Clause 81

Pensions Bill – in a Public Bill Committee at 2:15 pm on 7th February 2008.

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State Pension Credit: Extension of Assessed Income Period For Those Aged 75 or Over

Question proposed, That the clause stand part of the Bill.

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Work & Pensions

I hope that I will not detain the Committee long on clause 81 which we also welcome. Consensus seems to be back on the menu.

This arose out of the creation of the pension credit system and the ruling that anyone 65 or over is not assessed on a weekly basis, as was the case with minimum income guarantee. There is no responsibility on pensions to report changes in income on a weekly basis. Instead, this is normally assessed on a five-yearly period with automatic uprating during the lifetime of the assessment. The policy assumption being that they are very unlikely to have any changes in their incomes over the age of 65.

What clause 81 is doing—and it is very welcome—is to say that those 75 and over will be given an indefinite assessed income period. Instead of having the intrusion, complications and confusion of a five-year assessment they will run on the existing basis. Presumably, there will still be an underlying obligation if they have a great windfall or something to inform the pensions service, but beyond that they will not be troubled. I can do no better than quote with approval the comment of Age Concern when they said:

“This proposal makes good sense and will be welcomed by people over 75 who will be able to look forward to a guaranteed income without having to go through a reassessment process. However, it is very important that people understand the system and know to ask for a reassessment if their financial situation changes and they become entitled to extra money”.

So we will endorse that and support the thrust of the clause.

Photo of James Plaskitt James Plaskitt Parliamentary Under-Secretary, Department for Work and Pensions

Thank you, Mrs. Anderson. I am grateful to the hon. Member for his support for this clause, which is an important one.

Assessed income periods are, as he says, a key feature of pension credit. They were introduced to remove the weekly means test for pensioners aged 65 and over. An assessed income period is currently a specific period of up to 5 years, during which time the customer does not have to report changes to their retirement provision, broadly their income from capital, annuities and retirement pension. When the assessed income period comes to an end, customers need to provide evidence and information on their current income and capital—in the same way as they do at the start of a claim—before another can be set.

The effect of subsection (2) of the clause is that claimants aged 75 or over will be generally be given an indefinite assessed income period. This will remove the need for those customers to provide evidence and information every five years on their retirement provision once this has taken effect. From age 75 people's retirement income—as the hon. Member for Eastbourne said—tends, broadly, to be more stable. Most people by the time they reach that age will generally have converted any pension pots into an annual income.

Subsection (4) of the clause will apply where an assessed income period is brought to an end by the expiry of a period of five years or more and the claimant is aged 80 or over. Again, generally the assessed income period will be extended indefinitely.

Subsection (5) makes some explicit provision about the commencement of the earlier subsections but, broadly, the changes will apply from 6 April 2009.

Subsection (6) is important—it is the sunset provision. The new provision inserted by Subsection (4) covers those people already in receipt of pension credit who have an assessed income period at the point of introduction. The provision only needs to be in place to cover these  customers for a maximum of five years—therefore it will cease to have effect on 6 April 2014, five years after its initial introduction.

The effect of clause 81 is to introduce a significant easement targeted at those most elderly pensioners who are unlikely to have any significant changes to their income and capital, and who may be worried about the impact of small fluctuations in those things on their benefit payments. Their responsibility to inform us of major changes, as the hon. Member for Eastbourne says, of course remains.

However, it is worth clarifying that these pensioners will still be able to request a review of their claim should their retirement income or capital reduce. So I am grateful for these words of support and I hope the Committee will agree that this clause be part of the Bill.

Clause 81 ordered to stand part of the Bill.

Further consideration adjourned.—[Mr. David.]

Adjourned accordingly at twenty-eight minutes past Two o’clock till Tuesday 19 February at half-past Ten o’clock.