Work and Pensions Committee
Oral evidence: Pensioner Poverty: challenges and mitigations, HC 465
Wednesday 18 December 2024
Ordered by the House of Commons to be published on 18 December 2024.
Members present: Debbie Abrahams (Chair); Johanna Baxter; Mr Peter Bedford; Steve Darling; Damien Egan; Gill German; Amanda Hack; Frank McNally; John Milne; David Pinto-Duschinsky.
Questions 1 - 37
Witnesses
I: Carl Emmerson, Deputy Director, Institute for Fiscal Studies; Daniela Silcock, Independent Pensions Research Consultant, Pensions Policy Institute; Peter Matejic, Chief Analyst, Insight and Policy, Joseph Rowntree Foundation; and Carole Easton, CEO, Centre for Ageing Better.
II: Caroline Abrahams, Charity Director, Age UK; Morgan Vine, Director of Policy and Influencing, Independent Age; Adam Stachura, Associate Director of Policy, Communications and External Affairs, Age Scotland; and Jonathan Safir, National Administration and Information Manager, National Pensioners Convention.
Witnesses: Carl Emmerson, Daniela Silcock, Peter Matejic and Carole Easton.
Q1 Chair: Welcome to the first evidence session for the pensioner poverty inquiry. I am delighted to welcome our guests today. We have Carl Emmerson, Daniela Silcock, Carole Easton and Peter Matejic. Carl, please introduce yourself and then we will go down the line.
Carl Emmerson: I am deputy director at the Institute for Fiscal Studies, and I am one of three people leading our current pensions review. I should probably add that I am a member of the Social Security Advisory Committee, but I am here 100% in my capacity as deputy director at IFS.
Daniela Silcock: I am an independent researcher and director of Daniela Silcock Pensions Research. I have about 20 years’ experience in pensions and policy research.
Carole Easton: I am chief executive of the Centre for Ageing Better.
Peter Matejic: I am chief analyst at the Joseph Rowntree Foundation, focusing on poverty.
Q2 Chair: Welcome to you all. I will kick off. Could you tell us what led to the fall in pensioner poverty from the late 1990s and, again, what related to the increase in pensioner poverty since 2013?
Carl Emmerson: Pensioner poverty in the UK, if you go back many decades to the ’60s, ’70s and ’80s, was very, very high. There have been big successes since then, both in better operation of the private pension system and better operation of the state pension system. Since the mid-’90s and the early 2000s, there was the increase in support provided through means-tested benefits—in particular, the introduction of pension credit was a big part of that—and pensioner poverty fell.
We have reached a level where pensioner poverty is now lower than it is among the working-age population, so a pensioner is less likely to be in poverty than a working-age adult or a child. That is a big success. Over the last decade, there has been a slight rise in pensioner poverty. Part of that is because of employment growth. While earnings growth has been pretty terrible since the great recession, there has been a lot of employment growth in the UK. That has benefited the working-age population but has been of less benefit to the pensioner population. Secondly, I would point to the fact that the pensioner poverty rise is among those in rented accommodation. In particular, you see people in the private rented sector and the social rented sector increasingly more likely to be in poverty than they were in around 2010.
Q3 Chair: You have answered the question in terms of how it compares to other cohorts. So you are saying that proportionately pensioners are less likely to be in poverty than children and working-age adults—is that correct? What about disabled people?
Carl Emmerson: Disabled people are a bit more complicated, because, of course, it is hard to know—you are comparing the income of households, and the needs of households for people with disabilities may be different. Do we know that disabled people have higher levels of poverty? They clearly have other challenges, as well as the household income. It is a much more complicated picture.
Q4 Chair: What about indicators, in terms of what we focus on to understand what is happening in pensioner poverty? How do those compare with metrics, for example, around child poverty?
Carl Emmerson: Others may be better—
Daniela Silcock: I have that information here. All of the stats that I am quoting are after housing costs, which makes the most sense because people might have high housing costs. We have 20% of working-age adults in relative poverty and 17% in absolute, and then 30% of children in relative poverty and 25% in absolute.
While pensioners as a whole may have lower rates of poverty, we still see much higher rates of poverty distributionally among older pensioners, women, disabled people, carers and ethnic minorities. There are still quite a few worrying cohorts, particularly those who are claiming state pension under the old system, pre-2016, where they are getting a basic state pension and then top-ups from the earnings-related element. Pensioners are a group that span 20 to 30 years, so we cannot necessarily group them together in terms of comparisons.
Carole Easton: I agree with Daniela that there is a huge risk of talking about pensioners as one group. We would not talk about any other age group in that way. We must allow for diversity, and we know that the number of people over 65 in poverty is growing and that that trend is set to increase, because the people most likely to be in poverty are aged 60 to 64. So, very shortly, they will be pensioners.
That is why I am delighted you are running this inquiry. That number is set to grow, with the impact of what is happening to people this side of pension age as they move into pensions. I would add to that the group of people who are not working at the moment—so looking at economic inactivity and because of the demographic trends in this country of growing numbers of older people, more people living alone and housing costs. In fact, the number of people renting is, as you say, a burden potentially on future poverty, but there are also people in owner-occupied who will have mortgages later in life because they started later in life. The trends are very worrying and that is why we need to look at the impact before and post-pension age.
Chair: Peter, do you want to add to that?
Peter Matejic: Yes, just on the trends between child and pensioner poverty, which are both up over the last decade. It is very small—about a 3 percentage point increase—but if you look at a consistent group of 65 and over, that is close to 700,000 more pensioners in poverty than a decade ago. Obviously, there is an ageing population, but that is still 700,000 people who are below the poverty line.
Other metrics agree. We have something called the Social Metrics Commission measure, which has gone up, and also the number of pensioners below our minimum income standard has gone up. We work with Loughborough to calculate that, which has the cost of living factored in. That has gone up even faster. There definitely is a growing problem and, as Carole says, it could be growing in the future as well.
Q5 Steve Darling: You have already started to pick some of this apart for us. It is really about getting more of the detail of which groups of pensioners find themselves in poverty. In my Torbay constituency, we have a higher number of 80-year-olds, which is more where the country will be in a few years’ time. Also, I am very much alive to the fact that, quite often, when pension companies are reflecting on what pension income you require, they do not necessarily factor in the cost of housing—we had some evidence the other week from pension companies—and yet if you are renting a property, particularly in the private sector, that can be a significant part of your household costs. Can you unpick and explore that a bit more for us?
Carl Emmerson: Absolutely. I agree with Daniela that those who reached the state pension age before 2016 faced a state pension system that had a smaller flat rate component than the one since 2016. If you are in receipt of a full new state pension on your own and you have no housing costs, you are above the poverty line. Therefore, older pensioners who were not able to receive that are clearly more at risk of being in poverty.
Another way of getting yourself into poverty is not to receive a full state pension, being on a low income and being entitled to pension credit but not taking it up. We know that pension credit take-up is nowhere near complete. And the private rented sector is a big issue—if you are receiving the full new state pension as a new pensioner but are in private rented accommodation—as there are many areas, particularly in the south of England, where pensioners live and find that their housing benefits do not cover their full rent. That is essentially leaving their after-housing costs income below the standard poverty line.
Daniela Silcock: There are a few demographic groups that are important to look at—so women and single women, in particular, and this ties in with older pensioners. Women live longer than men and are more likely to be single when they are older. Women—particularly today, but not necessarily as much in the future—are more likely to have much lower levels of pension entitlement than their male partners. If there is a bereavement or divorce, they may end up on a much lower income.
