we are facing a growth of approximately 19% over the next three years across all three benefits. The forecast is on 2003–04 data for all the business events within DLA, AA and CA cases and compared with the statisticians’ workload forecast (derived from the national GB forecasts using may 2004 data). All the figures took account of the weighting factors for each business event to calculate a meaningful workload increase over the period. The Department’s statisticians are confident in the accuracy of the forecasts and suggest that there are a number of underlying factors leading to this growth: 12. For AA, DLA and CA there has been growth in claims recently which appears to be the result of a number of initiatives and or policy changes. For example the Pension Credit take up campaign and Joint Action teams appear to have had a positive impact on AA claims and the extension of the upper age limit in Carers Allowance has increased claims for this benefit. This recent growth is expected to continue, albeit at diVerent levels, for all three benefits. 13. Analysts believe the main reason for increase in AA claims in the recent past is the Pension Credit take-up campaign. Currently there are only 20 Joint Teams in operation. However, the plans are to roll Joint Teams out in the 200! secondary tier local authorities across the country over the next couple of years. We think that most of the impact of Joint Teams on AA (and CA) has yet to occur. 14. I hope you find this information of use and do not hesitate to contact me if you require anything further. Terry Moran

B. David Leach, Rosalind Hall 15. Operations Performance Improvement Initiative — Scope of this work involves DBU only at this time, set against a context of: — Constant drive to improve Customer Service. — DWP reducing headcount requirement. — Accommodating new work transferring from Sutton. — Achieving the above without just “cracking the whip” over staV. — Criteria for improvements to be considered: — Better Customer experience. — Better StaV experience. — Greater eYciency. — Once DBU opportunities have been identified and implementation has commenced, focus will shift to include DBCs. 16. Examples of the Themes Addressed by Quick Wins: — Reducing bureaucracy: — Re-classification of Valuable items. — Reducing red-tape: — Reducing the number of graded signatures. — Improving staV experience: — Ceasing completion of duplicate overpayment information by Operations on combined payment cases. Work and Pensions Committee: Evidence Ev 233

— Minimising unnecessary administrative/ clerical work: — Using email rather than transmitting forms clerically. 17. What’s next — Complete Proof of Concept trials and validate To-Be designs. — Validate potential benefits. — Undertake implementation planning. — Implement from February 2005 to mid-year. — Start delivery and recognition of benefits.

C. John Carey, Award Management 18. From a customer perspective, there are problem areas that prevent DCS from delivering the required service: — Inconsistency of decisions, for example, by region. — Quality and accuracy of decisions. — High overturn rate at appeal. Each of these areas needs to be addressed to deliver improved customer service. 19. From a Decision Maker’s perspective, there are also specific problems: — Information and evidence-gathering, for example, the claim form is often inaccurately filled in and there is a problem of receiving medical evidence. — Guidance is not at the appropriate level—handbook last updated 1998 and needs to be more customer-focused. — No clearly defined decision-making framework. — A high rate of contested decisions. — Limited IT support. They need to provide Decision Makers with a comprehensive, supported decision making process. 20. A number of integrated initiatives to address these issues include: — Decision Maker accreditation. — Modernisation of IT. — Award Management Guidance (AMG). 21. AMG is an IT supported framework for Decision Makers. The framework: — Is customer focused and impairment specific. — Retains the customer’s care/mobility needs as the primary consideration. — Uses the claim form as the primary source of information. — Works within current legislation. — Uses diagnosis to make best use of the guidance. — Applies to all claim events and multiple disability cases. — Provides factual and interactive help screens. — Uses the International Classification of Diseases coding system. 22. AMG supports the Decision Makers by: — Identifying what information is required at the outset. — Using the customer as the first source of information. — Tailoring evidence gathering to the individual as much as possible. — Identifying the best source of further information. — Providing a clearer explanation of the decision. — Providing comprehensive medical & legislative guidance. — Using the prognosis to help maintain accuracy and consistency of decisions. 23. It is hoped that AMG will ensure better customer experience, more job satisfaction for Decision Makers and greater management control of the claims process. AMG will help to: — Delivers a more customer-focused outcome. — Improved consistency and accuracy. — Improved quality standards. — Reduced challenges at review and appeal. Ev 234 Work and Pensions Committee: Evidence

— Fewer appeal overturns. — Improves confidence and credibility in the decision making process. — Improved business focus. — Supports the Government’s modernisation and eYciency agenda. 24. For the future, DCS: — Is working closely with medical and policy colleagues to develop the guidance and exploring IT solutions. — It will consult with all stakeholders and use a step approach to design and development with ongoing testing and evaluation.

