Clause 3 - Savings credit

Part of State Pension Credit Bill [Lords] – in a Public Bill Committee at 3:00 pm on 18 April 2002.

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Photo of Ian McCartney Ian McCartney Minister for pensions, Department for Work and Pensions 3:00, 18 April 2002

I see the amendment as a scene-setter for a more substantive discussion on clauses 15 and 16. I shall try to paint a broad picture, and a more detailed discussion of Opposition Members' contributions may be best dealt with during our consideration of those clauses.

Although the amendment appears to be a draconian attempt to blow a hole in the Bill below the water line, I accept that that is not the intention of the hon. Member for Daventry. He has floated several ideas to see what comes back from the fishing expedition.

Subsection (2)(a) shows that entitlement to savings credit is based on a claimant's qualifying income. Subsection (4) shows that the calculation of the savings credit is also based on the amount of a claimant's qualifying income. If the amendment were accepted, without removing the word ''qualifying'' from subsections (2) and (4), we would be left with a calculation without a definition of the terms on which it is based. In effect, no one would be rewarded for thrift—the hon. Member for Daventry said that he did not intend for that to happen.

The concept of a qualifying income is important to both the working of the savings credit and the principles behind it. We want to reward specifically people who put away money to provide for retirement. Many people have to take difficult decisions when

finding money to put into second pensions and general savings. We also want to reward people who continue to work after pension age.

We intend to prescribe qualifying income as all income defined in the Bill as retirement pension income, which is mentioned in clause 16, in addition to income from capital, annuities and earnings, which is defined in regulations under clause 15. Those income streams represent either a pensioner's savings during their working lives or, in the case of earnings, a pensioner's continuing contribution to, and participation in, the work force.

We do not think that it is right that some elements of income are rewarding. We would not want pensioners to be rewarded for their earnings through the new working tax credit. It would be absurd for that income to reward pension credit—it would be a credit on top of a credit. Similarly, if a pensioner had a younger partner in receipt of incapacity benefit, we would not want to reward that benefit—that would be bizarre.

I shall paint in the field, and give an extensive, but not exhaustive, list of items that will not be treated as income or that will be treated as income and totally ignored—they will not be defined as income under the Bill. The list includes: attendance allowance, disability allowance, and similar elements of war pensions; payments in respect of dependant children, including integrated child credit, and any other income or capital of those children; rent from second properties, as capital value is taken into account; actual income generated by a person's capital, as we take notional income into account; payments from local authorities, where persons provide foster or respite care; payments from the independent living fund, the Macfarlane or Eileen trusts, and community care direct payments. Other items that we are proposing to disregard also include cash in lieu of concessionary coal, voluntary payments from relatives and charitable payments—which the voluntary sector will be pleased to hear.