Clause 3 - Savings credit
State Pension Credit Bill [Lords]
10:15 am
Professor Steve Webb (Northavon, Liberal Democrat)
The Committee benefits from the fact that the Bill has been considered in another place. A fundamental issue was raised there: the treatment of 60 to 64-year-old women who are excluded from the savings credit under clause 3. These amendments
address that matter. They are intended to equalise entitlement to the savings element of the pension credit not at 65 years of age, as the Bill proposes, but at the state pension age—although it is clear that that will rise for women.
The initial effect of the amendments will be to bring everyone over 60 into the scope of the savings credit, rather than to exclude everyone under 65. That will bring in women pensioners of between 60 and 64 years of age, as well as male non-pensioners in that age bracket.
The Government say that they have to equalise, and we understand that. The winter fuel payments situation is a good recent example where the Government fell foul of the courts because they did not equalise. They were forced to equalise ex post, which was not desirable. Therefore, we accept that there must be equalisation. However, a question must be answered: should that happen at 65 or at pension age? For the sake of simplicity, I will say ''60'' instead of ''pension age'' throughout the rest of my contribution.
It appears that the argument in favour of 65 goes as follows: the Bill is about pensioners, so why should men aged 60 to 64 who are not pensioners get the savings credit? The first response to that is that men aged 60 to 64 who are not state pensioners get guarantee credit. The idea that the state pension credit does not apply to non-pensioners is wrong. A group of non-state pensioners—men aged 60 to 64—get the guarantee credit if they are entitled to it. There is not a principle at stake. People who are not pensioners already benefit from the pension credit.
Why should men aged 60 to 64 be excluded from the savings credit element of the pension credit? There is an assumption that to keep non-pensioners out, we must equalise at 65. However, one can think of measures in addition to the guarantee credit, such as the winter fuel payment and concessionary travel, that are aimed at pensioners and equalised at 60, although the equalisation of concessionary travel was forced by a court case. The argument that one cannot include non-pensioners when one equalises is not borne out by other aspects of the system, or even the Bill. Therefore, there is no reason why men aged 60 to 64 should not fall within the scope of the savings credit.
The second concern might be what happens to rich men aged 60 to 64 because the measure is designed for pensioners who, on average, are poorer members of society whom the means-tested benefit is designed to help. We do not want to help rich men aged 60 to 64. However, the benefit is means-tested and, therefore, such a person would have pots of money and would not be entitled to the benefit. We are not discussing rich men aged 60 to 64 but relatively poor men between those ages.
The question arises: what is the problem? Baroness Hollis implied in another place that part of the integral structure of the state pension credit is that it is built around the state pension. One of the thresholds in the Bill—I forget its name—is the same as the pension. Therefore, if we are addressing a group who do not
draw a pension, how can they be given a savings credit that is premised on the assumption that people draw a pension? That is where amendment No. 2 comes in because it would assume that men aged 60 to 64 were drawing the pension that they had accrued so far.
The point is slightly subtle and I have had difficulty getting my head around it. However, given the way in which the system is structured, a person who has a pension entitlement that is less than the full entitlement must use their savings to bring them up to that entitlement before they earn pension credit. A man aged 60 to 64 who did not have a pension would not receive savings credit unless he used earnings or pensions to bring himself up to the £77 level of the pension. He would receive savings credit only on the bit above £77. I happily accept that a system that rewards men aged 60 to 64 with more than £77 of savings is peculiar, and that would have been the strange effect if we had tabled only amendment No. 3.