I should like briefly to set out what the provisions in clause 10 mean and give some idea of why we think that general upratings of second pensions are possible in respect of pension credit. Clause 10 resembles, as I am sure that members of the Committee who have been Ministers will know, the routine adjustment provisions in sections 159 and 159A of the Social Security Administration Act 1992. I can see everyone's ears pricking up at that, because they are all familiar with that legislation. The only difference between those provisions, which allow for general uprating, and these, is that these operate only while an assessed income period is in force.
In practice, the clause allows us to get, annually, an updated view of the retirement provision that must be taken into account in awarding pension credit. I was sorry to miss an earlier debate about this matter because I was attending another pensions debate with the hon. Member for Daventry—pensions debates seem to be popular in the House at the moment. I will try not to go over old ground.
In respect of the assessed income period, we are trying to ensure that pensioners do not have to report changes in every little dot and comma of their income and retirement provision every week, which is the current position in respect of income support. However, the period should not be so long—I am sorry to see that the hon. Member for Northavon is no longer in his seat. However, he has left his jacket, so we have every hope that he will return in due course.
As long as it is within the next five years, his jacket will still be validly assessed.
Clause 10 allows us to keep abreast of the retirement provision. That means that although we are abolishing the old weekly means test we will still keep track of where the claimant's provision is, more or less. There will be no sudden end to entitlement after five years. If we just reassessed everything after five years, we might find that the entitlement was out of date. People might lose their pension credit after such a reassessment. The provisions enable us to keep track of where things are going.
The clause does not mean that pensioners must start filling in vast forms and sending in reams of details to update our assessment of their retirement provision, because we know, for example, that most second pensions are increased annually, and by what amount. When pensioners first apply, it will be possible for us to ask them when their second pension is uprated and
if there are rules on by how much it can be uprated. We will be able to deal with it ourselves without bothering them.
The Under-Secretary used the phrase ''second pension'', and by that I think she meant occupational pension rather than state second pension.
There will be an annual process to deal with notification of uprating to the basic retirement pension as well as any SERPS or state second pension entitlement. If the Under-Secretary works towards such a system, it may eventually be possible to transfer data on occupational pensions across direct from the database, subject to the necessary safeguards, in the same way in which my accountant, for example, knows what my dividends are—there are not that many—even if I have not told him because he has a computer with the relevant data, which can be updated.
I confirm that I was talking about retirement provision by means of occupational pensions or other non-state pensions, as defined in the Bill. I reassure the Committee that we shall not end up with assessments that are so far out of date that they are bound to change hugely at the end of five years. That will enable us to deal with known increases in certain elements of pensioners' income without having to bother them about filling in vast numbers of forms. Ignoring increases in second pensions during the assessed income period would mean that pensioners might face a dramatic fall in their pension credit at the end of the five-year period.
We can take known changes in pensioners' incomes into account, but it does not mean that they will have to fill in vast numbers of forms to enable us to do it. We generally know by how much occupational pensions increase. That is relatively well known, and we can ask people to tell us when they first apply. The Government Actuary, for example, tells us that most occupational pensions are uprated by the retail prices index. We know that half of all pensioner households entitled to pensioner credit will have some kind of occupational pension scheme. We can largely work out what the uprating should be with a little bit of information at the beginning.
I hope that that will reassure the Committee that while we are keeping track of increases in retirement provision that have an impact on pension credit, during the assessed income period we will not be getting so far out of date that we will end up with big-bang changes at the end of five years that might overly affect pensioners, and might mean that we are spending far more on pension credit than we would have if we had taken those increases into account. I hope that that explains clause 10 to the Committee. It is about making sure that we can take account of matters during the assessed income period, without the Secretary of State having to make a separate decision on well-known upratings and increases that we know are going to happen.
I am grateful to the Under-Secretary for that useful explanation. That is a sensible way in which to go about the process. By way of an obiter to
that discussion, if she and her Department are to know where they are with pension credits on an annual basis, it is at least a consideration whether the period should be shorter than five years, but I shall not reopen that debate.
I have one serious point to share with the Under-Secretary, and it is to register a concern about the ability of IT to manage. I mentioned in an intervention that my accountant knows more about any modest dividends that I receive than I do because he has the basic shareholding and can work out what they would be even if they are modified, or the shareholding is modified, because the shares are split. In exactly the same way, I am sure that it would be possible, while of course observing data protection priorities, for the Pension Service to be aware of accruing income that is retirement provision for an individual. It will be able to keep that information on a continuously updated basis.
All I say to the Under-Secretary, and I say this in all seriousness, is that the Department's record over the years—I do not exclude the Government of I which I was a part from this—on computer systems has not always been of the highest possible standard. There are concerns that the pension credit will come into effect in autumn 2003 on the old computer system. She may wish to comment now or she may wish to reflect on what I say, but there are still markers to be put down and concerns to be expressed about the robustness of the computer systems. If I may say so—I hope that this is not offensive—it is all a little like motherhood and apple pie, but neither of them might happen.
I note that during discussion of the Bill in another place the noble Baroness Hollis of Heigham talked at length on the need to break with the system of weekly means-testing that has characterised such income-related benefits since the inception of our welfare state. She described the decision to move to a five-yearly income assessment of the pension credit as part of a move to dissociate income support from charity, poverty and means-testing.
