Clause 13 - Transitional provisions

State Pension Credit Bill [Lords] – in a Public Bill Committee at 5:30 pm on 23rd April 2002.

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Photo of Mr Win Griffiths Mr Win Griffiths Labour, Bridgend

With this we may discuss amendment No. 34, in page 8, line 40, at end insert

'but without prejudice to the right of that person to request a fresh determination under section 8.'

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Work and Pensions)

The amendment raises one or two primarily administrative points about the transitional period. I shall follow the numerical order of the amendments and deal first with amendment No. 34, which is relevant to some of the administrative points that I shall touch on in a moment.

The provision is that an assessed income period—this matter was discussed at length during the enforced absence of the Under-Secretary and myself this morning—may be normally no longer than five years and may be shorter. I am seeking a declaration from the Minister that there will be no circumstances in which a claimant loses out because that period is defined as a longer period. We shall come to the reasons why it is so defined in a moment. I do not think that there will be such a case, but I should like an assurance on the matter.

The issue is then about prescribing a longer assessed income period and why that is mentioned. The explanatory notes to the Bill, ever helpful, are quite interesting on that point. The set of arguments are perfectly understandable. The notes explain, for example, that people already on income support will not have to make a fresh application and go through a fresh form and all the rigmarole of a new claim for pension credit. It will be passported, to use a shorthand term, from their existing income support on to their pension credit.

I want to make a point of substance on that issue, to which the Help the Aged briefing refers. It quite reasonably says that not everyone who may benefit from the pension credit arrangements is now on the minimum income guarantee or income support. It says, of course, that the savings credit applies only to people over 65, and some may not be eligible for the guarantee credit. That organisation is concerned about protecting the entitlement of such people and providing a fast-track claims procedure for people who are waiting for their benefit. The Minister may like to reflect on that.

There is also a general point about the administration of the benefit, which goes back to points that we made in the clause 10 stand part debate about the robustness of the IT systems for the Department. Let us consider the explanatory notes to clause 13(2) and amendment No. 36, which would remove the power to prescribe a longer period. The message from the notes is that many people will be coming on to pension credit in 2003, and on the assumption of a five-year assessment period, they will refresh their claims in 2008. I re-read the explanatory notes and did a double take because I had assumed that they would say 2003, but I read 2008. The Minister may want to comment on that.

It seems clear that there will be fewer people to have a renewed assessment period in 2008 than those in 2003. I think that the answer to the conundrum is that many of those in 2003 will be on income support and will be transferred to pension credit without a fresh set of procedures, whereas in 2008 they will all be asked to produce further details or there will be a discussion with the Pension Service as to whether their benefit should be modified. I was puzzled because if it was necessary to make that special provision for 2008, I am not sure that there may not also be a problem in 2003, when the benefit comes on-stream.

It is true that many of those people will already be on an income-related benefit such as income support and they will transfer to the new benefit. However, if we consider the mass of claimants in October 2003 and compare that with the potential mass of the re-claimants in 2008, it becomes clear that during that time many of them will have made a fresh application anyway if their incomes have declined or they have had another change of circumstances. Others—perhaps this is the most extreme change of circumstance—will sadly have died during the period. Others will go through the process for the second time during their life as a pensioner. The Minister should explain what the weight of cases may be between the two. The system may require changes, or people may be allowed further time in 2008 because of the rush of claims. I am concerned that the initial claims in 2003 will also overload the system, especially as they will be on an old computer system that may not be able to cope. Amendment No. 34 probes that issue, and I hope that the Minister will respond.

On amendment No. 36, I hope that the Minister can assure us that any extension of the period will not be to the detriment of the individual. We will not press the matter to a vote, but would like the Minister's assurance about what is going on. Even if everything is lickety-split, and there is no loss to the claimant, there is a danger that if the claimant has not received a form from it, the Pension Service may not pick up the fact that he or she is entitled to more benefit. As we know, there is a qualifying period for making claims for benefit. Someone may not have had contact with the Pension Service for the perfectly good reason of administrative overload. I am anxious that they should get back what they would have had within the usual five-year cycle if they had been invited to apply and had done so.

Mr. McCartney: Clause 13 provides the Government with a power to regulate the smooth transfer of pensioners from the current system of financial support and income support to a state pension credit. The probing amendment gives us an opportunity to set out the transitional arrangements in some detail. This is a massive exercise, and enacting the Bill is the easy part, if hon. Members do not mind me saying so. I reassure the Committee that a great deal of effort has been spent on the implementation strategy, and a great human and financial resources have been made available to ensure the smooth operation of pension credit in a rolling programme over the next few years to access the system. I shall write to the hon. Gentleman and to the hon. Member for Northavon if they want regular updates. It is in all our interests that the system is open and transparent.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Work and Pensions)

I want to put on record that I would appreciate, as I am sure that the hon. Member for Northavon would, a continuing briefing on the matter. As the Minister rightly says, it is in the interests of everyone, especially our constituents and pensioners, to know what is going on and what the plans are for the service.