D. Trade Union Side 25. The impact of proposed staYng reductions was proportionately greater on the Preston/Fylde coast area which currently had some 10,000 Civil Service jobs. Already in 2004, 500 jobs, involving 380 people had been declared surplus. The people concerned had little or nothing to do and suVered low morale. Communication about the jobs aVected was poor and decisions seem to have been haphazard. 26. IT trainers had been declared surplus while 90% of new staV were unable to undertake their duties because of lack of IT training. 27. DCS staV numbers had reduced from 2,500 (in 2001) to 1,600 currently, by natural wastage. StaV numbers were being cut before the eYciencies from IT improvements had been achieved. Complex benefits led to more mistakes and resulted in greater demand on the helpline. 28. There had been no lateral co-ordination between local DWP business units and jobs were oVered at a great distance from current location. 29. Concerns about the cuts were that it would lead the to a concentration on meeting targets, possibly to the detriment of the service as a whole. It was also felt important to see whether IT would in fact deliver eYciency before reducing staV levels.

Pensions Service

A. Blackpool Pension Centre Manager and management team 30. Blackpool Pension Centre was established in 2002. Migration of work from the Benefits Agency was completed in January 2004. The Centre currently serves East Sussex and Surrey, but from 31 January 2005, it will also handle claims from pensioners in Brighton, Lewes and Hove which are now processed by Wrexham Pension Centre. The Pension Centre Manager was confident that Blackpool could accommodate this additional workload. She explained that Blackpool was currently one of the smallest Pension Centres, but that it had the capacity to double in size. At present 37 staV process claims from East Sussex and 81 staV process work from Surrey. Additional staV will join the East Sussex processing team in January. 31. Blackpool had taken on a substantial number of fixed term and casual staV and the Centre Manager was about to make a business case for keeping them permanently. Blackpool could recruit a very high calibre of staV, even fixed term or casual, as the only alternative to Civil Service employment on the Fylde Coast was the poorly paid tourist industry. When asked whether a recruitment freeze was in place, the Centre Manager said that to be fair to staV she first had to check whether new positions could be filled from local surpluses, but that otherwise she could recruit. Only one member of staV from Liverpool and Burnley Centres which were closing felt they could manage the journey to work at Blackpool. 32. The management team were uncertain about the Centre’s future. They did not yet know whether it was a migration site which would close or a transformation site that would remain and receive new IT. They hoped to receive news by Christmas. 33. Blackpool Pension Centre is overachieving against clearance times for Pension Credit and State Pension applications and against the national target for calls answered. Poorer performance against telephony targets in April was due to an increase in calls following a Pension Credit take-up drive. This had a subsequent eVect on processing time in May and June. The Manager explained that figures for complaints and compliments included expressions about policy rather than administration eg “Thank you for the winter fuel payment”. The Centre had participated in national monitoring of accuracy involving a sample of its caseload on three occasions. So far it had achieved 100% accuracy. The Centre had also implemented a Local Improvement Plan to address any accuracy issues. As part of this Plan, accuracy is monitored at a local level and desk aids and further training are given to staV. Work and Pensions Committee: Evidence Ev 235

34. The Centre Manager claimed that the customers now applying for Pension Credit were the harder- to-reach clients. Surrey and East Sussex are aZuent areas and applicants often have many diVerent sources of income, making it more diYcult to assess entitlement. StaV had received new training to address this. The management team believed that people who were not claiming small amounts for which they were eligible should be encouraged to apply for Pension Credit because it is a gateway to other benefits. 35. The Centre Manager explained that because Blackpool Pension Centre is so geographically distant from its customer base, she had made every eVort to build a good relationship with the Local Service and local authorities, for example, using video conferencing. The management team spoke positively about Joint Teams and explained that East Sussex authority had formed a Joint Team with the Local Service which was working well. Surrey did not yet have a Joint Team. The Local Service in Blackpool had a very good relationship with Blackpool local authorities. 36. The management team explained that only 3.1% of staV are of ethnic minority origin. However, they had never had anyone on the phone who needed an interpreter. Rather people who could not speak English tended to ask a relative or friend to call the Pension Centre on their behalf. Translation of correspondence had only been required two or three times. 37. The Centre had been aVected by the recent IT diYculties with problems lasting two days. However, the Manager claimed that the Centre had been less badly hit than other Pension Centres as some of its PCs were able to access the main system so they were able to link telephone staV to these. She said no pensioner had missed a payment as a result of the problems. The Centre Manager explained that the Pension Transformation Programme was not a new system but a bolt-on addition to the main system that would streamline services. She added that experienced front-line staV would test the new technology before it was rolled out. The management team explained that under the current legacy IT system it could take up to a year for suggested improvements to award letters to be made.

B. Meeting with North-West Local Service StaV together with representatives from the local community 38. A representative from the local Citizens Advice Bureau said that in her view face-to-face interviews were a more eVective way of working with older people than call centres. She was concerned that we did not know how many people give up rather than pursuing claims, particularly where there were literacy issues or where people are deterred by the prospect of having to send in documents. The existence of a healthy local service was felt to be vital the functioning of the service. It is important that people have places where they can take documents etc There are diVerent ways of accessing the local service in diVerent areas. For example, in some towns, you can go into the town hall, where they have a one stop shop. The visiting service was said to be very good, although, particularly in rural areas, visiting oYcers can be inundated. There was concern at the prospect of cuts to the local service, with the importance of retaining a pro-active approach to take-up of other benefits, such as Attendance Allowance emphasised. 39. The development of the joint teams was felt to have positive aspects, with the contribution of the Pension Service appreciated. The proactive and holistic approach to benefit take-up was felt to be a good thing. There was a view that while the telephone service was good for some pensioners and good for simple things, such as reporting changes of circumstance. For more complex transactions, such as making a claim, however, many pensioners were felt to prefer face-to-face. 40. Citizen’s Advice Bureaux may end up having electronic access to departmental data. This is being discussed at national level. There are questions about how Bureaux retain independence through this and also about equality of treatment for other advice workers. 41. The impact of savings credit on housing benefit was identified as a particular barrier to take-up of Pension Credit.