As I said—and as Carl also said—it is about being under the state pension system previous to 2016. Just to give you some figures on this, the current new state pension level is £221.20 a week, and then the basic state pension is £169.50 a week. Why this matters is because the full new state pension is triple locked, so it goes up by that lock every year, whereas the basic state pension goes up by the triple lock, but then any additional amount that pensioners have from additional earnings-related state pension or S2P will go up only by CPI, so they see a larger portion of their income eroding.
I also wanted to mention ethnic minorities. While 16% of white pensioners were in poverty in 2022, 33% of Asian or Asian British pensioners and 30% of black or black British pensioners were in poverty.
I have some figures for renters. It is considered that so long as you are spending 30% or less of your income on rent, that is affordable. The average private sector rental at the moment in the UK is around 34% of the average income. In London, it is much starker. The average private sector rent in London is £2,172, compared to the average for England, which is £1,100. Therefore, we are seeing clusters of pensioners in the private rental sector or younger people who will be pensioners, particularly in London, who will struggle in the future.
Carole Easton: Could I add a couple of things? I agree completely with everything Daniela said. There are geographical variations. Although London and the south-east are supposed to be considered one of the most affluent areas, in fact the rates of poverty are among the highest. That could well be to do with property costs. As much as the incidence in private rented is often higher, and the demand on people may be perceived as being higher, we know that of the 1.9 million people in poverty, 1.2 million may be owner-occupied. So even if you own your own home, it does not necessarily protect you from living in levels of poverty.
I do not think we have mentioned carers, which again is a very vulnerable group, particularly intersecting with women, who are more likely to be carers. Again, to bring this back to the prevention agenda, because it is so important that we don’t just keep adding people to this group—that is why any review of this needs to start before 65, 66 or 67—there are people who have fallen out of work due to ill health or other reasons before pension age, because they are then starting at a huge disadvantage even before drawing their pensions.
Peter Matejic: Having a private pension income is important. Basically, over a third of pensioners who don’t have a private pension income are in poverty, whereas 10% of pensioners who have a private pension income are in poverty. The importance of things like auto-enrolment are critical as well.
Q6 David Pinto-Duschinsky: Thank you. That was incredibly elucidating, and it provides a clear segue to the questions I want to ask, building very much on Steve’s questions. Listening to you, it sounds like there are a series of underlying drivers for pension poverty. It sounds like the headline broadly—not quite, but summarising roughly—is that it is half the level of child poverty. However, there are pockets, and it sounds like the problems you have identified are these: there is a housing problem, there is a London problem, there is a carers’ problem and there is a pre-retirement problem, which is driving a lot of people coming in with inadequate provision, either because they don’t have a private pension or because their incomes fell long before they hit pensionable age.
From your standpoint, do you see any other big drivers? The big question is this: if this is the pattern, what is driving it underneath? It sounds like housing is a key part of it, but what big drivers would you identify, and what are the levers you are trying to pull to address this?
Daniela Silcock: There is an upcoming issue, which is that we are seeing higher levels of economic inactivity preceding state pension age. We are also seeing more people accessing their private pension savings, so those people are likely to be reaching retirement with less private pension savings than they would have if they had worked. That is because we are seeing the state pension age go up. We are seeing higher levels of caring, and obviously as the state pension age goes up, there are more people with health problems. We are not really seeing a means-tested benefit system that works with those people.
We still have work-first assumptions in the working-age benefits, which means that there are relatively low and punitive levels of benefits before state pension age, even for those who cannot work because of health or caring, which means that they feed into a lower level of income once they reach retirement.
That also plays into the fact that we have an owner-occupier assumption in the benefit system. A lot of the benefits are designed so that you do not have any housing costs—so you can get state pension and pension credit, and not apply for housing benefit and have an income of a certain level. But if you end up having to apply for housing benefits above the state pension level in retirement and you have private pension savings, that will be eroded in the means test. I think part of the issue is that people’s behaviour has changed, but also the way that the system interacts with people in terms of benefits has not caught up.
Carl Emmerson: On the housing issue, Carole is completely right, in that most pensioners who are in poverty are in owner-occupied housing. That is because the vast majority of pensioners own their own homes. Renters are more likely to be in poverty, but they are a smaller group. Policymakers need to worry about that, because the proportion of new pensioners who are renting is growing pretty quickly. It is still going to be a minority of pensioners, but it is going up quite a lot. We have been used to a world where being in the private rented sector was pretty uncommon as a pensioner. That will become an increasing group in society, which we need to make sure that we support.
More generally, when you see someone in retirement who is poor, you need to think “Is it that they didn’t use to be poor, and therefore, perhaps part of the solution could be whether they should have transferred and whether we could have done more to help them transfer their resources from working life to retirement?” So we can help them to make better savings decisions.
But some of them will always have been poor. There are many working-age poor people—hence poverty rates among working-age families are higher. For that group, we need to be careful, because I don’t think transferring more money from when they were working and poor to when they are retired and poor would make them better off. In some cases, they may well have a better standard of living in retirement—even though they are in poverty—than they had in their working life. If you want to help them, you need to think about things that will boost their lifetime incomes in some way, either by making them more productive, helping them work, or by just redistributing more towards them.
Peter Matejic: Yes, I think that is right. On the pension side, it is just about managing that pension over the life course while you are working. Also, people underestimate their likely years of retirement, so that can often run it down too quickly.
The other point is that we are seeing falling healthy life expectancies. That is a worry for older pensioners. The other thing about the pensioner poverty level—you are exactly right about this—is that it is lower than the rate of child poverty, but as a pensioner, once you are in poverty, you are more likely to stay there because your income is flatter. So it is still a persistent problem.
Carole Easton: Yes, that is exactly right. There are prospects when you are a child and an opportunity for things to change. For pensioners, their costs go up but their incomes do not go up to match. For example, we are looking at heating and fuel costs. Recently, there has been a lot of conversation about that, and also that the combination of state pension and pension credit does not take you to the minimum income standard in this country, as defined by the Joseph Rowntree Foundation. The rates are low. The system is hugely complex. The poorer you are, the more complex it is.
Recently, I tried to apply for pension credit just to see how it goes. I failed miserably, but that is because it is complicated. We hear that the numbers of people being turned away are very high. There are things that can be done, as my colleagues have said, post-retirement and pre-retirement to enable people to enter retirement in a better position than we see at the moment.
The inequalities are stark. We have to remember that, and that comparison with children or the talk about the triple lock feeds into the narrative—I am sure not around this table—that somehow anyone over the age of 65 is living in a level of comfort and wealth, which we know is very far from the truth for at least 2 million-plus people over retirement age. We are talking about differences that then impact on health. The healthy living expectancy gap in this country is 20 years—it is completely shocking—and life expectancy is 10 years. People are dying in fuel poverty—literally dying, according to Marie Curie—in their tens of thousands.
Q7 David Pinto-Duschinsky: This is incredibly helpful, thank you. It reinforces the extent to which a lot of this is about lifetime income and prospects pre-retirement, although I absolutely take your point, Carl, about some people being consistently poor throughout and about housing and the interaction with that. What capacity do we have to predict how likely people are to be poor in old age? From what you are saying, it sounds like we should have a pretty good grasp of that.
Daniela Silcock: There are a few indicators. We have all been talking about lifetime income. Labour market behaviour or patterns during working life will be a huge predictor. We can look at where people live, whether they are female, what their ethnicity is, whether they are disabled or a carer and start to determine whether they will be disadvantaged in the labour market in two ways. They might not be eligible for automatic enrolment, or they might not work very much or work much in an employed role, so they might not save much.
The Pensions Policy Institute does an underpensioned index, which is very helpful for looking at people who are disadvantaged in the labour market and who are likely to have lower pension outcomes. It lists all of these people: women, ethnic minorities, carers, disabled people and the self-employed. You need to break it down into different ethnic groups. For example, working-age Pakistani and Bangladeshi households are more than 50% more likely to be in poverty, so there are huge differences within ethnicity.