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

I thank the hon. Gentleman. If he hears nothing, he should not surmise that there is a problem. He will have to trust me to get in touch with him with information that is not just a regurgitation or re-spin of what was said before. We will let him know where we are up to as we make progress.

During the transition period, we need to be able to transfer the 1.8 million people who qualify for state pension credit from the existing income support system, so that there is no interruption to their income. We intend to make regulations that will enable them to be treated as having made a claim for state pension credit. They will be notified of their new entitlement and will have the normal right to ask for a review or appeal. This proposal will remove the need for them to make a separate claim and so minimise bureaucracy and ensure continuity of payment.

We will introduce arrangements that will enable staff in the Department for Work and Pensions to recalculate these cases before October 2003 and arrange payments of state pension credit from the appropriate date. That answers one of the points that the hon. Member for Daventry made about the bulge in 2003–2004. In addition, there are 6.3 million households with someone aged 60 and over of whom we estimate some 2.4 million could be entitled to pension credit. We will systematically identify and contact them over the 18-month period from April 2003 to October 2004 to ensure they know what to do to take up their entitlement. We will make provision in the regulations that will allow backdating of the payment of pension credit to the start date in October 2003 if an application is made by October 2004 so that no pensioner need lose out.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Work and Pensions)

Let us make it absolutely clear—I do not think that I dissent from the Minister. Everyone will have been contacted by October 2004 so there is no question of anyone not having a chance to get the credit and having it run backdated from October 2003.

Mr. McCartney: That is why we are taking advance claims.

Subsection 2 (b) provides that regulations may also allow for an assessed income period in excess of five years where a person has reached the qualifying age when state pension credit is introduced. We expect that the circumstances of the vast majority of people, both existing minimum income guarantee recipients and take-on cases, who are over 65 will be settled and so a five-year income assessment period, starting from A-Day—the first date of implementation—would normally apply.

All the rules for setting and maintaining assessed income periods under clauses 6 to 10 continue to apply. Claimants would be able to ask for their pension credit entitlement to be re-determined under clause 8, so I can assure the Committee that amendment No. 34 is not needed. All those five-year periods would start from October 2003 and that would create a potential peak of reviews in October 2008. Setting a different period will help us to even out the work load in a manageable way, avoiding the operational problems that could otherwise occur five years after the introduction of the credits.

We have considered carefully how best to manage those arrangements and propose to carry out this large review task over a two-year period between 2008 and 2010. This will mean that pensioners awarded pension credit in the first year and, who would otherwise have an assessed income period of five years, will instead have an assessed income period of anything from five to seven years, which goes back to a point made by the hon. Member for Northavon.

Amendment No. 36 would prevent us from setting longer periods in those cases. That would mean either that the Pension Service would have to undertake an unmanageable number of reviews in 2008 or we would have to set shorter periods and carry out the extra work in the early years of implementation when we expect it to be concentrating on maximising take-up. That is the choice that we have had to make. Both jobs are not doable at the same time and there is no point in trying to claim that they are. Most people would welcome our decision, which gets them into the system and enables them to receive pension credit.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions 5:45 pm, 23rd April 2002

The business of backdating to October 2003 is tremendously welcome. It is a helpful thing that has come from the Committee. Those on income support have not been asked for some of the information that they will have to provide for their savings credit to be calculated such as, for example, the uprating rules that apply to their occupational pensions. Will they get a letter telling them about the new thing coming in in October and asking them for that information? Although they will not be making a fresh claim in one sense, they will be asked for extra information and that will happen in that six-month period.

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

The hon. Gentleman asks a very fair question. As soon as the Bill receives Royal Assent, we will start approaching those people, who will transfer to the pension credit. As soon as the Bill is

signed, sealed and delivered, that process will commence, and as soon as it does, we will notify hon. Members of that.

Amendment No. 36 would prevent us setting longer periods in such cases and make them unmanageable. I went on to say that we were concentrating on maximising the take-up. That is the judgment that has to be made, and we have made it. Given the two scenarios that I set out, pensioners' organisations would have wanted us to make that judgment. Assessed income periods are being introduced to reduce the burden on pensioners of reporting changes. Longer periods would generally work to the claimant's advantage.

The hon. Member for Daventry raised a couple of other points. First, on IT, for the next sitting, I will give him a copy of a letter that I had to send to Computing magazine, which ran a front-page scare story about our IT system for pensioner credit. It was a rather disingenuous story. My letter set out a rebuttal of that, but also reassurances. The hon. Gentleman might find reassurance in the statement made about IT by the Secretary of State, debating another matter in the House. My hon. Friend the Under-Secretary and I take seriously the issue of IT implementation and want to have an open and transparent strategy about it. Across the piece, Governments of whatever hue have had problems with IT. When I was in the Cabinet Office, I was made responsible for sorting those out, so it is all down to me.