C. Trade Union side 42. The representatives complained about a general lack of information from the top leading to a lot of unease among staV. There was a lot of insecurity about what would happen to jobs beyond the next two years. The most experienced staV could not be redeployed as they would be unable to move away from Blackpool. 43. StaV felt that there was no high level strategy for staYng cuts and wanted to see evidence of a co-ordinated plan across DWP. The representatives gave the Committee the example of Stockport where there were vacancies at a benefits processing centre but the town’s closing Jobcentre Plus would not release staV so they could apply for these jobs. 44. The representatives reported that morale was the lowest ever seen. They contrasted this with the mood in the Pension Service while it was being introduced and added that staV were encouraged to join this new innovative service for pensioners without any warning that jobs would go in the future. The representatives also made the point that benefit processing staV did have an interface with the public and that therefore there was an argument that they were also “frontline”. Ev 236 Work and Pensions Committee: Evidence

45. There was concern that the Local Service would be pulled back. Visiting staV had been put on “cold calling” pensioners who had been picked up on “scans” of data. Local surgeries were being cut back.

Glasgow Pensions Group Solution Centre, 31 January 2005

Extracts from DWP’s Brief for Committee’s Visit

Executive Summary 46. The Pension Service has embarked on a strategic business transformation programme, which will fundamentally improve the way services are delivered to customers. The IT developments to support this change will allow customers to transact more of their business at a single point of contact, including over the telephone, thereby eliminating the need for customers to provide the same information more than once. These IT developments will provide a more user friendly, joined up interface with existing benefits processing systems, and are being introduced into the business in a series of staged waves beginning in August 2005. 47. These changes will be complimented by the introduction of a new Computer Information System which will act as a central Departmental repository for customers’ personal data. This will provide staV with access to a customer’s up to date personal data, eliminating the need for the customer to repeat previously provided information. The Customer Information System will also reduce the need for so much data capture in other businesses by sharing the most up to date details held by the Department. 48. Pensions Transformation Programme has been realistic about the capacity of The Pension Service to absorb change without excessive disruption to the business. Pensions Transformation Programme is one of the first programmes to follow the Department’s new IS/IT strategy which avoids “big bang” development of new (or replacement of existing) IT systems and instead seeks to phase in new “front end” IT systems over time whilst also utilising the existing “backend” legacy systems. In this respect it is quite diVerent from previous programmes (for example Child Support Reform Programme). Implementation has therefore been planned over multiple “waves of change”, stretching over several financial years. The importance of people change management, communication, risk mitigation and contingency planning is integral to the implementation planning process. 49. Significant progress has been made to date. Pensions Transformation Programme passed through its Critical Design Review on 24 November 2004 with funding approved until 31 July 2005 subject to agreement in the next Spending Review settlement for the next three years. 50. Background Key factors hindering The Pension Service’s ability to deliver a high-quality, eYcient service are: — fragmentation; —insuYcient automation: processes are largely paper-based; — frequent hand-oVs; — information technology constraints; — variability of performance; and — susceptibility to fraud. 51. This combination of factors means that staV: — take up to three months to train in complex processes and systems; — have reduced job satisfaction; and — spend much of their time focusing on back-end processing not front-end customer facing activities and services. 52. Additionally, an examination of the Local Services operation found specific areas for improvement: — increase emphasis on take-up and eVective activity measurement; — define responsibility for take-up; — remove duplication of eVorts by diVerent agencies; — clarify purpose of partnerships and formalise relationships with partners; and — develop output based performance management. 53. The introduction of the first wave of Pensions Transformation Programme Change (Wave 0) from mid 2004, means that further progress is already underway on addressing some of these issues. 54. Project Objectives Pensions Transformation Programme focuses on both core and critical products for today’s pensioners and has three primary objectives: — increase take-up of entitlements to reduce poverty; Work and Pensions Committee: Evidence Ev 237

— improve customer service; and — improve eYciency. 55. An additional, non-primary objective is to deliver less invasive means-testing. These objectives are defined in more detail in Table 1 below.

