Clause 8 - Fresh determinations increasing

State Pension Credit Bill [Lords] – in a Public Bill Committee at 12:15 pm on 23rd April 2002.

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Photo of James Clappison James Clappison Shadow Spokesperson (Treasury) 12:15 pm, 23rd April 2002

I beg to move amendment No. 31, in page 5, line 43, after 'any', insert 'reasonable'.

Claimants may request a reassessment where circumstances have led to a reduction in income and, therefore, a potentially higher award of pension credit. Committee members will become familiar with this point during the morning. Where that happens, a determination is made regarding the elements or the amount of any of the elements of the retirement pension, which may have an effect on the pension credit.

The purpose of the amendment might seem to be to limit the opportunity for claimants to seek a reassessment and possibly an increase. However, I can tell the Committee that it is intended to ascertain,

in particular, whether claimants could seek a reassessment at any time during the five-year period. It is also designed to probe whether it will be possible for claimants to seek further determinations if an application should fail—that is, if it does not result in an increase in pension credit—and it would be interesting to know how many times a claimant may seek a determination in an assessed income period of five years. It would be useful if the Minister could say something about that, and tell the Committee how subsection (2) fits in with subsection (1), if subsection (2) is to deal with the situation where some elements are redetermined downwards and others upwards. The wording of subsection (2) is not as transparent as it might be.

Photo of Ian McCartney Ian McCartney Minister for pensions, Department for Work and Pensions

I hope that I can clarify this quickly for the hon. Gentleman, because clause 8 is designed to protect pensioners. It ensures that, whatever the changes in their income, pensioners have a right to a fresh determination of entitlement if that will result in their being awarded more credit. We have already discussed our objectives in introducing the assessed income period in the debates on clauses 6 and 7. It is designed to enable the abolition of the weekly means test, to put an end to intrusion and to introduce simplicity and transparency. It is fixed for five years and is available from the age of 65, when most pensioners' income has stabilised.

We want pensioners to benefit from the assessed income period. I accept in good grace that this is a probing amendment that is designed to find out whether the assessments are to be done for a reasonable purpose. Our intentions are plain and simple. Some pensioners may see drops in their income over the five years of the assessed income period, for example, if they choose to spend some of their savings. We do not want them to lose out and have to wait up to five years to have their entitlement reassessed. That could cause hardship or mean that they are living below the level of the guarantee, which would defeat the whole object of the measures. We want to take account of change when it happens, but only where it is to their advantage. Obviously, we need to look at their retirement provision to check their entitlement and take account of any changes to other income in the normal way.

If a pensioner's income has gone down, we will not wait until the end of the assessed income period to increase their pension credit entitlement; it will be increased immediately. If it turns out that their income has increased rather than decreased, they will keep the benefit of the increase for the remainder of the assessed income period. I was trying to make that point earlier—it is vital. It is important for pensioners not to be put off by the assessment.

There are no disadvantages to this system, only advantages—it is a virtuous circle. Giving pensioners all the advantages of a fixed income assessment without any of the disadvantages is a major change when it comes to benefits.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I think I agree with the Minister that the clause is to the benefit of pensioners. Will he clarify whether, when pension income from one source has gone down and pension credit could go up, all the other sources of income will be examined to see whether they have gone down or up? If any of them have gone up, will that be offset against the increase in credit? If one pension benefit has gone down by £10 but another has gone up by £5, will the assessment ignore the increase of £5 or will the person's net income be judged to have gone down by only £5? Will such variations be in completely separate boxes, or is there the possibility of a partial offset from an increase in income? I am slightly hazy on that.

Photo of Ian McCartney Ian McCartney Minister for pensions, Department for Work and Pensions

I am not clear what subsection the hon. Gentleman is referring to. Subsection (2) takes what the hon. Gentleman said into account, because in the event of the pensioner receiving income additional to their original assessed income, they maintain the level of pension credit based on the original assessment for the period of that assessment. However the calculation is made, there will not be a net loss, whether things are put in separate boxes or not, during that assessment period. It could affect the next assessment, but for the period of the original assessment the pensioner will not suffer from any clawback or penalty. However the calculation is made, there will be no penalty of the sort that the hon. Gentleman described—I do not think that he is trying to trip us up.

When I explained to the hon. Gentleman why the new system was a virtuous circle, I was trying to show that, for the period of the original assessment, the sum payable under that assessment could not be affected other than by a loss of income, which could lead to its being increased. Wherever we cut the cake, the pensioner does not lose out. Clause 8(2)(b) gives power to make fresh determinations considering the net effect of change—I think that that is the hon. Gentleman's angle. It looks at the net effect of the change. If he is not sure about that, I shall write him a note.

I hope that, given my explanation, the hon. Member for Hertsmere will withdraw his amendment.

Photo of James Clappison James Clappison Shadow Spokesperson (Treasury)

The hon. Member for Northavon made his point about the operation of subsection (2) far more eloquently than I did. The Minister's explanation of that subsection matches my understanding of it after reading the explanatory notes.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

My understanding of the Minister's reply is that the boxes are not completely separate. If something decreases by 10 and something else increases by 5, and the net effect is to make the person better off, the increase by 5 will matter and will mean that the improvement in pension credit is less than it would otherwise be.

Photo of James Clappison James Clappison Shadow Spokesperson (Treasury)

It is worth exploring the question. When I read the notes, I thought that I had grasped the common-sense meaning of subsection (2).

Photo of Ian McCartney Ian McCartney Minister for pensions, Department for Work and Pensions

No, that is exactly what I said to the hon. Member for Northavon. The net effect is important because that is the fundamental difference:

under the current system, the effect would be deleterious and there would be a reduction in income, whereas under the new system, there will not be.

The hon. Member for Hertsmere may say that the change has been made in an unhelpful way, but I disagree. His original understanding of the clause stands true: it creates a virtuous circle and, if a pensioner's income falls during the assessed period, he or she may receive an increase. If the income rises, on the other hand, he or she continues to receive the same level of income from the assessment. In both circumstances, the pensioner gains the advantage. That is the net effect.

I am trying not to recast what has been said but to catch the interpretations of both hon. Gentlemen.

Photo of James Clappison James Clappison Shadow Spokesperson (Treasury)

That is helpful, and we can leave that point.

On a smaller point, will it be possible for a claimant to make an application for a fresh assessment at any time—for example, if one of his sources of income falls unexpectedly very early in the five-year period? If a claimant has had a reassessment on that basis, could he make a further application for another reassessment if another source of income went down?

Photo of Ian McCartney Ian McCartney Minister for pensions, Department for Work and Pensions

The answers to the hon. Gentleman's questions are ''yes'' and ''yes''.

Photo of James Clappison James Clappison Shadow Spokesperson (Treasury)

That is helpful; I do not think that I can do better than that. As this is simply a probing amendment, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 8 ordered to stand part of the Bill.