We have talked about housing a lot, so housing tenure and working life, and household composition, both in working life and in retirement—just to say, 25% of single pensioners are in relative poverty compared to 14%. And then there are people who claim benefits in working life. So there are quite a lot of indicators during working life, where we can say, “Yes, this person is more likely to be in poverty in retirement.”
Q8 John Milne: Do you think that Governments over the years have been able to lay out a clear vision and rationale for what they are trying to achieve with the state pension? To frame that question a bit more closely, there is a big argument about whether the pension should be based on adequacy—as in, whether it actually meets the basket of needs—or on sustainability, as in what is the prospect of the Government being able to afford it, even if it is a good thing? It is the battle between those two.
Carl Emmerson: There is a third possible agenda about insurance and income replacement, which many western European and Scandinavian countries have—that is, essentially, if you earn more, you will pay more in tax and you will receive a more generous state pension. I think Governments in the UK have been pretty clear for quite a while that that is not something we want.
The move away from the state earnings-related pension scheme through the ’80s, ’90s and 2000s was pretty rapid. There is a pretty much a consensus in the UK that we have got to a system where people reach state pension age and if they have spent enough years in the UK, they will receive a flat rate state pension, regardless of how much was paid in. There is a nice simplicity about that system. It means we just have to make decisions about what level that should be set at and what age it should come in. Obviously, the age has been rising, with the state pension age increases, and that is a coherent response when people are living longer, at older ages. It is one way of managing the sustainability.
It is pretty clear that people will disagree about what the right level should be. I would point out that it is currently at 30% of full-time median earnings, which is higher than any flat rate state pension has been in UK history. The introduction of the new state pension, which was more generous than the basic state pension, and the triple lock has been sufficient to unwind the decline in the generosity of the basic state pension relative to earnings that occurred during the ’80s, ’90s and 2000s, through that period when it was price-indexed and earnings grew.
By UK historical standards, we have a flat rate pension that is set at a high level, but, of course, 30% of median earnings is not a level of income that many people are going to be very happy on when they retire. Your median earner is literally getting a 30% replacement rate. That is not a very generous system, and obviously people may well disagree and think, “Should that be higher? Should it be 33%? Should it be more than that?” I think there is plenty of space for disagreement on what that level should be.
However, the principle of having a flat rate system—one that is not means tested and is not more generous to higher earners—is very simple. I think it can be well understood. It has a lot to commend it as a basis on which people can make their private pension savings decisions, so hopefully people can understand, “I have this £220 a week coming. How much do I want to save on top of that?” I think there are many attractions to the UK system now.
Daniela Silcock: Looking back, the Pensions Commission, which reported in the early part of this century—most of today’s pension system is based around that, in terms of automatic enrolment and state pension—said that what we should aim for is that the state pension provides around 30% of median earnings. It then assumed that people would be saving enough to have a further 15% to 18% of median earnings provided through the automatic enrolment default and then would save extra on top of that to provide a further 15% to 18%. This calculation meant that people would achieve about 60% to 66% of median earnings as income in retirement, which makes sense if you are looking at a two-thirds replacement rate, which is roughly what you need to have the same standard of living in retirement.
Obviously, we are not saving that much. The Pensions Commission predicted that a lot of people would save 2% above the 8% minimum— that was stated by the commission. The Government have said in a few different publications that they are looking for the state pension to provide 30%. There is also discussion about total income and having the state pension provide 40% of total income and private pensions 60%. We are nowhere near a level where that is going to happen.
I have seen different estimates of the level of earnings. I know the IFS say that the new state pension replaces 30% of national average earnings; the Pensions Policy Institute says 26%. I think this has to do with whether you are looking at a mean or a median. If we are developing a target, it is really important that we are clear about how we are making that calculation. It is extra concerning that the pension review into adequacy has been delayed, because we do not have an established target at the moment. We need to figure out what we are aiming for and how to get there, and set a target and then aim for that. Without that, it is very difficult to do state pension policy; it is very difficult to do private pension policy. How can we make a decision about whether or not to maintain the triple lock when we do not know what we are aiming for?
Carole Easton: As well as—as I think Daniela mentioned—not delaying the adequacy review, I would like to see any major decisions about pension age and pension entitlement delayed until there is a very thorough review of the implications of doing so. When the pension age went up by one year a little while ago, we saw roughly 100,000 more people pushed into poverty, so we know the risk is high of making changes without due consideration. I would like to suggest a thorough review of anything pension-related—the mechanism and the targets, and also the benefits associated with both pre-retirement and post-retirement.
There has been a lot of talk about pension credit and the challenges for people receiving that. To avoid even more people being pushed into poverty, a commitment to a review—at least in the new comprehensive spending review—I think would be perceived really well by older people, people approaching older age and everyone representing them.
Peter Matejic: Perhaps I can say a few words on adequacy. We calculate our minimum income standard, and the pension level is at 90% of that, but it is very hard to get to that extra 100% because when any further earnings start to be taken away through the benefit system and so forth, you are almost stuck at the 90% level. A lot of the extra income is just taken away from you.
I would also make the point that this is a great part of the benefit system. It is like a minimum floor for pensioners—there is not a similar one for working-age people, and the adequacy is a lot higher. I think that should be a key part of the benefit system, but you have to be very careful about the cliff edges in the system that stop people just before, or a fair amount before adequacy, and it makes it very hard to get to that level.
Q9 Amanda Hack: There are a couple of points that relate to my question. I want to delve into adequacy across the age ranges of our pensioners and the regional disparities. One of the things that Daniela was saying was about particular poverty and elements of groupings of poverty with ethnicity, disability and caring responsibilities. I want to tease out whether that is similar in the working population, too. Is that a similar cohort?
The other point is something that I have always been concerned about. I sat on public health scrutiny for five years, and one thing that is quite clear is that people are living with multi-morbidities earlier and the impact that that is having on the point at which people retire, because they retire poorlier. What impact is that having on the younger pensioner population? The question is about adequacy, but looking at age, regional disparity and some of the things that Daniela has already spoken about.
Daniela Silcock: The short answer is yes, we are seeing this mirrored in the working-life population. We are seeing poorer people in the north, but obviously it varies by different region, ethnic minorities, women, disabled people and carers. I have talked about Pakistani and Bangladeshi households having more than 50% higher poverty rates.
As researchers and policy people, one of the things that is quite concerning for us is that there is not enough granular data—particularly on ethnic minorities, particularly over state pension age—because once you start to look at an ethnic group in a certain region of a certain age, you come down to very small sample sizes. I would love to have lots of amazing data to say, “Yes, that is correct, and this is why”. I don’t have all of that data. There are patchy bits out there. If you can call for things, one of the things to call for would be more data, particularly on ethnic minorities and retirement.
Q10 Amanda Hack: I love data. You did indicate, in terms of regional disparity—we talked earlier about housing costs being far greater in the south, but you mentioned regional disparity in the north, so is it variable? What does the picture look like across the regions from a pensioner poverty point of view?
Daniela Silcock: Obviously, within each region we will see variations. People in the north might have lower housing costs, but they are also more likely to be in poverty already. That comes back to labour market behaviour and patterns. It is all interacting.
When you look at rents, that is slightly different from just looking at regional variations, and then you add on to that gender, ethnicity, caring, disability and self-employment, which is interesting because it tends to go along with particular ethnic groups or carers, or people who have to work flexibly. It is difficult to say, “These people are poor and these people are not poor,” because there is a variation in each area. But yes, I suppose the rents and the region work conversely, because the rents are lower, but poverty is still high because it is just a poor area.