Table 1

PENSIONS TRANSFORMATION PROGRAMME OBJECTIVES

Objective Pensions Transformation Rationale Programme Ambition Increase take-up of — Delivery of benefits to all — Government commitment to entitlements to reduce those entitled deliver benefits to those entitled poverty— Delivery of benefits to those and in need of them most in need — Government commitment to — Achievement of Government reduce pensioner poverty take-up targets — Pension Credit targets Improve customer service — Accurate and timely delivery — Government commitment to of The Pension Service improve public service benefits — Government commitment to — Respectful and informed provide dedicated service to service for benefits critical to pensioners The Pension Service mission — Achieve customer service — Reduced visibility/impact of targets (Public Sector hand-oV Agreement) Improve eYciency — Radical productivity increase — Spending review requires — Reduction in overall absolute and unit cost headcount improvement — Reduce overall cost to serve — Government has set headcount pensioners reduction target for DWP

56. The following two key enablers were identified to ensure that these objectives maximise Pensions Transformation Programme’s ability to meet the overarching Pension Group objectives and Public Sector Agreement targets.

Enablers Pensions Transformation Rationale Programme Ambition Improved staV experience — Deliver more customer — To support a more flexible focused service organisation able to deliver the — Improve job satisfaction and customer experience rewards — StaV trained and empowered to — Increase knowledge and skill deliver entitlement at a single sets point of contact — Improve diversity of workforce Better Information — Single, unified view of the — To support the delivery of Technology Capabilities customer (eg, profile, improved customer service preferences, entitlements) — To improve eYciency of — Fully integrated Information organisation Technology systems (front oYce, back oYce and Legacy) — Workflow and case routing capabilities based on skills and service workload

57. Dependencies The success of Pensions Transformation Programme is dependent on a wide variety of internal and external factors. These include other projects within The Pension Service, such as the Customer Information System, as well as policy changes. 58. The main interdependencies with other projects have been identified as follows: — The Customer Information System project is an enabler to achieving accurate customer information more quickly and is therefore key to the successful delivery of Pensions Transformation Programme’s related benefits. Ev 238 Work and Pensions Committee: Evidence

— Pension Credit Project’s achievements will provide the baseline on which Pensions Transformation Programme will build to achieve the Public Sector Agreement targets for take-up. — The Link-Age Programme may overlap with some aspects of Pensions Transformation Programme. 59. Some policy changes are required to support the proposed systems, particularly in relation to the acceptance of electronic claims forms. The legislative change process can be lengthy and, depending upon the proposed changes, attract great ministerial or public interest. Any policy changes required by Pensions Transformation Programme will be carefully managed as delay or rejection of such changes will impact the new design processes being developed. 60. Key Policy Changes Key policy changes that were identified, prioritised and action being taken: — Removal of the requirement for segregation of duties between obtaining details from customer and approving claim/change. — IT support design includes appropriate controls and has been subject to appropriate risk assessment. PTP has supported review of The Pension Service mandatory checking regime. — Eliminate the need for a signature for change of circumstance (in line with Pension Direct). — Legislation now changed. Pursuing as part of the second wave of change detailed design and working with Risk Based Verification initiative to ensure common understanding/approach. — Enable The Pension Service to collect claim information for Housing Benefit/Council Tax Benefit. — PTP pursuing introduction and determining timing. — Eliminate the requirement for a signature on a State Pension claim form. — PTP worked with Policy/Strategy/Solicitors Branch on regulations. Amended regulations have been accepted by the Social Security Advisory Committee, were laid before Parliament on 17 January 2005, SI2005/34 (due to come into force 2 May 2005). — Enable Third Parties to verify evidence. — Link to Third Age/Link Age—Joint teams and integrated oYces. PTP to discuss with Fraud Strategy Unit and Working Age Housing Division. 61. The New Operating Model Over the course of the Spending Review for the next three years and the Spending Review period after that, Pensions Transformation Programme will design, develop and implement a new Operating Model that will enable The Pension Service to deliver a considerably improved customer-centric service that will encourage take-up whilst achieving significantly increased productivity and eYciency. The Operating Model will: —beaneYcient and eVective delivery model tailored to meet the diVerent needs of diVerent customer groups; — be capable of providing the product mix, new and improved channels, information service and delivery capability that will achieve Ministers’ outcome requirements and targets to increase significantly the income of the most disadvantaged pensioners by increasing take-up of Pension Credit and other pensioner entitlements; — be easy and convenient for customers to access through a single point of contact allowing a wider range of needs to be met in a single transaction; — make best use of new technology; — allow staV eYciency and productivity to be increased; and — deliver a national telephone-based service with highly automated straight-through processes supported and enabled by integrated systems. 62. At the outset of Pensions Transformation Programme the operating structure was as shown in Figure 1 and had the following key features: — telephony teams are separate and can only take enquiries and initiate claims; they cannot process a claim in its entirety; — processing is paper-based and product-focused, with separate handling of State Pension and Pension Credit; — local service focus on benefit take-up could be further improved; — three levels of management and support: pension centre, regional and central. (The regional layer has since been removed as part of the early eYciency changes introduced in wave 0 of the Pensions Transformation Programme); and — staV are dependent on legacy systems. Work and Pensions Committee: Evidence Ev 239

