The delivery of Pension Credit: Where is the problem? – An alternative view

 

DWP anticipate a diminishing problem – Sidney asks if pension credit take-up is a problem at all

This post has been sent me by Sidney Harlow (about whom I know nothing but that he lives in Reading). Thank you Sidney for expressing a view that I publish verbatim. I don’t share this view but I suspect it is shared by a large minority and possible a majority of people in the UK. The blog asks “where is the problem ” with pension credit take up at current levels. Is Sidney right and am I wrong?

Sidney calls at the end for “Comments for Discussion”, you can of course comment either anonymously or in person, at the end of this blog. Or you can send your views to me , henry@agewage.com and I’ll forward them to Sidney.

 


The State Pension, whether old Basic or New standard rate, only requires the establishment of a NI contribution record to determine which one the person receives and the value of payment at the point of their State retirement age, thereafter uprated automatically by the Chancellor’s autumn statements.

Once claimed receipted payments are automatic every four weeks until the person dies. Other than change of address and which bank account to credit they don’t have to provide any further information!

Whereas any state benefit that is ‘means tested’ requires a constant stream of financial details to keep the payments on-going and accurate, correcting over-payments and under-payments in response to information (‘changes in circumstances’) passed on by the claimant. State Pension is a one off data capture, Pension Credit is not. Therein lie the difficulties! Agreed? Yes or No

Meaning: the amount of income & savings that grants a level of Pension Credit is only for the period where there is no change in the financial circumstances of the household; it is a mere snap shot and has to be updated with further snap shots.

For example: When someone moves into the household, or moves out the DWP must be informed so that a re-calculation can be done on the amount of Pension Credit going into the household, either down or up, and it only requires a small money inheritance to disqualify entitlement altogether.

Thus, the administration of Pension Credit is trying to hit a moving target of entitlement. Once that is understood you should realise that looking to technology to bridge the data gaps is a non-starter. The individual will always hold the vital information and must be required and prepared to given it up, which based on the take-up issue, should inform you that some individuals are just not prepared to divulge their incomes and savings. They want the money with no means test and no further questions asked. I’ve paid a lifetime of taxes, I want my money back!

Yet the main problem with the lack of take up appears from research to be that of ignorance, not in the stupidity sense but in the not knowing sense. That ‘not knowing’ is the result of lacking curiosity to find out how the welfare system works in general and which aspects are likely to become more relevant over one’s lifetime. There is little understanding that N.I. cash deducted contributions pay for current account State Pensions; that there is no State ISA with their name on it!

Unless a person is going to remain in employment until they drop down dead they will have an expectation to retire from paid work. The question should then arise: where is the money going to come from to finance their continued expenditures and will it be enough? Well before actual retirement they should be, but apparently isn’t, the motivation and curiosity to find out what monies can be secured to finance their lifestyle and for how long after their working & earning life is over.

Simple Curiosity test: using internet Google search, merely typing the word “pension” displays a list sufficient to motivate further clicks, especially a box of options headed ‘Related Searches’ where there is the option named Pension Credit, click on that and the new page displays Pension Credit: Overview – GOV.UK and states Pension Credit gives you extra money to help with living costs if you’re over State Pension age and on a low income. Pension Credit can also help with ….. Does the person click to find out more or should they stop before their brain becomes overloaded with useful information?

It is curious to note that Housing Benefit, being also a means-tested benefit, requires the same household financial details, income & savings, from the claimant, and which require the same timely updates in response to ‘Changes in Circumstances’ as Pension Credit, but there appears to be little or no problem with pensioners accessing and receiving financial help for the payment of their rent.

Could it be because securing monies to keep the roof over one’s head is judged important enough to expect State support and considered more important than any (false) pride that could prevent applying and receiving Housing Benefit? Just a thought.

Moreover, someone aged 62 and renting into their retirement but yet to claim their State Pension, who has taken private pension lump sums to finance their rent until they can claim it, will find their savings wiped out if they didn’t make a claim for Housing Benefit. For example: if they start with a savings total of £64,000 and their PCM rent is £750, with an annual rent increase of 3.27% taking their rent to £850 a month in five years would eat up £48,005 of their savings, which would then be reduced to £15,995. Being below £16,000 they would then qualify for Housing Benefit, which combined with their then claimed State Pension, would willingly apply for HB to prevent further erosion of their savings. The same necessity driver doesn’t appear to be evident with the reluctance to seek out and claim Pension Credit. Could mean that ‘entitlement’ doesn’t always = need!                 Just another thought.