Peter Matejic: I think Northern Ireland and Scotland have among the lowest pensioner poverty rates in the south-west, according to DWP statistics, so there is a country-level difference as well.
Q11 Frank McNally: Good morning, everyone. We all welcome the value of the triple lock and the contribution that it has made to reducing poverty over the years.
Carl, through yourself and the IFS, you have highlighted the uncertainty that the triple lock brings to those in receipt of the state pension as well as, obviously, the challenges linked to public finances. Given that cost and the fact that it benefits all pensioners, I am keen to get a sense of whether you think the triple lock is the best mechanism to increase the state pension.
Carl Emmerson: If you want the state pension to be higher, clearly, the triple lock has a track record of having delivered that, and that might be one reason why you like it. I would point to the fact that it only delivers it in periods of economic instability and periods when Government finances tend not to be in such a healthy state. I think a better system would be to say, “If you think the state pension should be more generous than the 30% of median earnings that it is at the moment, you should set a target for what it should be and a pathway to get to that target”, because the triple lock will not deliver increases in the state pension relative to average earnings, if we get a stable growing economy again. It only does it in periods when, for example, earnings are falling in real terms.
A good guarantee might look something like, “We will always increase the state pension at least in line with inflation. That is what we have done since at least 1975, so that makes sense. Over the longer term, we have a target for a level of earnings that we want it to be at and we will work towards getting there. If it goes above that level, we will claw back those gains, but we will be looking to increase it to that level and hold it at that level over time.” I think that is the kind of model we should be aiming for.
Carole Easton: I did want to say something that is less about the mechanism and more about communication. Whether the triple lock is fit for purpose, in terms of the intentions that my colleague has mentioned, I think we would support that, but unfortunately, the way it is communicated perpetuates what I would call ageist assumptions. Every time it is communicated, it is somehow again that older people get preferential treatment compared to younger people in this country. Rather than communicating that, even if you get the state pension and pension credit as a result of the triple lock, that still only gives you less than the minimum income standard, as defined.
I would suggest that there is a different way of communicating it, and also support the idea that we really need the data to support what is happening in particularly the poorer groups, in terms of how reliant they are on state pension and pension credit. Is there any other income at all, or not? A lot of the data already comes from DWP, so I think it just requires further granularity.
However, it concerns me greatly that every time we communicate about the triple lock, there is a kickback, saying that we care more about older people than younger people in this country. I know that that is not what anyone intends.
Daniela Silcock: I completely agree with Carole. I think the intergenerational divide is not helpful and should be discouraged. It is worth looking at the history of the triple lock. When the ex-Pensions Minister, Steve Webb, was in Parliament he said, “We have implemented this because we have higher state pension ages and people are no longer able to accrue an earnings entitlement, so let’s give them a decent pension level”. But a target was never actually set.
It is worth looking at what the triple lock has done. The level of the state pension eroded in relation to earnings from 1979, when it was delinked from earnings. We have now brought it back up to the level of the basic state pension in 1979, so we can ask whether we are happy with that level or whether we want more. However, I think the real key is to have a target for where we want it to be and not get rid of the triple lock until we have decided what the target is, because if you then determine a target it will be harder to reinstate it.
I know this would be technically difficult, but is a percentage of median income a good target? We can see that fewer pensioners are in poverty, but more pensioners are in material deprivation, so this is not just about income compared to income. It is actually about what pensioners can afford. Should we aim for something like the minimum income standard for state pension, which is a standard developed to see what can pensioners afford, and can they afford to meet basic needs to have a decent standard of living?
Just to go back again to the adequacy review, that is what we were hoping would lead to a target. Without a target, I think it is quite dangerous to take away the triple lock, because it is then unlikely to be reinstated. How do we then meet a new target?
Peter Matejic: The only thing I would add is on Carole’s point about adequacy and relative adequacy. There is a temptation to say, “It is better than the working-age benefits, so it is adequate”, but working-age benefits are at destitution level and this being slightly better than that is still not great.
Q12 Damien Egan: We have received evidence that for most pensioners, the state pension is their main pension. We have also had evidence in a previous session about the impact of auto-enrolment and how that will change over time. You have talked to these points, so I am trying to think what the main financial risks are as we look ahead, such as housing tenure, age and geography. Are there others? This kind of builds on what Carole was talking about around age. We have the evidence that for older pensioners, there is a higher level of poverty. Is there data around expenditure and how that changes as we age in retirement?
Carole Easton: I think it is about relative expenditure. We know that older people spend more time at home, so the cost of living has impacted them very badly when heating costs and energy costs go up. We also know that a lot of older people are living in very poor-quality homes. Again, there is an intersection here. Not only is the cost of living, of providing the energy to heat your home, more important because you are at home more, but you are more likely to be living in a poor-quality home with draughts, damp and mould. We know that in the region of 2 million older people are living in very poor-quality homes, which is damaging their health. That creates a burden for the health service. It creates a burden for social care.
This is also about looking at people in the round, if you like, and when we are looking at pensions, joining up and talking with housing and the health service to find out what else can be done. It is not just about the pound signs, money coming in; it is about the quality of life.
There is a lot that could be done to reduce costs. If people’s homes were improved, for example, that would improve their health and their quality of life. It is one of the reasons why we have been pushing for a joined-up strategy on ageing. We would love to see a commissioner in place to say, “Let’s look in the round and not isolate one element”—which is literally income, when, as Daniela has implied, there is how that income is used and the opportunity to even spend it if you are housebound. If that is a way of answering—
Damien Egan: It is very helpful.
Carole Easton: So I would love to see not only a delay in the pension changes until we have done a more thorough review of everything related, but also an ageing strategy where all the aspects of later life are addressed. A commissioner could oversee that and join Departments up, because it is to the mutual benefit of different Departments.
Q13 Damien Egan: That makes a lot of sense. Are there any other risks that the panel can see?
Carl Emmerson: You asked about spending patterns. If you look at household spending through retirement on the same groups of pensioners, it looks remarkably flat. The story of, “I am going to spend lots of money in the early part of my retirement and have less spending need later in retirement” does not seem borne out in data. It could be quite a dangerous strategy if people thought that was going to be the case. After inflation, it looks remarkably flat.
In terms of risk, if you think about younger people and how they might play through the system—at the risk of turning this into an entire pensions review—with employees brought in through automatic enrolment, there are questions. Are those automatic enrolment rates set at the right level? There is a case for making them higher, but I would caution against blanket increases. I would think very carefully about the struggles that working-age people have with their disposable incomes, and many poor working-age people, so I would think carefully about how to target that.
I would then worry about the self-employed, because there is no automatic enrolment for them. Their engagement with private pensions is a lot lower than it was in the mid-1990s. It has just collapsed. It is quite remarkable, so I would worry about that group. I would then worry about the people who are opting out of automatic enrolment—employees who have chosen to get out of their scheme. If they are doing that for good reason, that is great. That is why we are not compelling people to save. We have automatic enrolment, but you can choose to get out.
I might worry that some are getting out for reasons that we might be less comfortable with. For example, people from Pakistani and Bangladeshi backgrounds are much more likely to opt out of their pensions, and I think that does raise questions about whether the pension system is working well for them.
Q14 Damien Egan: Do we know why?
Daniela Silcock: It is because of labour market behaviour, so I think it is Pakistani people who are more likely to be self-employed. Both groups are more likely to work part-time or in flexible, casual work. They may not be on the books, and this is partly because of discrimination as well as other issues around education and poverty.
I will add a couple of points. I agree with everything Carl and Carole said. The point about inflation is so important, as is the fact that pensioner spending does not increase in the same way as the rest of the population. It is worth noting that the Office for National Statistics and the UK Statistics Authority are currently producing a household cost index, which has a pensioner index, so it shows how expenditure is increasing for pensioners, which is different from the standard CPI. It would be good if, at some point in the future, we start to link pensioner benefits and pensioner incomes from pension schemes to that index.