Figure 1

THE PENSION SERVICE OPERATING STRUCTURE—PRE PENSIONS TRANSFORMATION PROGRAMME

Current TPS Operating Structure

Phone Paper

ChannelChannel Enablers:Enablers: Telephony Post Room

CentralCentral TeamsTeams Central Site Processing Teams 26 pension Telephony Telephony
centres Local Service All input received by post and keyed in
Benefit take - up Team(s) Teams
All processes paper based – limited focus
Enquiries
EnquiriesEnquiries
Separate handling of RP (claim / maintain), PC (claim / InternationalInternational Enquiries
Service to
Initiation of
Initiation of maintain) Initiation of Initiation of customers who Winter Fuel claim/CoC claim/CoC
Winter Fuel claim/CoC claim/CoC Multiple hand -offs are not

…

Process staff make occasional follow - up calls to independent customers
Programme
Operating Teams Low productivity, high error rates protection CentralCentral Specialist Specialist
No common model across all sites TeamTeam (incl.(incl. NPC)NPC)

SiteSite M&SM&S SiteSite Management, Management, Support Support Functions Functions

11 regions RegionalRegional ManagementManagement && SupportSupport FunctionsFunctions

Mgmt & Support Central Management & Support Functions

IT Legacy PartnershipsPartnerships

63. In future, the service oVered will be customer focused, responsive, and much more eYcient. An overview of the end-state operating model is depicted in: 64. Figure 2. Revisiting the key features of the current structure shows major areas of change: — complete processes will be conducted by telephone and electronic channels as well as post, improving both service eYciency and customer convenience; — first-line customer agent teams will handle both State Pension and Pension Credit products; — local services will actively promote benefit take-up; — there will be no regional management and support layer, increasing eYciency; and — staV will be supported by modern, packaged Information Technology systems enabling best-in- class customer service and avoiding the need to work directly with complex, proprietary legacy systems.

Figure 2

THE PENSION SERVICE OPERATING STRUCTURE—POST PENSIONS TRANSFORMATION PROGRAMME

 CustomerCustomer Proposition: Proposition:  Core Products (RP, PC, WFP)  Gateway Products  Signposted Products

PaperFax Phone Internet / e - Forms iDTV Computer Telephony Channel Enablers: Imaging / Scanning WebWeb ManagementManagement EmailEmail Management Management Channel Enablers: Integration

Document Central Teams Document CustomerCustomerCustomer AdvisorAdvisor Agent Teams TeamsTeams Local Services Central Teams AdministrationTechnician  Administration  Complete case resolution for routine cases ServiceService to to TeamTeam Complete case resolution for routine cases ––Both Both customer customer interaction interaction and and processing processing customerscustomers who who InternationalInternational WorkflowWorkflow ––Both Both realreal timetime resolutionresolution andand throughthrough casecase followfollow upup areare not not ManagementManagement ––Independent Independent ofof channelchannel independentindependent  CustWFPWFP Acq SoftwareSoftware  ImprovedImproved customer customer service service (accessibility, (accessibility, accuracy, accuracy, speed, speed,quality quali quali )ty)ty) ActivitiesActivities to to

… promotepromote take take- -up- -up e.g: CustomerCustomerCustomer AdvisorAdvisor Agent (Specialist) (Specialist)(Specialist) Teams TeamsTeams e.g: Customer Advisor (Specialist) Teams ––Partnerships Partnerships  Operating Teams  ResponsibleResponsible forfor moremore complicatedcomplicated casecase resolutionresolution ––Outreach Outreach  SpecialistSpecialist skillsskills and/orand/or deeperdeeper productproduct knowledgeknowledge eventsevents OtherOther required required local contacts SiteSite M&SM&S SiteSite Management,Management, SupportSupport FunctionsFunctions LocalLocal Services Services M&S M&S

Mgmt & Support CentralCentral ManagementManagement && SupportSupport FunctionsFunctions Integrated CustomerCustomer Relationship Relationship Management Management (CRM) (CRM) / /Workflow Workflow / /Document Document Man Management agement agement System System System / Rules // RulesRules Engine EngineEngine IT IT NationalPartnershipsPartnerships Partners LegacyLegacy

OtherOther Agencies Agencies & & Systems Systems Other Agencies & Systems = hand - off

Note: This is an illustrative diagram, and the sizes of boxes a re not proportional to actual operating sizes Ev 240 Work and Pensions Committee: Evidence

