Paying pension credit automatically….

Improving Pension Credit Participation – a big win

I am talking with Paul Lewis this lunchtime on his Money Box about how we can increase  the payment of pension credit to all who are eligible. I have said to the Pension Minister, his civil servants and to the Daily Mail that the long-term goal of the DWP should be to pay this benefit automatically , because they know their customers sufficiently well.

I expected push-back from the DWP and I got it, they told me to come back in 3 months with a feasibility study on how long I thought the journey to that point might be and what can be done in the meantime, to make people aware of the benefit, comfortable with the eligibility conditions and prepared to submit their details for assessment.

There is one comment, from my friend Gareth Morgan that stands out.

“Even if you get the lowest  Pension Credit of 10p per month, you should grab it with both hands”

For pension credit , important as it is in its own right, is the key that unlocks the door to reducing council tax, to further help with heating costs , to a free TV licence – to many other benefits. I believe that there the best way of decreasing pensioner poverty in the UK today, is by increasing the take up of Pension Credit and the benefits it unlocks.

Claiming Pension Credit isn’t easy  (nor automation)

But automating a means tested benefit is not straightforward. I had spent some time yesterday going through the circumstances of an elderly relative who has a small private pension and a reduced state pension. She has no entitlement to the Guaranteed Credit as her total income is above her Standard Minimum Guarantee but she has an entitlement of £3.50 pw to Savings Credit, because some of her income is from retirement saving.

My point is that this took me (with the help of the Citizen’s Advice Calculator)some 45 minutes (and I had access to all the information needed). I did not get to a detailed analysis that might have bumped up the Minimum Guarantee, nor did I make a detailed analysis of income from capital, but it confirmed to me that an assessment for Pension Credit is (currently) not an easy task.

Then, as I was listening to the World Cup Draw, this message arrived in my inbox. I have only amended it by putting in bold my answers to yes/no questions.

Why paying pension credit automatically couldn’t happen today

Dear Henry Tapper,

With reference to Daily Mail article: “Pension credit payments should be automated for clearly needy people”, bTanya Jefferies for published: 08:24, 31 March 2022

I make the following observations:

  1. Pension Credit is a means-tested benefit that requires a household’s private income and savings to be declared to ascertain eligibility, of a payment value between the old Basic State Pension and the maximum ‘credit’ payable. Agreed? Yes or No
  2. Housing Benefit requires the same types of household financial information. Agreed? Yes or No
  3. DWP will have knowledge of a person’s pensionable age and the amount of weekly State Pension they are receiving (paid 4 weekly). Agreed? Yes or No
  4. HMRC will be aware of a person’s taxable income, which will include private pension(s) sources, and based on that information will issue tax codes to the private providers to deduct any tax due at source, thereby deposits of private pensions into bank accounts will always be net if there is any tax due. Agreed? Yes or No
  5. Against a person’s NI number the passing of such financial information between DWP & HMRC is automatic. Agreed? Yes or No
  6. What neither agency will have access to is a person’s current account bank balance, the value of any cash for emergencies held external and in addition to bank statement values, and the value of all savings held. Agreed? Yes or No
  7. Nor will either agency be aware of a potential claimants household living arrangements, where cohabitation with a non-relative will require their financial details (bank account, savings and income) to be declared and combined with that of the claimant. Agreed? Yes or No
  8. As with Housing Benefit, any changes in household circumstances DWP must be informed to re-assess entitlement & revalue the Pension Credit award up or down. Agreed? Yes or No
  9. Thus, the vital information that grants entitlement to Pension Credit and works out the amount to be paid and allows continuity of payment is exclusively held by the individual making the claim, and not held by any Government department. Agreed? Yes or No
  10. Therefore, in the context of the above and especially point 9., the payment of Pension Credit cannot be made automatic because though a financial need may exist there is never “a clear entitlement”. Agreed? Yes or No

Would very much appreciate a reply so as to pin-down the administrative facts of Pension Credit and to put me right where I have got things wrong!

My answer – you are right, but I am not wrong!

. I know the difficulty ahead, automation is so much harder than demanding automation.

So much harder…

The problem is so much harder than a glib pronouncement that “we should automate pension credit”  suggests. But it is not a reason not to try.

The last official study into pension credit participation is now ten years old. Lucy Radford’s work is still available on the web. This study considered whether it is possible to use data held by the DWP and HMRC to pay Pension Credit directly to customers deemed eligible but not receiving it, without them first having to make a claim.

Those obvious candidates were paid Pension Credit and then had the payments turned off. One group were left to make personal claims – only 8% did so. Another group had visits from the DWP, even then only 13% continued a claim. Lucy Radford found that even following the study payments, perceptions of ineligibility and of not needing the additional money remained strong barriers to claiming

Unsurprisingly , the DWP did not adopt the pilot, presumably agreeing that the cost of increasing participation either through auto-payment or DWP visits was too high. It is so much harder than easy comments can admit.

 But not impossible…

The fact remains that there are up to 850,000 households in the UK where pension credits aren’t being made. This isn’t a Martin Lewis, or a Daily Mail or even a Henry Tapper statistic, it is a DWP estimate based on data they hold.

We might ask if they know about the problem, why can’t they engineer a solution and the answer is again not simple. It will take time, technology and considerable endeavor to get there but I believe that if we set a target of “within five years”, brought the technology to bear that has given us open banking, real time information and will give us a pension dashboard, we can at least automate those parts of the process that get us to a simple estimate of whether a claim is likely to succeed

There is never a clear entitlement under the current system without accessing more information than is available to DWP through its databases. But that does not stop us moving on from the Radford report in 2012 and finding a way to provide a solution that works 90% of the time.

Even if such a system gave rise to the occasional payment of a means tested benefit to a person not entitled to it, wouldn’t it be worth considering the feasibility of a 90% solution that saved the DWP its current cost of assessment.

We have only started joining up the information that is available to Government. The pension credit claim system was designed when much of what we take for granted by way of data access, was out of reach. Within five years, what I am writing today will look feeble by comparison of what is then available.

We must plan on the assumption that solutions will emerge, not on the basis that participation rates are increasing slowly but that up to 850,000 households missing out is ok. I know that the DWP don’t think this , but I suspect that many people who work in pensions are saying this is someone else’s problem. I don’t think it is.

Is there the will?

My correspondent is clearly well-informed, there are many people who are and who work for Age Concern, Age Partnership, the Citizens Advice Bureau and charitable groups we don’t hear about so much.

While researching this subject since my meeting with the Minister, I have been introduced to the work of the Manchester Ageing Hub which from a standing start has put £3m a year into the back pockets of Mancunian pensioners by increasing pension credit take up.

Where there is a will, there is a way. We just need to find that way. That’s what I’ll be saying to Paul Lewis this morning. Tune into Radio 4 at 12pm today  or listen to today’s show on BBC Sounds. 

Written Saturday 2nd April 2022.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to Paying pension credit automatically….

  1. Quick correction, 10p a week is the minimum payment.

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