Pensions Bill

moved Amendment No. 20: 20: Clause 5, page 6, line 40, at end insert— ““150B Annual up-rating of earnings disregards of state pension credit (1) The earnings disregards shall be raised to— (a) £20 for a single person’s earnings; (b) £30 for the earnings of a couple; and (c) £40 where a single person or one or more of a couple— (i) qualifies for one or more of the following— (a) adult disability premium (whether or not the higher pensioner premium is applicable); (b) carer’s premium or carer’s allowance; (c) higher pensioner premium; (d) long-term employment support allowance; (e) severe disablement allowance; (f) attendance allowance; (g) disability living allowance; (h) war pensioner’s mobility supplement; (i) disability or severe disability elements of working tax credit; or (ii) is a single parent; (iii) is or are registered blind; (iv) is or are a part-time firefighter; (v) is or are an auxiliary coastguard on coast rescue activities; (vi) helps or help to operate or launch a lifeboat; or (vii) is or are part of any territorial or reserve force. (2) The Secretary of State shall, before the start of the first tax year after the coming into force of subsection (1) above and before every tax year thereafter, review the amount of the earnings disregards in order to determine whether they have retained their value in relation to the general level of earnings obtaining in Great Britain. (3) Where it appears to the Secretary of State that the general level of earnings is greater at the end of the period under review than it was at the beginning of that period, he shall lay before Parliament the draft of an order which increases the amounts referred to in subsection (1) above by a percentage not less than the percentage by which the general level of earnings is greater at the end of the period than it was at the beginning. (4) The Secretary of State may, in providing for an increase in pursuance of subsection (3) above, adjust the amount of the increase so as to round the sum in question up or down as he thinks appropriate. (5) If a draft order laid before Parliament under this section is approved by a resolution of each House, the Secretary of State shall make the order in the form of the draft. (6) An order under this section shall be framed so as to bring the increase in question into force in the week beginning with the first Monday in the tax year following that in which the order is made. (7) For the purposes of any review under subsection (1) above, the Secretary of State shall estimate the general level of earnings in such manner as he thinks fit.”” The noble Baroness said: In moving Amendment No. 20, I shall also speak to Amendment No. 25. On Amendment No. 20, whatever we do when we debate social security uprating, which we do every year, we almost invariably fail to uprate disregards. I am hoping for support here from the noble Lord, Lord Kirkwood, who I know has been involved in these debates in the other place on many an occasion. Thirty years ago, the disregard for a single person in retirement was£4. Twenty years ago it was £5—£10 for a couple—and it has not changed since. It is worth less than an hour’s work a week at the minimum wage for a single person, or an hour and a half or so for a couple if one of them is working. Amendment No. 20 would raise the level of disregard so that a woman in her 60s could, if she chose, clean for three hours a week, or a man could do two hours or so a week of gardening—I am sorry; these are very gendered examples—without endangering their pension credit. That is probably good for their health and for socialising with other people, as it gets them out of the house; it is certainly good for their income. I would argue that this is in effect a nil-cost amendment. Either people do not do the work because of the fear that it may jeopardise their benefits, or they do it for cash in hand and do not declare it, thus entering the territory of fraud. What they do not do is earn the money—we are talking about modest sums here—declare it, and then see it knocked off their benefit. Why would they bother? The amendment would allow us to revisit disregard levels. The Bill would remain unchanged, so the amendment would have nil cost. No additional benefit money would be paid out, and no one would have any benefit knocked off because they were declaring it, so far as I am aware. We would have helped to take some potential for fraud out of the system, which is a good thing, and helped modestly to improve the financial circumstances of retired people. Amendment No. 20 suggests a very modest disregard on earnings. Amendment No. 25 seeks to address a related issue—the disregard on capital. At the moment, one can trivially commute a small private pension worth up to £15,000 in total, which I calculate—perhaps the noble Lord, Lord Oakeshott, can help me here—would buy an annuity of less than £1,000. Pension providers would not be particularly keen to handle such small sums. In any case, it may be the only sum of capital that many people experience in their working lives, and it would allow them to get work done on the house, or whatever, when they come to retire. If they claim pension credit, the first £6,000 of any such sum is free. Thereafter, a notional income of £1 for every £500 is attached to the capital, which in effect wipes out the lump sum at around £12,000 to £15,000. The same notional rules apply to housing benefit and council tax benefit, but there we also have a very belt-and-braces approach—a capital limit of £16,000. This means that anyone with a small personal pension—say, an older woman who in years to come fails to opt out of a personal account—comes below the trivial commutation rules and can then find her pension is deducted almost pound for pound against income-related benefits, particularly if she is a tenant. So she should never have saved at all. She would effectively have been, through inertia, mis-sold a personal account pension because she did what we wanted her to do and did not have sufficiently detailed financial advice to discourage her from doing it. To avoid these problems, we need some headspace to make small pensions worth having. It is curious that we have quite stringent capital rules for private pensions. You can commute only up to £15,000 and only the first £6,000 is disregarded. Thereafter, you have a quite steep taper. We disregard it with quite tough rules for private pensions, but the same stringency does not apply to the basic state pension. If someone with a full basic state pension record carries on working, drawing the BSP may be deferred for, say, five years. At that point, a person can either take an enhanced basic state pension, worth about 10.7 per cent a year for each year, or have it rolled up into a lump sum which could be worth up to £40,000. I was party to this and I am delighted that we did it: we introduced the lump sum alternative precisely so that people who have never had the chance to accumulate capital might, as they go into retirement, have a lump sum allowing them to fix the roof, replace capital goods and so on, which would be great. Income from a deferred basic state pension is set against pension credit and other income-related benefits, and probably will cost most of a person’s income-related benefits. It is a bad buy for most people who might otherwise be on benefits, just as with private pensions. But here is the anomaly: if a person takes the money as a lump sum, it is disregarded entirely, but it is counted if taken as income. Effectively, there is a £40,000 capital disregard if your pension sum comes from a basic state pension, but only a £6,000 capital disregard if it comes from a stakeholder or personal account. I do not want to take that lump sum disregard away from the basic state pension: I want to extend it to small private pensions, so that just as the BSP disregard encourages people to have extended working lives, so the private pension disregard could and should encourage people to extend their savings. Ultimately, I would like to see those capital disregards equalised and not taken into account for income-related benefits. Given the anomalies that we currently have, I hope that the Minister will agree. I beg to move.