A person currently in receipt of the minimum income guarantee has an ongoing obligation to notify the Department of any change in circumstances. However, pension credit recipients, once a five-year period has begun, will have to notify only major changes. A claimant is not obliged to report changes in retirement provision during the income assessment period, although he or she may report changes that would result in an increased entitlement to pension credit.
That situation was described in another place as a win-win prospect for pensioners. I am not entirely convinced of that. I am certainly not convinced that a five-year income assessment period will prove entirely advantageous for our pensioners. My concern centres on how many pensioners, having navigated the treacherous waters of pension credit once, will be persuaded to return should they find their deemed income diminishing as a result of the financial volatility that is such a sign of our times.
I return to the example that I quoted last week. I have again this weekend had pensioners coming to my constituency surgeries who are simply unwilling to get involved in that level of complexity. How will pensioners be notified about, or encouraged to apply for, reassessment in order to receive such an increase as the measures provide for? Can the Under-Secretary roughly estimate how many income assessment periods are expected to run for less than five years? In other words, how often will the effects of the variations in clause 7(4) be exercised?
We are dealing here with an extremely complex piece of legislation, the purpose of which is, I believe, to introduce more complex choices into an already over-complex system. Our sole purpose should be to protect and support our pensioners, not bamboozle them. I am uncertain whether that is what the pension credit sets out to achieve. Whether pensioners will be encouraged to benefit from the so-called win-win prospect of the pension credit is a key consideration, which demands greater attention than the Government seem prepared to offer it, given the growing evidential basis that suggests there is anything but such a prospect.
The publication of the latest statistics on benefit take-up again drew attention to the problem of complexity dictated by the Government. The statistics showed that the take-up of income support was lowest for pensioners, at between 64 per cent. and 78 per cent. by caseload. There is evidence that the percentage of entitled pensioners taking up income support fell between 1998–99 and 1999–2000. In 2000–01, 58,000 eligible pensioners were not receiving income support, yet the Government continue to bombard pensioners with yet more complexity.
I recognise what the Government seek to do with such provisions, but many pensioners, if brave enough to enter a claim at the outset, will simply take any money offered with a sigh of relief and affirmation of their intent not to undergo again the trial of application until absolutely necessary. Certainly, everything that I have heard on the street, on the pavement and especially when canvassing for the forthcoming district council elections, leads me to think that.
The hon. Member for Daventry asked whether the current IT systems, on which we shall initially operate pension credit, can deal with upratings as provided for in clause 10. We operate millions of benefit claims already. We have a tried and trusted method with which our systems can cope at the moment, and we have no reason to think that our current IT system will be unable to manage the provisions in clause 10.
Unless I misunderstood the Under-Secretary's earlier argument, we are talking about not simply uprating the payment of benefit, but taking into account the accruals by way of retirement income from other sources. The ability of that data to transfer into the system, and to drive changes in the benefit system, is relevant. With the greatest respect to the Under-Secretary, there is a difference between altering a
means-tested, or income-related, benefit such as state pension credit and the annual uprating procedure for the basic retirement pension, which should be a simple mathematical calculation.
We naturally considered whether we could cope with that before introducing the Bill. We have no reason to think that our systems would be unable to cope.
I was not sure whether the hon. Member for Newark (Patrick Mercer) was talking about clause 9, but he mentioned section 7(4) so I think that he was referring to clause 10. For a moment, I thought that he had missed his chance to talk about an earlier clause. He referred to complexity and take-up problems.
I apologise to the hon. Member for Canterbury if I am not speaking clearly enough. I have a bit of a throat at the moment, but will do my best to speak clearly so that he does not misunderstand what I say.
The hon. Member for Newark again raised the take-up issue. He asked how many pensioners were to have an assessed income period of five years given that there are some circumstances in which it could be shorter. We think that the vast majority of pensioners over 65 will have that assessed income period, and a small minority will have a shorter assessed income period. An example of those who may have a shorter period are those awaiting income streams on retirement, which have not yet been fixed. After they have been fixed, those people can go on to a five year assessment. We may not be able to fix an assessed income period for those with fluctuating foreign pensions. We do not know how many of them there will be until we have worked out the detail of the regulations, but we think that the number will be small.
The vast majority of pensioners will experience a claims procedure that has to happen much less frequently. They will see upratings in their retirement provision, which will happen automatically. In some cases, that may result in changes to the savings credit that people receive without them having to go through the process of filling in another form or having onerous obligations to report minuscule changes in income. From a pensioner's point of view, that experience will be less intrusive and more acceptable.
We have tried to make it easier for people to claim the minimum income guarantee; for example, we have reduced the claim form from 40 to 10 pages. We are still trying to reduce the types of forms that elderly people in particular have to fill in, because we know that that can be onerous.
Once pension credit has been introduced, we think that the experience of pensioners will be much more acceptable, and on that basis we hope to increase
take-up, if that is what puts people off from claiming entitlement. We stress that the provision is an entitlement, not a favour. We want to ensure that those who are entitled apply. I hope that I have dealt with some points that were raised.
Question put and agreed to.
Clause 10 ordered to stand part of the Bill.