65. Information Technology Development As noted previously, one of the key enablers of the transformation of The Pension Service is “better Information Technology capabilities”. Pensions Transformation Programme has adopted DWP’s new Information Systems/Information Technology Strategy and Enterprise Architecture to deliver this. Change in Information Technology is based on the deployment of best-in-class commercial oV-the-shelf packages, as a lower cost and lower risk alternative to the large bespoke development projects undertaken at the Department in the past. 66. Representatives of Pensions Transformation Programme played an integral part in the selection of each of the following Departmental strategic commercial oV-the-shelf packages projects, all of which will be part of the Pensions Transformation Programme Information Technology solution: — Customer Relationship Management: Siebel. — Workflow: IBM WebSphere Workflow. — Integration backbone: IBM WebSphere Integration. — Document management: FileNet. — Rules engine: iLOG. 67. The Pensions Transformation Programme Information Technology solution is being delivered by a number of external suppliers, under the management and guidance of DWP staV in the Pensions Transformation Programme Information Technology Strand and DWP Technology OYce. Accenture is the Information Technology Solution Provider, leading the delivery of the overall solution. As well as the commercial oV-the-shelf packages vendors above, other key suppliers are EDS (legacy system changes and legacy integration) and British Telecom/Syntegra (telephony and networks). The Pensions Transformation Programme solution further depends on required functionality being made available from other DWP systems (eg Customer Information System) and systems at other government departments (eg National Insurance Recording System 2). The Pensions Transformation Programme Information Technology strand includes dedicated resource to manage this network of suppliers. 68. Implementation The scope and scale of implementation planning, and subsequent deployment of the new capabilities within the operational businesses, is hugely challenging. At the heart of the implementation strategy and approach is the need to minimise the operational impact, on both staV and customers, and the key, critical success factor is to maintain business as usual whilst managing the transformation. 69. The high-level business implementation approach has been designed to underpin, and provide a structure for, a complex programme of multi-dimensional change which touches every part of the organisation, and its people. This change will be delivered over time, and across sites, process-by-process group, rather than completely transforming on a site-by-site basis. 70. Against this background of complex organisational and people change, the following critical success factors for implementation planning were identified: — Practical phasing of change. — Ensuring that changes are phased in a manner that: maintains business continuity, stability and performance during transformation; is practical in terms of resource and capacity requirements and constraints; and aligns with programme objectives of improved eYciency, customer service and take-up at all stages. — Operational buy in and readiness. — Ensuring a clear understanding and ownership of the change objectives and approach within operations and readiness to make change happen. —EVective people change management. — Ensuring that full account is taken of the need to communicate and prepare people properly for change, and support them through the transition. —EVective risk mitigation and contingency planning. — Anticipating key risks to the programme and the business, and put in place robust mitigation and contingency plans—linked to revised business continuity plans. 71. Pensions Transformation Programme has established an approach that is fundamentally joint working in full partnership with teams from the programme, Booz Allen Hamilton, and Accenture. A detailed and robust integrated programme plan with all key deliverables and dependencies has been established. Progress of the programme is closely tracked to agreed timescales and quality. 72. The programme deliverables are governed by senior stakeholders from across The Pensions Group, The Pensions Service and has a Programme Steering Committee with Departmental Heads from Human Resources, Programme Systems Delivery, Finance and representatives from senior stakeholder organisations such as Jobcentre Plus. Work and Pensions Committee: Evidence Ev 241

73. Pensions Transformation Programme will be implemented in successive waves of manageable change. 74. The first wave of change involving new Information Technology (Wave 1a) will be deployed in three transformation sites and will only aVect the State Pension claims process. Deployment will begin in August 2005 in Dundee, Swansea and London Pension Centre (Newcastle). Deployment for State Pension and Pension Credit will begin in the remaining transformation sites from April 2006 to September 2006. 75. Deployment of subsequent waves will follow a similar pattern, with new processes fully implemented in one site then rolled out in tranches across the remaining sites. 76. Implementation of Waves 1 and 2 will enable key financial targets to be largely met, such as the Public Sector Agreement headcount target of approximately 8,000 Whole Time Equivalent staV by March 2008 and the Service Delivery Agreement unit cost reduction by March 2009. These Waves will also contribute to Pensions Transformation Programme’s other objectives by increasing Pension Credit take-up to three million in March 2006 and improving customer service. 77. Implementation of new operating model will make The Pension Service more customer focused, responsive and eYcient (see Table 2 below).

Table 2

IMPACT OF NEW OPERATING MODEL ON THE PENSION SERVICE

Customer Focused Responsive EYcient — Customer insight capability, — Emphasis on resolution of — Faster and more which is necessary to support customer service requests standardised service via: the tailoring of our product (as opposed to contacts). — Process redesign and and services oVer to all — Wider range of requests Information Technology customer segments. handled by agents (eg enablement. — Significant outbound claims, enquiries, changes — Broader range of acquisition capability to of circumstances). communication options create a sustainable basis for — End-to end ownership and (eg e-Enablement). Pension Credit take-up. accountability. — Smaller operating — Seamless hand-oVs when footprint. required for resolution. — Fewer Pension Centres — Proactive management of and staV with some capacity and service levels centralisation. to ensure fast and accurate — Local Service. request resolution.