One of the big issues that I am not sure we have mentioned is that people are not saving as much into defined benefit schemes any more, so people just have lower incomes reaching retirement anyway and will do in future. It is the next 20 years where we will start to see those cohorts reaching retirement, and that is a significant issue.
Peter Matejic: The only group I would add is people in ill health, and that growth among the working-age population and older people. That is something I am worried about.
Q15 David Pinto-Duschinsky: Again, there is a helpful segue from Damien’s excellent questions and the points that Amanda and Frank raised. We have talked overall about pensions adequacy, and it is really interesting. I would like to step back a second and look at means-tested benefits, but start with the big picture of how our spending is allocated against need. You have painted a very particular picture of need. We have a London problem, we have a pre-retirement low income problem, and we have a housing problem, but a lot of the benefits are universal and so on. You also mentioned the interaction with housing need. How does spend stack up against need? Does it target it effectively?
Carl Emmerson: There are some areas where I have concern about the current system. One is that when we push up the state pension age, the state saves a lot of money, because it is basically exposing people to a much less generous working-age benefit system for longer and to a bit more generous state pension system for less long. I would raise the question: what about those who are not in work before they get to their current state pension age and those on a low income?
It is slightly remarkable that we have not done any mitigations with the increases in state pension age that we have done already. Something we put out last week looked at the case for making universal credit a bit more generous, for example, in the year before you reach state pension age, noting that the basic level of support for working-age people, if you compare that to the basic level of support for pensioners—in 1988, support for pensioners was about 30% higher, so 1.3 times that of a working-age person. It is now 2.5 times that, so 150% more generous. There is a huge cliff edge. If you are out of work or on a low income before state pension age, you are much more likely to be in poverty. There is concern there.
For pensioners, there are things that the Government should be looking at around take-up of benefits. That really matters, but also returning to the housing question, the fact that pensioners spend more time at home and concerns about the private rented system, I would point to the fact that if you are in the social rented system, you often get your rent paid in full; the state is supporting you more there. Unlike working-age people in the social rented sector, you are not subject to what has been known as the bedroom tax, so you can have a second or even a third bedroom and there is no issue. If you are a pensioner in the private rented sector, your entitlement to housing benefit is based on one-bedroom accommodation.
There is a case for making that entitlement to two-bedroom accommodation. That would be treating pensioners in the private rented sector a bit more like those in the social rented sector. It would also say that because pensioners spend more time at home, their housing is more important to them. Maybe we think it is reasonable, for example, that an adult child can come over and stay in a room of his or her own. I think there is a case for looking at that as well.
Carole Easton: Could I add to that my real agreement about before retirement and people not in work? Again, it comes back to cross-departmental interest, because the “Get Britain Working” paper that has recently been released, which is important in terms of reducing unemployment and economic inactivity, does not have an age lens on it. We know that half the 3 million people who are economically inactive at the moment due to long-term illness or disability are between 50 and 65. That is a big number of people. Getting many of those people back to work would benefit them, in terms of their pension. It would also hugely benefit the economy.
We also know from our research that a good proportion of those people want to work, but ageist practice, challenges in terms of flexibility, caring responsibilities and health provision mean that it is not possible for them to go to work. I think it is important—this is not about spending more money necessarily—that we put an age lens on some of the laudable interventions that have been proposed in that paper, so that over-50s get the focus and response from employers that they need, so they can stay in work longer and accrue the benefits that Carl just spoke about.
Peter Matejic: A separate point about pension credit is that most pensioners in poverty are not on pension credit. Only something like one in six or one in seven pensioners in poverty are on pension credit, so the ability to target poorer pensioners through the benefit system is quite limited with that benefit. Part of that is for positive reasons—because of the rise in the state pension and because of rising private pension provision—but that makes it quite hard. That is why it is important to get take-up.
Perhaps it is also important to try to bring housing benefit into the pension credit system, because housing benefit take-up is slightly higher and you would obviously get a bit of a boost there. Quite an important point about pension credit is that it is only topping up some of the pensioners in poverty. It is not that effective in terms of coverage for targeting.
Daniela Silcock: I think about 1 million eligible people are not claiming pension credit. I want to build on what Carole was saying, which was such an excellent point. Within the pensions world, we are looking more closely at finances throughout working life and connecting those to retirement. There still seems to be a very big cut-off in terms of levers, motivating factors, rewards and penalties between working-age benefits and retirement benefits, and that division is becoming less and less helpful. As Carole said, we are seeing more people out of work at older ages. We are seeing higher levels of in-work poverty, particularly for those coming up to pension age, so it is about more cross-working between Departments and maybe a benefit system that does not necessarily see the change into retirement as a cliff edge but looks at what needs to happen for transitions.
Q16 Damien Egan: I really appreciate the emphasis on those few years before pension age. It is a reminder for us to think of that when we have the pensioner poverty review, and to add in whether you have been doing physical or manual work, because the body changes, so it is more difficult.
I want to ask about housing benefit, and we touched on it a bit in thinking about pensioners as a whole and housing. I am thinking of different countries such as the US, where there are big retirement-style villages where people live, and the type of housing. I was in local government before and one of the things we found was that, for people in supported living—of course, this is set against a backdrop where the Government have this massive housing target, so how do older people fit within that? For supported living, it is very difficult to make the finances work for people who are not on housing benefit, for owner-occupiers and people who might have done right to buy, to try to free up housing.
Do you have any thoughts around housing in the future? Given that the biggest risk is around housing tenure and growth in the private rented sector—of course, a lot of the money going out in housing benefit is going to private landlords as well—do you have thoughts about how we address that, so there is a better future for the next generation of pensioners?
Daniela Silcock: This is really a supply issue. After right to buy, there were intentions, on and off, to replace the right to buy stock that was bought. It has never been replaced to the amount that were sold, and we have not been keeping up with demand. Every year we have less affordable housing than we had the year before, and that is what is behind this.
A lot of people are looking at ways of helping people to buy houses. House purchase is decreasing but that does not necessarily mean it is decreasing from the natural level. The policy community think that there was a bubble led by right to buy and economic factors that meant that people were buying more housing for a while, but if you look back earlier in the century, lower levels of home ownership are more natural. It is not necessarily the right thing to do, to try to help people to buy more houses, and that could distort the housing market. What we need to look at is more affordable housing, and then we would not have this problem with private rentals. That would immediately address a lot of the issues that we are going to see coming up with the increase of pensioners in the private rental sector.
Carole Easton: I agree with that. I cannot comment particularly on housing benefit, but just say that there could be some changes. For example, if we are going to build 1.5 million new homes, could we have 100% of them accessible, for example? That way they are more convenient for people with disability, they become more practical for people to age in. Is the transport system around them going to be adequate so that people are not isolated in their homes and can still participate in their communities? You can make environments age-friendly. We run a huge network of age-friendly communities in this country, and they will give you lots of good ideas about what can be done about housing. Accessibility is absolutely crucial, as well as the quality of people’s homes. As I touched on before, not just building new homes—affordable ones—but making the ones that we do have, the majority of which are already built, safe places in which to age would reduce the cost of those homes both on the individual and the state.
Finally, I would say that we need a review. Again, we have this very unfortunate narrative of older people living in huge mansions and if they would only move out, we would sort out one element of the housing supply. If any of you have tried to move house recently, you will know how challenging it is when you have all your wits about you and people to advise you. If you are isolated and navigating the system alone, let alone the cost of moving and finding somewhere—we know that there are hundreds of thousands of older people who would like to move. They cannot find anywhere to go and cannot navigate the system to be able to do so. It is broader again, in my view, than just the housing benefit argument.
