[Mr. Roger Gale in the Chair] — Pensioner Poverty

Part of the debate – in Westminster Hall at 9:30 am on 23rd February 2010.

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Photo of Jo Swinson Jo Swinson Shadow Minister (Foreign and Commonwealth Affairs), Liberal Democrat Spokesperson (Foreign Affairs) 9:30 am, 23rd February 2010

My right hon. Friend anticipates me and moves me seamlessly on to the issue of fuel poverty. The plight of the poorest pensioners has been worsened recently by rising fuel prices. Pensioners are more likely to be fuel poor than any other group, and, tragically, are also the most vulnerable to the effects of the cold.

Recent research commissioned by Age Concern and Help the Aged in Scotland showed that in the winter of 2009 a third of people aged over 55 turned down their heating because of fears about their finances. Given that we have just experienced one of the coldest winters for many years, surely such a statistic should give us great cause for concern. Indeed, turning down heating can have dire consequences for the health and well-being of the elderly poor. It is estimated that fuel poverty contributed to the deaths of 36,000 people last year.

Last year, 2.7 million pensioner households-one in three-were living in fuel poverty. This year, with energy prices higher than ever and the prolonged cold weather forcing people to heat their homes for longer, the figures are bound to be worse. Meanwhile the Government's measures to tackle fuel poverty are condemned as "not fit for purpose" by the Institute for Public Policy Research in its report, "The Long Cold Winter: Beating Fuel Poverty". As has been mentioned, eligibility for cold weather payments depends on having applied for pension credit, so many payments go unclaimed. In my constituency of East Dunbartonshire, nearly 1,500 eligible pensioners have missed out on cold weather payments this winter.

Energy companies have, on the whole, not reduced their tariffs in line with falling wholesale energy prices, allowing them to rake in record profits. The cheapest energy tariffs are often only available online, to be paid by direct debit, which many older people are unable or unwilling to access. Many older people do not have a bank account, but use Post Office card accounts. Extending such accounts to allow direct debit payments would not only support our post offices but enable pensioners to reduce their bills. Although such a move would be a welcome first step, surely the cheapest energy should be available to pensioners with the lowest incomes in the form of social tariffs.

The most sustainable and cost-effective way to tackle fuel poverty is to invest in energy efficiency measures and better insulation and heating systems in people's homes, because that will cut fuel bills for years to come. The warm front programme in England and the energy assistance package, as it is now called in Scotland, could be very welcome interventions. However, many poor pensioners are still not reached by such schemes, and there is scope for both to be radically expanded. I am sure that other hon. Members also feel incredibly frustrated by such schemes. In Scotland, to be eligible for replacement central heating, a person's existing central heating must be broken beyond repair. At that point-a person will not be eligible if they apply before it is broken beyond repair-a company will agree to send someone out within a couple of weeks to carry out an assessment. Then it will decide whether the person is eligible, and then it can be weeks or months before new central heating is installed. If someone's central heating breaks beyond repair in November, then this scheme is not much good.

Many pensioners on low incomes rely on the interest they earn from savings to keep them out of poverty, but with interest rates currently near zero such people have seen their incomes decrease drastically over the past few years. Shockingly, the Government currently take no account of lower interest rates when calculating how much council tax benefit or pension credit a person receives. Income from savings is assumed to be 0.2 per cent. a week, which currently bears no relation to reality and means that thousands of pensioners are having their incomes overestimated.

It is hard to express the frustration that is felt by savers, so I want to share a few comments from some of my constituents. Mr. C said:

"I have just retired and planned to use the interest from my savings to live on, however with the latest cut in Bank Base Rate, I will be struggling."

Mrs. B. said:

"So many pensioners and others rely on small amounts of interest on saving to make the difference between poverty and a reasonable existence... The Government seems to be helping those groups who have failed in business and many people who have made no effort to live a responsible life, and is ignoring those who have made every effort possible."

That sums up the feelings of many savers in this country.

Furthermore, the compulsory annuitisation of pension funds at the age of 75 is forcing struggling pensioners to accept far lower rates of annuity than they might receive if they could wait for the financial situation to improve. One 74-year-old constituent told me that having saved all his life, he felt that he was now being penalised by having to purchase an annuity at the worst possible time, and that his personal and private savings plan had been "shot to pieces" as a result.

Retirees buying an annuity today are getting pension incomes of almost half that of their counterparts back in 1994. Alternatively secured pensions, the only alternative to annuitisation, are highly taxed and can be withdrawn only at 70 per cent. of an annuity, making them not a financially viable option for the poorest.

The Economic Secretary to the Treasury acknowledged in a letter to me that ASPs are "not suitable for everyone" and advised that people seek independent financial advice before taking one, which is a luxury that many cannot afford. I can see no good reason to continue to require people to annuitise their pension savings by the age of 75.

A culture of inequity in the treatment of our aged, together with discriminatory Government policy, have led to a troubled end to some elderly people's working lives. Research by the Third Age Employment Network before the recession showed that only 31 per cent. of over 50s made redundant succeed in getting a new job within three months. Only 32 per cent. of those manage to keep their former level of pay, and on average they had to take a pay cut of more than a quarter. In the past year, long-term unemployment among men over 50 has doubled. Such an exit from the job market, coupled with the default retirement age, leaves some pensioners who have worked all their lives in a desperate situation. They are being forced to retire earlier than they had planned, which many cannot afford.

Government policy that disadvantages our elderly community in the workplace plays a major role in exacerbating pensioner poverty. I refer here to the default retirement age of 65 for men and 60 for women.