Oral Answers to Questions — Pension Credit

– in the House of Commons at 12:00 am on 2 April 2001.

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Photo of Phil Hope Phil Hope Labour/Co-operative, Corby 12:00, 2 April 2001

What impact the pension credit will have on helping middle-income pensioners. [154860]

Photo of Alistair Darling Alistair Darling Secretary of State for Social Security

The pension credit will provide a cash addition to reward saving for single pensioners with incomes up to £135 a week and for couples on incomes of £200 a week. The credit will ensure that it will pay to save.

Photo of Phil Hope Phil Hope Labour/Co-operative, Corby

I thank my right hon. Friend for his reply. A number of former steelworkers in my constituency receive occupational pensions that lift their incomes above the level of the minimum income guarantee. They visited my surgery and, being good Labour supporters, they supported the work that we are doing for the poorest pensioners. However, they were concerned about the way in which the system operates at the moment, whereby they are always being penalised for having saved for their retirement while they were working. We know that the Tories' proposed tax relief on savings would not benefit them at all, but will my right hon. Friend tell us how the pension credit will help those with small occupational pensions that take their income above the level of the minimum income guarantee? Will he also tell us whether, when it is introduced, it will be simple to understand and easy to claim?

Photo of Alistair Darling Alistair Darling Secretary of State for Social Security

My hon. Friend raises a point that I suspect will be familiar to most Members of the House. We have all met people with a modest amount saved in a bank or building society and, perhaps, a small occupational or works pension who think that, under the system that we inherited, they are not being helped through the social security system. The pension credit will ensure that if people have put money by, they will not be penalised for having done so. There will be no tariff income—the notional income that the social security system assumes pensioners receive from their savings. Indeed, from April, we are increasing the capital limits as a first stage; as a result, people who are already on the minimum income guarantee will be some £6.30 a week better off.

The object of the pension credit is to ensure that those who have saved are rewarded for their saving by receiving an additional cash top-up. As part of our proposals, some 3 million pensioners will gain because of the tax changes that we are making as we introduce the credit itself.

Photo of Julian Brazier Julian Brazier Conservative, Canterbury

Does the Secretary of State acknowledge no inconsistency at all between stripping £5 billion out of occupational and personal pension schemes and making such a small repayment subject to filling in a hugely complicated set of forms? Will he confirm that the savings ratio is close to a 40-year low?

Photo of Alistair Darling Alistair Darling Secretary of State for Social Security

One of the consequences of making the changes to corporation tax to which the hon. Gentleman refers is that we have been able to reduce corporation tax to its lowest-ever rate and, I think, the lowest rate among all our major competitors. The Conservatives never did that.

The credit will not be complicated. As the hon. Gentleman knows, all pensioners have to be written to when they retire to let them know how much pension they have accrued over the years. At the same time, we can calculate how much credit they are due, to reward them for their thrift. I cannot understand why he and his hon. Friends want to maintain a system under which, if people have saved and done exactly what successive Governments have told them to do over the years, they get punished for it. There cannot be any sense in that. The pension credit will mean that, for the first time, those who save money will get a cash top-up—a reward from the state—and that must be the right approach to encourage saving.

Photo of Mr Andy King Mr Andy King Labour, Rugby and Kenilworth

I am glad that my right hon. Friend has clarified the issue in relation to income from savings because, like my hon. Friend the Member for Corby (Mr. Hope), many visitors to my surgery have said, "I have lost out time and again because I live off some capital. I am just above the social security threshold." How many additional pensioners who lose out because of the capital thresholds will benefit from the pension credit?

Photo of Alistair Darling Alistair Darling Secretary of State for Social Security

More than 5 million pensioner households will gain as a result of the credit, but the issue is pretty clear. Under the system that we are introducing and under the pension credit, those who save money and who have a modest occupational pension or other income will be rewarded for their thrift; under the Conservatives, they would continue to be punished. I cannot understand the logic in the Conservative position.

Photo of Edward Leigh Edward Leigh Conservative, Gainsborough

What proportion of middle income pensioners are on means-tested benefits, and what will be the proportion in 2003?

Photo of Alistair Darling Alistair Darling Secretary of State for Social Security

That brings us back to the point that we have made over and over again. The Conservatives oppose means-tested benefits because people are getting more money. The minimum income guarantee would never have been introduced under a Conservative Administration. If there were to be a Conservative Government, there would be no minimum income guarantee.

We wanted to eradicate pensioner poverty, which is why we introduced the minimum income guarantee. We also wanted to ensure that the vast majority of pensioners who had saved money and had a little in the bank were rewarded for their thrift. It is surprising that the Conservatives should find that a laughing matter. Most of us believe it to be a matter of concern. We want to reward thrift, not punish it. The divisions between the two parties are abundantly clear: if we are returned to government, pensioners will be rewarded for their thrift; if the Tories get back in, the same system will continue year after year after year.