Q17 Chair: Thank you. I will ask just a couple of additional questions to make sure I have covered everything. Would you like to make any specific comments on the delays in the pensions review, particularly around the adequacy phase, as well as the relative help of the winter fuel payment and whether this is going to cause problems?
Carl Emmerson: I think a pensions review is needed. Labour was right to put in its manifesto that it was going to do one. The Pensions Commission did a great job, but that was 20 years ago and much has changed since then in both the policy environment and the economic environment. There is much to learn about how automatic enrolment has gone and how the state pension age increases have gone. A review is overdue and is needed. One should happen next year, and I still hope that it will—indeed, that is why IFS has been trying to do its own one for the last couple of years.
On the winter fuel payment, it is important to remember the context. The winter fuel payment was set at £200 back in 2000. It then halved in real terms over the subsequent 23 years because successive Governments just left it at £200. When it is taken away from those not on pension credit, there is lots of coverage about the cut, but it was halved over that previous 23-year period, and we should not forget that. We should also remember that it is £2 billion of state spending compared to £140 billion on the state pension. The state pension is much more important.
Daniela talked about the fact that the new state pension is £50 a week more generous than the basic state pension was, so that is £50 every week going in flat rate pension relative to the basic state pension. It is important to remember the context.
That said, there is a case for targeting a winter fuel payment on those who need it most. If you are going to do that, you probably want to give more notice to ensure that you can get people on to pension credit. I think there would be a case for doing it with at least a year’s notice to get that landed safely. I also think that the more you land things on, “If you get pension credit, you get this extra thing,” you create unfairness because it means that someone who just gets pension credit gets all those extra things. Somebody who is still poor, but just a bit better off and does not get pension credit then does not get it. The winter fuel payment is just another thing we have added to that list.
Chair: Any more very brief comments?
Daniela Silcock: I have mentioned the adequacy review. We need to have the adequacy review and then decide how to deal with it. You cannot really set policy without it. The winter fuel payment seems like a blunt approach. We have talked a lot about the distribution of incomes and the fact that you might be just above the pension credit level but still in material deprivation. I know Age UK says that the winter fuel payment has a big difference in keeping pensioners out of poverty, so if we need to look at the winter fuel payment, maybe we can look at doing it in a way that is not so blunt.
Carole Easton: I would agree; it is too quick too soon. It should be reviewed. Again, it is a sticking plaster for our poor-quality housing crisis. You could save £200 easily if people’s homes were improved and a joined-up approach, including DESNZ, DWP, MHCLG, just to name two or three, could be a different way of addressing the issue.
Peter Matejic: I just make it clear that DWP should speed up the processing of pension credit claims. There has obviously been a big spike in people claiming, but there is quite a time for it to come through. If you are successful in claiming, you are probably better off than the loss of the winter fuel payments in terms of the pension credit you are getting, but you will need to get it as soon as you can.
Chair: Thank you so much, everyone; we really appreciate it. It was very interesting. I will move on to the next panel now.
Witnesses: Caroline Abrahams, Morgan Vine, Adam Stachura and Jonathan Safir.
Q18 Chair: Good morning. Thank you so much, everybody, for coming to our second panel of this first session on pensioner poverty. It is a pleasure to welcome Caroline Abrahams, Morgan Vine, Jonathan Safir and Adam Stachura. Have I pronounced that correctly?
Adam Stachura: Very good, thank you.
Chair: Would you like to introduce yourself very quickly, starting with Caroline?
Caroline Abrahams: I am the charity director at Age UK.
Morgan Vine: Hello, everyone. I am the director of policy and influencing at Independent Age. We are a national charity who support older people in poverty.
Jonathan Safir: I am the national administration and information manager at the National Pensioners Convention.
Adam Stachura: I am the policy and communications director for Age Scotland.
Q19 Chair: Are you able to clearly identify which pensioners are at risk of experiencing poverty and should be prioritised for support from the existing data that we have?
Morgan Vine: To build on the session before, those groups are the groups that we probably all also identify. Single older people, women and private renters are a massive, growing group. To add to the earlier session, we did some research at Independent Age with a university that showed that private renting in later life will treble by 2040. That could double the poverty rate in later life, so it could go from about 2 million, as it is now, to about 4 million if policy change does not happen. Private renters are a big red flashing light that we need to be worried about.
People from minoritised ethnic communities are at much higher risk of being in poverty in later life, and carers, for all the reasons that were mentioned in the previous session. I think those groups are well known and lots of statistics are available.
Q20 Chair: Can you tell me—again, we did hear a bit about this from the first panel, but it is about you also reiterating these points—the geographical areas where there may be particular issues?
Caroline Abrahams: I would say all over the place. Obviously, the age profile of the population varies from one area to another, but that does not always make a difference to the poverty rate among older people. We know that there is a smaller, older population in London, but we also know that a very significant number of older people in London are living in or around poverty. There are well-known areas, such as the coastal areas, where there are large populations of older people. In some parts of the country, they are obviously very poor, but all the areas that we know are socially excluded often contain significant numbers of older people who are also living in poverty.
Jonathan Safir: To add another area, places where manufacturing has declined massively. In those geographical locations, there is also older pensioner poverty.
Adam Stachura: I was going to suggest, as a slight extension of that, areas where there have been traditionally working-class professions, and there is also agriculture. We see a lot of this through the central belt of Scotland: people who have had nothing but the state pension and will never have—they may be over 75 now—have had any occupational pension scheme, but will be on the basic state pension at best.
Morgan Vine: There are also groups of private renters. If you look at the two censuses, you can see that older private renters have vacated towns and communities where they lived and have moved to often deprived coastal and rural communities. We did some analysis of where those places are, so we can share that with the Committee.
Q21 Chair: What does this mean particularly about targeting support for pensioners in poverty?
Adam Stachura: Not much. I don’t think the silence we have there is unique to the UK Government. I think we will probably have the same position throughout the different Governments across the UK. There are not any particularly strong pension or poverty strategies, if anything. Looking at Scotland, the last benefit uptake strategy is a good few years old and pretty thin when it comes to pensioners.
We are also looking at people who are, as you said in the previous panel, just pre-state pension age, even if that is five or 10 years beforehand. We are looking at women in their late 50s, who are more likely to be in poverty than other counterparts, and what the future holds for them, but probably one side of A4 might be able to pick up what the strategy is across the UK.
Morgan Vine: But this can be done, because there are councils across this country doing an amazing job at targeting their communities that they know live in deprivation. We did a project with local councils, talking to the ones who had managed to increase pension credit uptake in their communities. Strategies can happen, because we know the groups who are most at risk, where they live and the places they might visit. Strategies can be put in place, but I would agree with Adam that there does not seem to be one at the moment for how we get social security to the right people.
Q22 Gill German: Before I go on to my question, what you say about coastal communities is interesting. I am from a coastal community and the local authority has been quite proactive, which is great, but as you say, it is by no means uniform. The other point I would make is about the pressure that it places on local authorities when a high number of people go to retire in that area—a slight segue there, but it is interesting that you made that point.
I want to ask about the benefit system as it exists for older people—the role it takes in addressing current poverty levels and in providing an adequate income in retirement. I am interested in your thoughts on how the coverage and levels of benefits for pensioners exist at the moment, what we can do better and the idea of take-up and linking benefits. I am thinking about, for example, housing benefit and pension credit, and the impact that that could have on both take-up and coverage of where there is need.