To reiterate: on the one hand there is acceptance by pensioners of means testing for Housing Benefit, but on the other hand they can reject the same administrative process, of form filling the same personal details and updating, for Pension Credit! If such reasoning holds true then there is no way that Government policy on the administration of Pension Credit ‘take up’ can counter such mental gymnastics’.

Thus, the comparison between Pension Credit and Housing Benefit establishes that within their respective benefit formulas the determinants for entitlement and amounts paid out are the levels of income and savings, which remain privately held until they are declared in an official claim form. Agreed? Yes or No

Given that the Government’s National Average Income Surveys cannot data capture these two benefit determinants because they are out of reach of HMRC and DWP, the Treasury do not have the information to estimate how many pensioner households are at a qualifying level for Pension Credit or by how much they would financially benefit if they made a successful claim? Do you agree with the logic? Yes or No

Therefore the “estimated 850,000 eligible households missing out on Pension Credit” has no credibility because the household income and savings data to support that conclusion is just not there, is it? Agreed? Yes or No

Furthermore, the often-quoted amount of Pension Credit monies going unclaimed is notional and not actual, and for the same reason as above: the data is not there!

Treasury underspend is not any indicator of needs unmet no more than an overspend an indicator of an insufficient budget, or a balance budget an indicator of all needs met; they are merely the results of subtracting from what funds were set aside and made available for the purpose intended during an accountancy period. Pensioner household financial need exists independent of what monies are available; the two are not linked in the manner perceived, though I know this is counter-intuitive to argue.

If the number of pensioners claiming Pension Credit exceeded the budget set aside would the latecomers be turned down because the money running out indicated that financial need had been met? Therefore if an exhausted budget is no indicator of needs met then, conversely, a budget surplus of itself is no indicator of needs unmet. Agreed? Yes or No

To emphasise the point being made: If Treasury were to set the Pension Credit budget based on the actual value of payments made from the budget for the previous financial year, so that there was no indicator of a underspend balance being brought forward on the balance sheet, there could be no estimate of how many pensioner households could be eligible.   Agreed? Yes or No

Such reasoning and conclusion raises the question has anyone any idea how large the problem of take up actually is or even whether there is a problem at all?

That is not to argue that need does not exist but that the remedy of motivation to seek out State help and secure it must lie with the ‘householder’ as it does with other means tested benefits like Housing Benefit.

 

Comments for discussion?

 

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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8 Responses to The delivery of Pension Credit: Where is the problem? – An alternative view

  1. Derek Scott says:

    I am fortunate to live in a country where three of the major political parties included aspirational references to the development of a Minimum Income Guarantee in their manifestos for last year’s national elections.

    https://www.gov.scot/publications/minimum-income-guarantee-steering-group-background-on-minimum-income-guarantee-and-basic-incomes/

    The idea of a pensions credit top up seems to me to be a rather “top down” solution to some of the inequalities of income distribution and pensions policy, whereas a Minimum Income approach offers more of a “bottom up” approach in these times when so-called “levelling up” seems to mean different things to different politicians.

    But I agree that minimum income top ups will still require some form of periodic review, with inputs from the recipients and those eligible to receive, at least where we still have the current mixed/disintegrated system of PAYE, self-assessment and DWP benefit payments. I don’t share Mr Harlow’s belief that the remedy of motivation to seek out State help and secure it must lie with the ‘householder’. I’d like to think social workers, certain charities and others (even a few enlightened employers or through individual pro bono interventions) can also play a part in raising awareness and in securing additional income where it is most needed.

  2. K M Jeary says:

    If the point that the article makes ie that housing benefit has a much higher takeup than pension credit and requires roughly the same data, should not the system automatically assess whether or not somebody is entitled to Pension Credit when their eligibility for housing benefit is assessed?

    • It’s been tried with limited success, when recipients had to make a formal application after some months of automated payment. The real problem area is homeowners however.

  3. I think this raises, or illustrates, some valid points and some opinions which deserve a considered response.

    “… any state benefit that is ‘means tested’ requires a constant stream of financial details to keep the payments on-going and accurate, correcting over-payments and under-payments in response to information (‘changes in circumstances’) passed on by the claimant. State Pension is a one off data capture, Pension Credit is not. Therein lie the difficulties! Agreed? Yes or No”

    It’s true, but it’s not the difficulty. Any means tested system must respond to changes in circumstance. The length of time used to assess needs and means will always be a trade-off between accuracy, responsiveness and administrative cost and convenience. Some systems average everything annually and only check once a year. Pension credit is, like most of the, now old, legacy benefits, based on a weekly test; although in practice that’s honoured more in the breach.