Visit Notes

A. Phil Bartlett, Business Design Director

78. The Centre was created to look at ways of transforming and modernising the delivery of business within the Pension Service. The Centre, which was built and opened in 10 months, provides the facilities to bring people across a range of grades together to work on business solutions to problems. Groups are made up of two-thirds front-line staV. Emphasis is placed first on understanding clearly what the nature of the particular problem in question is. Private sector partners also frequently get involved. Average projects last six to eight weeks. Project groups have access to the Pension Service’s Legacy IT system and to partners’ networks. The 50 projects undertaken in the last 12 months have recouped the initial and five year running costs of the Centre. By removing the demand that solutions are “ready to run”, teams are able to arrive at solutions far more quickly than has historically been the case within DWP. Some teams have delivered solutions fully fit for purpose within eight weeks. For example one team solved a 15-year IT problem, which had been increasing the rate of error. Their solution was rolled out four weeks later. 79. Responses to queries: — The Solution Centre does have the capacity to address the challenges of a shift in pensions policy, should such a change occur. — Projects are underway to create better data-sharing arrangements. Ev 242 Work and Pensions Committee: Evidence

B. Charlie MacKinnon, Operations Manager (Based on slides presented to the Committee) 80. The Pensions Service is developing a new operating model, PTP, that is expected to: — Increase take-up. — Improve customer service. — Improve eYciency. See Figure A below for the project’s design objectives.

Figure A

Objective Ambition Measures of Success and Quantifiable Benefits Increase take- — Delivery of benefits to all those — Increase number of households in up of entitled. receipt of PC to three million by March entitlements— Delivery of benefits to those most 2006. to reduce in need (combat poverty). — Increase number of households in poverty. — Achievement of Government receipt of guaranteed element of PC to take-up targets (eg, Pension 2.1 million by March 2006. Credit (PC)). — 79k “gateway” referrals (Attendance Allowance) and 95k (Council Tax Benefits/Housing Benefit). — 85% of all gateway referrals pass the eligibility test of other agency. Deliver less — Deliver a package of “entitled — Measures of Success for this objective invasive benefits”. have been incorporated into increase means-— Less invasive claims process. take up and improve customer service testing.2 objectives. Improve — Accurate, secure, and timely — 80% of calls answered within 20 seconds. customer delivery of The Pension Service — 95% of Local Service visits conducted service. benefits. within 10 days by March 2008. — Respectful and informed service — Decrease postal contact from 68% to for benefits critical to The 21% by March 2008. Pension Service’s mission. — Increase e-mail traYc to at least 4% by — Reduced visibility/impact of March 2008. hand-oV. — Decrease error rate to 1.6% for RP and 3.8% for PC by March 2009. — Reduce cost of error from £11 million to £5.4 million for RP and from £47 million to £22.5 million for PC. — Reduce average actual clearance time (AACT) to process a PC claim from 12.9 days to 10 days by 2006; the AACT for an RP claim from 23.8 days to 15 days by March 2008; and the AACT for CoC to 2.8 and 5.4 days for PC and RP respectively. — Increase the overall customer satisfaction rating from 80% to 90% by March 2008. Improve — Radical productivity increase. — Programme NPV of around £600 million eYciency.— Reduce overall cost to serve and Internal Rate of Return (IRR) of pensioners. 20%. — Greater than 30% reduction in unit costs.

81. The transformation will occur through process redesign, supported by new IT. It will enable the Pension Service to simultaneously deliver its contribution to DWP’s eYciency challenge and its PSA targets for the take-up of entitlements. Once the programme is fully implemented the Pension Service will be a radically streamlined organisation, with fewer sites, fewer staV and a lower cost base. The projected Net Present Value of the programme is around £600 million.

2 Not a primary objective but elevated during the Design and Initiate phase until the Core Team is satisfied that it is embedded in all customer-facing processes. Work and Pensions Committee: Evidence Ev 243

82. Current business processes in the Pension Service are complex, ineYcient, largely paper-based and present barriers to take-up of entitlements. Up to seven customer contacts are needed to claim Basic State Pension and Pension Credit. The existing Legacy IT system does not allow for interaction between the two products. StaV need a lot of training to understand the complexities in the system and find its ineYciencies frustrating. 83. Under the new operating model, applications for Basic State Pension and Pension Credit will be combined. There will be no paper-based processing. Pension Centres will be able to process at least 50% of applications immediately, telling customers their final award at the end of the phone call. Only the International Pension Centre will remain separate, as the work of dealing with customers from abroad is highly specialised. 80% of staV within each Pension Centre will be part of routine teams. The remainder will be in specialist teams who will handle more diYcult applications. Details already given to routine operators will be available on-screen if callers are passed to a specialist. Regional tiers of management will be removed under PTP. Rigorous performance management will ensure that changes can be implemented and sustained. 84. The Pension Service has recently appointed a Customer Acquisition Director, who will be responsible for enabling the Pension Service to meet take-up targets. As part of PTP, the Local Service will be come a more mobile workforce with a greater focus on take-up. It will continue to work with partners. 85. PTP is being implemented in a series of “waves” to reflect the Pension Service’s capacity to absorb change, to match funding available and to manage down the risks of failure. Wave 0 of the programme involved making tactical eYciencies ahead of the challenge of introducing PTP. The first release of IT as part of the programme will be in August 2005, when three Pension Centres will receive new technology for processing State Pension claims (Wave 1a). In April 2006, the telephony for Pension Credit and Basic State Pension will be integrated in Pension Centres to allow applications for both to be combined (Wave 1b). DWP is retaining control over the introduction of IT, which is being delivered by a number of external suppliers, with Accenture leading the delivery of the overall solution. There will be no big-bang delivery— the new IT builds on existing systems rather than replacing them. 86. PTP is interdependent on other projects and policy changes including: — the Customer Information system; — the Link-Age programme; and — *enabling the Pension Service to collect claim information for Housing Benefit or Council Tax Benefit. * The note from them says they’ve got the legislation now on this (see page 6 of 13). 87. Funding has limited the timing of the transformation programme. Due to funding constraints, Waves 3–5 will not be delivered until SR 2006, or until additional funding becomes available. The end-date is now expected to be 2011–12. However, the majority of its eYciency benefits are expected to be delivered through the implementation of Waves 1 and 2 by the end of 2007–08. See Figure B below.