Caroline Abrahams: There are about four questions there, I think, so I will pick up just a bit of it. The bit that I was thinking about was that—we are seeing this with the recent change that the Government have made—if you successfully claim pension credit, that entitles you to a whole raft of other support, which people very much appreciate: a free TV licence if you are over 75, help with glasses and dental charges, both of which can be very significant, as we know, and various other bits and pieces.
All that is great, but of course the problem is what happens if you do not get it or if you are eligible and you are not claiming it. We find ourselves now in the rather strange situation where somebody whose income on paper looks higher and they are not quite eligible for pension credit ends up being worse off than somebody whose income was objectively lower but who claims it, gets it and gets everything else as well.
The cliff edge is becoming an ever-greater problem, because obviously there are lots of older people who just miss out on the gateway benefit that entitles you to other things. I am sure we will come on to this, and I am sure you talked about it with the last panel. The fact that so many people do not claim it is a big issue, and this is not just about pension credit.
The other one that is very typically not claimed is attendance allowance, which helps to compensate for the cost of disability. It is important for lots and lots of older people, but if somebody said to you, “You might want to claim attendance allowance,” it does not sound particularly like it is anything to do with anyone, does it? It is a rather odd title and we know that loads of people do not get it.
Morgan Vine: To build on that and some of the information that was shared in the first panel, and to put this in context about the new state pension and the basic state pension, there are about 8 million people on the basic, so it is not a small number. That number is not going to drastically change for about 20 to 30 years. We do need to worry about that group. When we are talking about things like the triple lock, that group will not get the same amount that everyone is talking about. That is not the increase that they are going to see. I thought that was important to say.
Caroline has rightly mentioned there are so many things that can come out of a pension credit claim that people become entitled to, but often they have to tell people again; they do not just get it. That feels like a simple thing that could be addressed. For example, if you get pension credit, your council tax should pretty much become nothing, but you have to contact the council and tell them you are on pension credit, and then fill in the form. The fact that you get it—councils could just do it. There are other things within that brief that could be done and given to the person. It is a lot to go through a pension credit claim. The complexity and the number of questions—doing it mentally is a lot for people. To make them do it again and again, to have to tell so many other people that they are entitled to more and more, it is difficult for people.
To pick up on one of your points, there is real complexity to this system. For example, you could not be entitled to pension credit until you apply for carer’s allowance, which you will not receive because you are a pensioner. But when you apply for it, you get told you would have received it, so now your pension credit threshold goes up a bit and now you can get pension credit.
Our advice team tell people what order to apply for things in, but if you are just trying, you would apply for pension credit, get rejected, and that is that. But actually, you could get it for lots of different complex reasons. To try to make the system simpler and to help people navigate it, there is a lot that could be done to improve it, I think.
Jonathan Safir: I would not disagree with anything that Morgan just said. I would point out that when we are talking about the state pension and the figures that are being given generally, that is the maximum. Only 25% of people get that. When it is reported in the media or it is in reports, the vast majority of people are not receiving that in their pockets.
Again, on the difficulty of pension credit, applying for it and the number of questions—I think it is 243—it is ridiculous. On top of that, as Morgan said, you have to go from one to the next to the next, applying and applying in order to get what you are entitled to. It is a very complex system. Many older people do not engage with that. Also, they feel a stigma about applying for these things that they are entitled to. There are a couple of things around messaging that we need to get right, so that people do not feel that, but we also need to simplify the system so that they get what they are entitled to.
Adam Stachura: There are some very good points there. The piece on who gets the full new state pension is important, because we have been hearing with the removal of winter fuel payment, “Well, come the spring there might be another £400-odd coming in the state pension,” but that is not in one lump sum and it does not compensate. Looking at Scottish figures, 20% of Scottish pensioners will be on the full new state pension, six in 10 are on the basic state pension, and four in 10 are on the new state pension, but only half of them get the full amount.
Those figures make it feel as if it is something quite generous, but when you look back at the pension credit level, it is pretty meagre in all reality. Even beyond that, we could not possibly suggest that somebody on £1,000 a month is well off and should not be receiving some extra support to cope with the extraordinary financial challenges that we have in our society today.
I think these lines that we have—that is, pension credit is the only one that exists for pensioners and it is an incredibly low level, which I do not think does enough justice to those who really need some extra support because they are left in a void otherwise.
Q23 Gill German: Perhaps I can just follow up—this is particularly for Caroline and Jonathan—about adequate income in retirement. I know that you have called for a longer-term approach to this. I wondered if you could give us some more detail of what you think that might look like and what you would expect that approach to take into consideration and include.
Caroline Abrahams: I think this is something that we will all want to come in on, if that is all right, because I know that you guys are doing loads of work on adequacy. It would be good to have an objective look at what people need to live well in retirement. When researchers have had a go at that not that long ago, I think something like £14,000 a year would allow someone to live decently, and obviously that is quite considerably above what people get at the moment, if they are able to claim pension credit or wherever the line is drawn.
There are different ways of doing it, but looking at what a basic basket of goods and services that somebody ought to be entitled to live on now is a good way of doing it. From that point of view, it is disappointing that the Government have recently announced that they are not going to be bringing forward phase 2 of their pensions review, which would have allowed the beginnings of getting into that.
The other obvious way, or time for looking at this, is as part of the spending review, but again, older people are not listed as one of the priorities for that. My understanding is there will not be any scrutiny of that. I think it would be good for everybody—good for the country and for the taxpayer as well—to look at how money is being spent on older people across the piece. Certainly, our view at Age UK is—I cannot speak for my colleagues, and it would be interesting to see what they think—that you could argue that older people at the bottom of the income distribution are not getting enough. It may be that some very affluent older people—very affluent people period, regardless of age—might be able to afford to pay a bit more, but obviously, the Government have taken that off the table. That is not something they are going to look at and I think that is a shame, given all the other context that we know about.
Jonathan Safir: I would echo some of Caroline’s thoughts on the review being delayed. The NPC has a policy that the state pension should be set at 70% of the national living wage. In 2024, that would be £280.28; in 2025, that would be £299.15 per week. We feel that that would enable older people to live with dignity, respect and be able to live a life, not just—
Gill German: To live well. Morgan, I am interested in your thoughts as well.
Morgan Vine: Just to build on what Jonathan and Caroline have said, we have been doing quite a lot of work on adequacy. I know lots of you will be hearing this from your constituents, but to put it into context, we have been getting a lot more calls from people who are not entitled to any social security. Our advisers know that. These people are telling us things like they are washing in cold water; they are not eating any hot food at all; they cannot justify the cooker. Somebody the other day told us that they sit in a sleeping bag from 1 pm just to keep warm on their sofa. To put it into context, these are people who do not qualify for anything. We do not think the lines are set at the right place anymore.
I would agree with everything the first panel said. Taking a step back, where do people need to get to and what role does the state play in getting them there? We all have personal responsibility, we can try to make sure we have private pensions, and we can try to make sure that we have savings, but some people will not be in that situation. For those people, how can the state support them to reach a level that means they can afford to put the cooker on and wash in warm water?
Q24 Amanda Hack: We talked about pension credit take-up, and the panel has already indicated that the form is a bit long. Actually, going through the process, you do not need to fill out all the questions. Do we have a responsibility to break down some of those barriers, and how do we do that? What do we need to do to support an increase of pension credit claims? Morgan, you were talking about some local authorities that have taken that on board. What difference have they made, and how have they done that? I would be interested to delve down into that.
Morgan Vine: I can share the full report with the Committee, but some of the things that local authorities shared with us include that they were literally doing phone calls and door knocking. They were targeting areas of their community by sending—if they had capacity—people into local libraries or areas where they know that people congregate so those conversations can happen.
