Pension Credit

Oral Answers to Questions — Social Security – in the House of Commons at 12:00 am on 5 March 2001.

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Photo of John McFall John McFall Labour/Co-operative, Dumbarton 12:00, 5 March 2001

What plans he has to inform older people of the pension credit proposals. [150483]

Photo of Mr Jeff Rooker Mr Jeff Rooker Minister of State, Department of Social Security, Minister of State (Department of Social Security)

We set out our proposals for how pension credit will work in the consultation paper published on 9 November. That has been made widely available and is free of charge. At the latest date, we had issued more than 4,000 papers. The website has been available since the date of publication.

Photo of John McFall John McFall Labour/Co-operative, Dumbarton

Does my right hon. Friend agree that the shame and scandal of the pension industry is that, far from being rewarded to date, those on occupational pensions and those with savings have been penalised for their thrift and prudence? Does he agree also that the consultation document changes the pension landscape for the first time? Will he reassure the many millions of pensioners that something will now be done for those who had the foresight to save for their retirement? Will he ensure that once he has studied the consultation document proposals they will be made available to everyone so that everyone can claim what is his or her right?

Photo of Mr Jeff Rooker Mr Jeff Rooker Minister of State, Department of Social Security, Minister of State (Department of Social Security)

My hon. Friend is perfectly right. It does not pay to save in this country, and it never has since 1948. The pension credit will reverse that. For the first time, it will pay to save, and that message must go out. More than half the pensioner population—more than 5 million people—will gain directly when pension credit is introduced. Our plan is to introduce it in 2003. There have been more than 400 responses to the consultation document. The closing date was only last week, and we have not analysed all the responses, but to the best of my knowledge not one submission has opposed the pension credit. We thought through the policy idea before we published the consultation document, and it has received universal approval.

The flowers on the Opposition Benches sometimes wilt—I know that you do not like us criticising them, Mr. Speaker—and their policies change every week. The pension credit system will be universally successful and will be seen to benefit more than half the pensioner population.

Photo of Paul Burstow Paul Burstow Shadow Spokesperson (Health)

The Minister talks of the beneficiaries of the policy, but does he not accept that, as a consequence of the implementation of the pension credit, more than half of this country's pensioners will be forced on to means-tested benefits? That is a direct consequence of the Government's commitment to targeting, rather than investing in the universal basic state pension. Our policy is clear. Why do the Government not accept that their policy consigns pensioners to a future in which the basic state pension will wither away?

Photo of Mr Jeff Rooker Mr Jeff Rooker Minister of State, Department of Social Security, Minister of State (Department of Social Security)

If that is a signal that the Liberal Democrats oppose the pension credit, which will directly benefit 5.5 million pensioners, it is fine to have that on record. One cannot equate the language of the means test with the proposed pension credit. It is not a weekly means test; it is not an annual means test; it is not even a bi-annual means test. Pensioners will be examined on their circumstances at the age of 65, and again at the age of 75. If anything changes in the meantime, they will not have to report it. If they want to make an extra claim, that will be fine. Once they are over the age of 75, there will be no further examinations. To equate that with what has happened since the early 1930s and 1940s and the language of the means test, when over 50 per cent. of pensioners will benefit, is a travesty of the proposal.

Photo of David Willetts David Willetts Shadow Secretary of State for Work and Pensions

Is the Minister aware that the Institute of Fiscal Studies said that the abolition of capital rules and the new pension credit could leave some pensioners "worse off"? Will he give the House and pensioners an assurance that no pensioner will lose out as a result of the changes in 2003?

Photo of Mr Jeff Rooker Mr Jeff Rooker Minister of State, Department of Social Security, Minister of State (Department of Social Security)

The thrust of the IFS's report supported the pension credit, which will make the biggest single contribution to pensioner incomes under any Government since the start of the welfare state. Of course, we made it plain in the consultation paper that the final shape is not clear; that was the reason for consulting. The plan is not that people will lose out. The fact is that in April the relaxation of the capital rules—which were frozen for years under the previous Government—will be of substantial benefit to 160,000 to 200,000 pensioners. Our plan is to abolish capital rules under pension credit. It is ludicrous to argue that that would disadvantage pensioners.

Photo of David Willetts David Willetts Shadow Secretary of State for Work and Pensions

It is appalling that the Minister cannot give a simple assurance to pensioners that the changes in 2003 guarantee that no pensioner will be worse off. There is no point in his talking about a change in the capital rules now; we want that simple assurance. If he cannot give it, pensioners will have been warned that his changes in 2003 could mean that some with modest savings will lose out.

Photo of Mr Jeff Rooker Mr Jeff Rooker Minister of State, Department of Social Security, Minister of State (Department of Social Security)

The hon. Gentleman is talking about the figure that is below the capital rule at present. We have made it abundantly clear that 5.5 million pensioners will benefit from the change and get direct extra cash. Unlike the previous Government, we will for the first time ever reward pensioners with small occupational pensions and people who continue to receive modest earnings after their retirement. The credit is not exclusive to those who receive pensions. It is not intended that the abolition of capital rules will disadvantage pensioners who, in ordinary terms, have tuppence ha'penny in the bank. I have already said that.