I give the hon. Member for Northavon reassurance that we are designing the system to use spare capacity. For the introduction of pension credit, we will use capacity that we transferred out to other systems. Rigorous, properly managed programmes will be put in place at every stage, including risk assessment and timetables for implementation and testing. All of that is part of the preparations for the introduction in 2003.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Work and Pensions)

I am grateful to the Minister for saying that he is genuinely trying to help the Committee. However, given the read-across to the difficulties in introducing the new formula for child support that I am sure he had in mind, will he assure the Committee that if a problem were to develop—even if he thinks that it will not—in the implementation of pension credit for the scheduled date of October 2003, he and the Secretary of State will take an early opportunity to report that to the House? I think that it would be the general view of most Members, rather shown by the case of child support, that it is far better to get it right and implement it, than to half-implement it and get off on the wrong foot.

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

I understand what the hon. Gentleman is saying. If he hears that I have left the country, he will know that there is a problem.

It is all a matter of transparency. We discussed that with the stakeholders in the Department. Obviously, we built into the design of the IT systems periods for testing and, once testing is reviewed, periods to make the changes. Again, I assure the hon. Gentleman that a rigorous process is in place to ensure that we have robust measures to minimise risk and to apply testing.

Testing will take place during a period of months, not a period of days. We will not just decide the weekend before the launch to have a live check of the system and see how it goes. Those days are over, but there used to be occasions when projects were not even tested in the weekend before they went live; they just pressed the button and hoped that things went well. The system has radically changed, and a very robust system has been put in place for the delivery of the credit in October 2003.

The hon. Gentleman also asked whether anyone would lose out when a longer assessed period was set. The answer is no, because of the win-win situation. The claimant can always ask about changes to his or her entitlement provision, which will result in an increase of pension credit entitlement. As a result of the phased introduction, there is no potential loss to the individual concerned. I hope that those explanations will allow the hon. Gentleman to withdraw his amendment.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Work and Pensions)

I am grateful to the Minister, who has helpfully explained some complicated administrative issues to the Committee. I do not think that he will dissent if I say that it is very much in pensioners' interests that we get the scheme right. We wish him godspeed in getting on with the job of informing pensioners so that take-up of the new benefit can take place as soon as possible and the detached savings credit—if I may put it like that—can be handled as soon as possible. I hope that the computer system works. If I were he, I would be keeping my fingers crossed, but I shall not ask him to get up and confirm, so that it is in Hansard, that he will be doing that.

I shall rehearse one area on which the Minister commented usefully, to check that I have understood the figures aright. He said that, in respect of pensioners, claims transferring from income support and the minimum income guarantee would be in the order of 1.8 million and that there would be, on the Department's estimation, a further 2.4 million household claims for pension credit. I evince no surprise at the fact that that is broadly consistent with the reply that he gave me in a written answer on Monday 22 April. He said then that about 4.1 million pensioner households would be entitled to pension credit, of which about 1.2 million contained a couple. We can allow for rounding and assume that we are talking about the same figures.

I understood the Minister to say that 6.3 million households have a person aged over 60 in them. [Interruption.] Sorry, a person aged 60 or over. That is not necessarily the total number entitled to pension credit, but the total number of households with such a person. However, the Minister gave a figure of about 4.1 million pensioner households that are entitled to pension credit. Albeit that is households not numbers of people, if there are 6.3 million households altogether that include persons over 60—they might not necessarily yet be aged 65—if I do some broad maths in my head, it seems that roughly two thirds of households containing a person aged over 60 are likely to be sucked into the pension credit scheme ab initio. To bring back a rather more controversial phrase, the

involvement in means-testing will therefore be about two thirds from the start, not later.

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

If I followed the Minister's figures correctly, the 6.3 million was the number of households containing someone aged over 60 apart from the 2 million already getting income support and who will be brought into the scheme. The figure should not, therefore, be two thirds.

Photo of Tim Boswell Tim Boswell Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson (Work and Pensions)

I am grateful for that elucidation. I had, perhaps, not entirely picked up that point. However, the Minister has performed a service to the Committee in explaining how the scheme is to work and, roughly, its scope.

I hardly need tell the Minister this, but there is a huge administrative task to be done. It is very important that it gets off on the right foot and works from day one. Anything done sensibly to increase the possibility of that is to be welcomed in the interests of pensioners. Some of the assurances that the Minister has given, the thinking that he has exposed and his readiness to share developments with us as they take place are welcome. Our little exchanges have been useful. I beg to ask leave to withdraw the amendment.

Amendment, by leave withdrawn.

Clause 13 ordered to stand part of the Bill.