Figure B

The successive waves will transform both frontline and support components of TPS…

Wave Rollout Plan Aug ‘05 Apr ‘06 Oct ‘06 Apr ‘07 Apr ’09(1)

Wave Wave Wave Wave Wave 3 Wave 4 Wave 5 1a 1b 2a 2b

Remaining CC
CC – alternate flows
CC – main
WFP
Remaining
Pension main flows for High Volume RM
Gateway/ RM processes Centres flows PC & Processes Signposting for SP SP/PC
E-channel comb

Local
Rollout of fully IT-integrated redesign
Services
Preparation for IT enabled process changes CA/LS
Home working/ footprint rationalisation functionality on (LS) CAM Customer
Rollout of fully integrated Customer

Completion of e- Acquisition Introduction of new triggers Acquisition capability (data matching)
Preparation for IT integrated process rollout
Outbound calling function in Pension enablement (Cust Acq) Centres function

Introduce new model for Transfer PC Application Line(PCAL)
Transfer NPC International Pensions Centre (IPC) Pension Payments Central
Transfer SP Tele -Claims (SPTC) functions to
Integrate WFP Centre (WFPC) at caseload to transformation sites Functions Transformation Sites Transformation
Reduced volume of cases referred
Sites Reduced volume of cases referred to NPC to NPC

(1) Due to funding constraints, Waves 3-5 will be delivered in SR06 or as soon as additional funding becomes available Ev 244 Work and Pensions Committee: Evidence

… and will deliver significant financial and non - financial benefits

Benefits Delivered By PTP

Wave Wave Wave Wave Wave 0 Wave 3 Wave 4 Wave 5 1a 1 2a 2b

Customer capture through new Customer Continued improvement in take-up through better triggers and Increased Acquisition Organisation automated referral process Take-Up Roll- out of processes for gateway referrals – Inbound Acquisitions

New PCFE tool and new Maintain PC Increase take-up to 3.2m and maintain it (1) triggers to achieve 3m target take-up at 3m

End to end Less handoffs and improved service with Further reduction in handoffs and service customer service Non Financial more integrated process for routine RP/PC improvement with roll out new processes Customer with integration of new claims and CoCs for complex RP/PC new claims and CoCs Service RP-PC & CC -RM

(2) (Decrease error rate Roll out for new controls for improved accuracy / reduced monetary value of error to 1.6% for RP and 3.8% for PC)

Staff savings realisation (3) Efficiency Site Exits / Redeployment Financial

(1) PTP business case is based on increasing take-up to 3m; PTP will provide TPS with the functionality to increase take-up beyond 3m (2) Each wave contributes to an improvement in accuracy and reduction in MVE (3) Headcount reduction partly offset by significant investment (440 WTEs) to increase and maintain PC take -up at 3m 88. PTP is expected to enable the number of staV to be reduced to 9,140 by 2008. The implementation of Waves 3–5 is currently planned to start in April 2009 and to enable staYng levels to reduce to 8,140 by end of the programme (expected to be 2011/12). See Figure C below. In the Local Service, staYng levels are to reduce to 2,350 in 2008 and to 1,930 in 2011–12.

Figure C

PTP WILL REDUCE HEADCOUNT BY 7,350 WTEs BY THE END OF SR04, AND BY 8,590 BY THE END OF THE PROGRAMME

PTP will reduce headcount by 7,350 WTEs by the end of SR04, and by 8,590 by the end of the programme

16,730 16,490

3,350 3,400 Headcount Headcount reduction of reduction of 2,840 7,350 WTEs 2,840 8,590 WTEs 360 9,140 370 19,200 19,200 8,140 1,330 1,230 2,350 1,930 9,940 160 10,120 140

5,300 4,840

Baseline 2003/4 Baseline SR04 end PTP SR04 end Baseline 2003/4 Baseline 2011/12 PTP 2011/12 (31/3/08) (31/3/08)

Direct Mgmt LS (incl Mgmt) Support / Central

(1) Projected head-count at year end including optimism bias Source: PTP analysis 89. Ideally there would be no break in funding as it is diYcult to stand down a programme for six months and then restart it. The managers are hoping that money might become available from under-spends by the Department.

ISBN 0-215-02270-X

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