Guaranteed Minimum Pensions Increase Order 2009

My Lords, I am satisfied that the orders are compatible with the European Convention on Human Rights. The uprating order will increase most national insurance benefits by the retail prices index for last September, which was 5 per cent, and most income-related benefits will increase by the Rossi index, which is the retail prices index excluding rent, mortgage interest, council tax and depreciation and was 6.3 per cent on the same date. The Guaranteed Minimum Pensions Increase Order provides for contracted-out defined benefit schemes to increase their members’ guaranteed minimum pensions that accrued between 1988 and 1997 by 3 per cent. Increases are capped at this level when the retail prices index exceeds 3 per cent. This year, the uprating order that will come into effect from April will add almost £6.2 billion to government spending. Of this, almost £4 billion will go to support pensioners, £1.2 billion to working-age people, £890 million to disabled people and carers and a further £70 million to children. The basic state pension will increase by £4.55 for a single pensioner to £95.25 a week. A pensioner couple will see an increase of £7.25 a week to £152.30. These increases are, against a backdrop of falling inflation, in line with the highest increase in inflation last year. For pensioners on the lowest incomes, the order will increase the standard minimum guarantee in pension credit by £5.95 to £130 a week for a single pensioner. Couples will see an increase of £7.25 to £198.45 a week. These increases are the highest since pension credit was introduced in 2003. This year, we will be spending more than £13 billion more on pensioners than if we had continued with the policies that were in place in 1997. Pensioner households are on average £1,600 a year, or £31 a week, better off and the poorest pensioner households are on average £2,200 a year, or £42 a week, better off than they would have been under the 1997 system. We have taken further action this year to help pensioners. For example, this winter we have increased the winter fuel payments by £50 for households with someone aged 60 to 79 and by £100 for households with someone aged 80 and over. We are helping further by making an additional Christmas bonus payment of £60 this year. This takes the total value of the Christmas bonus for 2008-09 to £70. This additional support will not just help pensioners; it will help all of the 15 million people who receive the Christmas bonus, including those people receiving disability or bereavement benefits. Noble Lords may have seen a Written Statement tabled by my honourable friend in the other place that relates to issues concerning payments of invalidity allowance to pensioners from April 2009. The Statement highlighted a technical error that means that some pensioners might not receive correct state pension payments from April. Around 45,000 people may be overpaid and around 25,000 underpaid, depending on their circumstances. The weekly overpayments will range from 5p to a maximum of £3. The maximum underpayment will be £1.80 a week. Any customer who has been underpaid will receive the arrears owed to them. We will not seek to recover any overpayments. Customers need not take any action. As people become pensioners from April 2009, they should automatically move on to the higher rate of invalidity allowance paid to pensioners. Because the uprating order for this year does not provide the statutory basis ordinarily needed to make these higher payments, we shall be making them on an extra-statutory basis in the coming tax year. Around 7,000 customers are affected with payments worth in total around £350,000. I can assure noble Lords that the Pension, Disability and Carers Service will identify and correct cases as soon as possible and contact all of those concerned to explain their position. The uprating order before us today also increases working-age benefits. Most working-age income-related benefits will increase in line with the Rossi index of 6.3 per cent. We use the Rossi index to increase most income-related benefits because housing costs are usually met separately by those benefits. This year’s increase means that, for example, the personal allowance for a single person over the age of 25 will increase from £60.50 a week to £64.30. The amount for a couple will increase from £94.95 to £100.95. Families who receive income support or jobseeker’s allowance will continue to see the full value of any increase in their child tax credit because their child-related allowance will increase in parallel with child tax credit rates by almost 7 per cent from £52.59 to £56.11. From April, incapacity benefit will be increased by the same measure as employment and support allowance, the Rossi index, so that, over time, all customers in similar circumstances will receive the same level of support. Incapacity benefit customers with an age addition will not, as originally suggested last summer, have their benefit rates frozen. Instead, such customers with an age addition will see their overall benefit increase by at least half of Rossi; that is, 3.15 per cent. This means that they will not receive less than £95.15 a week, which is the same amount of incapacity benefit as received by someone in the support group getting contributory employment and support allowance. I hope that noble Lords will welcome these increases at a time of economic downturn. The cost of uprating benefits for next year is almost £6.2 billion and will take total benefit expenditure for the next financial year to an estimated £142 billion. I commend the orders to the House.