    “Yet the main problem with the lack of take up appears from research to be that of ignorance, not in the stupidity sense but in the not knowing sense. That ‘not knowing’ is the result of lacking curiosity to find out how the welfare system works in general and which aspects are likely to become more relevant over one’s lifetime.”

    It’s not realistic to expect people to exercise ‘curiosity’ about everything in the world around them. Pushing information more effectively to people about the sorts of things which might affect them is a more targeted approach. In the same way that people who become pregnant get given everything from baby boxes to maternity benefit advice, older people should get pushed Pension Credit information; crucially with some examples of the types of money and people involved.

    “It is curious to note that Housing Benefit, being also a means-tested benefit, requires the same household financial details, income & savings, from the claimant, and which require the same timely updates in response to ‘Changes in Circumstances’ as Pension Credit, but there appears to be little or no problem with pensioners accessing and receiving financial help for the payment of their rent”.

    A very high proportion of tenants have social landlords, like councils and housing associations. They’re very keen to get their rent paid, so they employ teams of benefit advisers to work with tenants. That makes a difference.

    “Moreover, someone aged 62 and renting into their retirement but yet to claim their State Pension, who has taken private pension lump sums to finance their rent until they can claim it, will find their savings wiped out if they didn’t make a claim for Housing Benefit.”

    They’d be very unwise to do this; untaken pension savings aren’t taken into account for benefits until state pension age. HB entitlement is the answer again. Should the pension provider be doing more to protect people doing this?

    “To reiterate: on the one hand there is acceptance by pensioners of means testing for Housing Benefit, but on the other hand they can reject the same administrative process, of form filling the same personal details and updating, for Pension Credit! If such reasoning holds true then there is no way that Government policy on the administration of Pension Credit ‘take up’ can counter such mental gymnastics’.”

    It tends to be different people claiming one and not claiming the other.

    “Given that the Government’s National Average Income Surveys cannot data capture these two benefit determinants because they are out of reach of HMRC and DWP, the Treasury do not have the information to estimate how many pensioner households are at a qualifying level for Pension Credit or by how much they would financially benefit if they made a successful claim? Do you agree with the logic? Yes or No”

    No. The estimates are modelled pretty well, and I’ve looked at the processes and results over many years.

    “Therefore the “estimated 850,000 eligible households missing out on Pension Credit” has no credibility because the household income and savings data to support that conclusion is just not there, is it? Agreed? Yes or No”

    No.

    “If the number of pensioners claiming Pension Credit exceeded the budget set aside would the latecomers be turned down because the money running out indicated that financial need had been met? Therefore if an exhausted budget is no indicator of needs met then, conversely, a budget surplus of itself is no indicator of needs unmet. Agreed? Yes or No”

    No. Of course the planners assume a level of take-up when budgeting but there’s no question of limiting the claim numbers.

  4. Richard Chilton says:

    The numbers of people eligible for Pension Credit has gone down in recent years and is likely to continue going down, driven by things like the increase in women’s state pension age, the New State Pension and the change to eligibility criteria for mixed age couples. However, there are still many not claiming who could be claiming. I can think of a couple of possibilities for identifying those who could be encouraged to claim.

    Some of them are ones who are newly retired but don’t qualify for a full state pension. These can often be people who came to the UK during their working lives, sometimes in their 50s, and have not been able to build up much if any state pension before reaching state pension age. They will often be in poorly paid jobs, renting their homes and have English as a second language. Some of them know nothing at all about state benefits. The government should be able to identify those who reach state pension age without qualifying for a full state pension. In some cases, it will also know who is married and living together from tax and other state records. A personal approach may be needed with potential claimants who may not be able to understand official booklets in any language.

    Older people who start to qualify for Pension Credit may be ones who have just been widowed and are only eligible for the old basic state pension. Some of them may be home owners who know nothing about means tested benefits, having never claimed any. The government will often know of the bereavement through the Tell Us Once service and will have tax records for the surviving partner. Again, a personal approach to such potential claimants may be needed.

    Such initiatives will never be perfect, but they could be tried as a way of increasing the percentage of eligible people claiming.

    • henry tapper says:

      Thanks Richard, some really interesting lines of inquiry here. Gareth and I are off to the DWP to talk about it this morning , – i will quote you,

  5. Ant Donaldson says:

    My response isn’t as detailed nor as eloquent as the previous responses. Essentially blaming potential claimants for not claiming their entitlements puts individual interest over collective responsibility, assumes a level of bureaucratic competence and confidence many don’t have and perpetuates the myth of perfect information across society. We are talking about the vulnerable in many cases here, so the job is to help them avoid penury in old age, not doubt their existence until they make a successful claim.

  6. henry tapper says:

    Thanks Ant

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