There is also a lot to be said for local community-based organisations. Independent Age has a grants fund and we grant-fund local organisations who are trusted in their communities. I think that can shift the dial, particularly with minoritised communities, for example, where there can be issues of trust. If it is a group of people they know and have built a relationship with, they are more likely to say, “I am struggling and I need a bit of help” and to seek that support. There are things like that.
Some of the local authorities have taken approaches such as an attendance allowance-first approach. Attendance allowance has much less stigma. It is an important benefit, and it can provide quite a decent amount of money if you qualify. It is not means tested, so often that could be a gateway to starting a conversation. Then, once you have built that relationship with our advisers, with the advisers at Age Scotland and Age UK, you can then say, “How about this? Now that you trust us, we could try these things”. It is about building that trust, which obviously takes time, but that is why I think charities and independent organisations are important for that.
Q25 Amanda Hack: One of the things that came out in the previous panel, but was not in my question, was pensioners who live with people of working age and what impact that is having, because universal credit takes on priority in terms of housing costs. How is it impacting pensioner poverty when they live with somebody of working age that is maybe caring for them, or how does that impact on overall pensioner poverty and the take-up of other benefits?
Morgan Vine: The only evidence we have—others might have different evidence or more—is from conversations we have had with older people who live in multigenerational households. Sometimes they feel more nervous to start a conversation with an organisation like ourselves, because they are worried that their children will be upset. They don’t want to make them feel uncomfortable, and those conversations can be more difficult to have privately. That is the only thing I can think of that we have done where we have heard things, but I do not know if others have.
Caroline Abrahams: It is the whole mixed-age couple phenomenon. I do not know if you were also thinking of that, where obviously you have one partner who is above state pension age and one who is lower. The Government made a change a few years ago, which basically meant far less generosity to those households. In those situations, those people can be in quite a lot of trouble because there is just not enough money, basically. We are not the only organisation who has been calling recently for another look at that policy to see if we can get to a better place for people.
Can I pick up a bit on your first question about what more we could do? Obviously, Adam will speak for Age Scotland, but for both the Age UKs, huge amounts of what we do nationally and locally are to support benefit take-up, for which we get no support from the Government whatsoever and never have done, by the way. There is no funding for that at all. Our local Age UKs have to work really hard to get any local funding for advice and information. It is one of the sectors that has been very badly hit by public sector austerity over the last few years. We think this is important—if we did not think it was important before the last few months, we certainly know it now—so we have set new objectives for ourselves in our new strategy. We are beginning particularly to try to reach out more into those deprived areas where, as Morgan was rightly saying, you may have people who are less keen to come forward.
As I understand it, the form is, by welfare benefit standards, not particularly complex, but it is quite long. There are 243 boxes. You or I would probably go whizzing through, we could miss large chunks of it and just go da-da-da-da-da. That just is not in the capacity of most people. I think the general view is that a lot of older people would need someone to help them with that. You can ring up the helpline and they will do it for you, and they are great, but how do you get through? They are totally overwhelmed, particularly at the moment, as I am sure you would understand.
Of course, we at Age UK will help as well. I did not want to speak for Age Scotland, Adam, but much the same would apply for you, wouldn’t it?
Adam Stachura: Very much so. I will answer, very quickly, the second question and say a little bit on the first question. We are supported by the Scottish Government with some funding every single year for our national helpline to help advise older people, their family and carers about social security, giving the good signposting and referrals into organisations that can help, and we are looking to develop that service further.
There are also corporate partnerships, whether it is SGN or the National Lottery Community Fund, which are helping to fund advisers in our helpline as part of our model, so we can help more people. I think last year we were approaching £2 million extra for older Scots who are missing out on the social security they are entitled to. That is the tip of the iceberg. I will give the Scottish context, which is what I have been digging into, but there will be about half a billion pounds every year in Scotland that goes underclaimed by pensioners—not just pension credit, but attendance allowance, council tax reduction, the full lot.
On the first question, we have to think about digital exclusion as well. You are looking at things that people have to go forward and do, and 25% of pensioners will not be online. More than a third of those who are online are not very confident using it and do not meet the main criteria for doing so safely. To the point of knocking on the doors and picking up the phone, you will do it as politicians; you do not have your voters come in to you and tell you how they are going to go and vote. You have had to go out and knock on doors and find that out yourself. These mechanisms are wholly important. For those who are not confident, if English is not their first language, if they have literacy challenges, if they have no one else in their life to support them and that associated stigma of saying, “I am poor”, then they are probably not going to come forward.
A much smarter approach is to identify people. I know there are some officials at DWP who have been doing a very interesting and good job for many years on that. I am sure there is a lot more the Department can do, but there is some smart thinking. Whether it is scaled is another question entirely.
Q26 Mr Peter Bedford: On the back of Amanda’s questions, Caroline, I recently met Tony Donovan of Age UK Leicestershire. He was telling me about all the work they do in Leicestershire to help recruit pensioners to the winter fuel payment, pension credit and those associated benefits. He was saying to me he was very concerned about the Budget. The national insurance increase has added £400,000 to their cost base, which means their ability to do that work is going to reduce, which is obviously going to have an impact on those who are eligible. Do you have anything to say about that?
Caroline Abrahams: That is absolutely right. My colleagues have recently done a survey of all our local Age UKs and about half of them responded. We will be publishing that just after Christmas, we think. It will not come as a surprise to any of the Committee members—you will have heard this from lots of charities—that of course we have been badly hit by the NICs changes. That of course is because they particularly hit people who have large numbers of low-paid staff—lots of charities, for example. If you run charity shops, of course you use volunteers, but you also have low-paid staff. Also, sadly, people who work on advice lines do not get paid very much either. So yes, it is a problem for us.
We have set ambitious targets for wanting to help more people nationally and locally to claim their benefits, but we are doing it now with another barrier in our way, which is the fact that there are definitely going to be financial challenges.
Q27 Mr Peter Bedford: What do we know about the use of the winter fuel payment in terms of how pensioners are using it?
Caroline Abrahams: I think the evidence from the IFS some years ago was that because it is called the winter fuel payment, most pensioners actually use it for winter fuel. Obviously, it has never been a vast amount when you look at how big energy bills have become over the last few years, but none the less, I think it has made a very distinctive difference for some people.
In particular, I think it has given them the confidence to run their heating during the winter. In a way, that is certainly one of the biggest worries that we have at Age UK: we know that many older people are reluctant ever to go into debt, having grown up in a world in which debt was definitely something you did not do, so they take pre-emptive action to avoid that. They ration their energy use very considerably and they will not take a chance. The extra bit of assurance and confidence, as well as the sheer money that the winter fuel payment gave lots of older people if they were on modest incomes, did make a difference.
We have been contacted by literally hundreds of thousands of people—maybe that is an exaggeration. Tens of thousands of people have been in touch with us explaining their situations. There is a tangible sense of anxiety and fear. People have cut everything that they can cut, as Morgan was saying, and they cannot think of any other cuts to make so are rationing their energy use. So far, we have had a fairly mild winter in the south. It has not necessarily been all that clement further north or in Scotland, or indeed in Ireland and parts of Wales. I think there are real worries about people living in cold parts of the UK. Also, we are only just hitting winter. We are really worried by what we hear.
The story that sticks with me is the woman who got in touch with us to say that she is in her 80s and her husband is a bit older than her, and he is dying. She knows they do not have enough money to pay their fuel during the winter, but she is going to spend it now so that he does not die being cold. She knows that will jeopardise her own wellbeing and her safety, but that was her choice. That is what she has decided to do. I just think it is a shame that that is where we have ended up.
Mr Peter Bedford: Does anyone else have anything to add?
Jonathan Safir: I was going to reaffirm what Caroline said. The vast majority of our members say, “We get the winter fuel payment. We spend it on fuel”. We have had some sad cases where people have said, “I am just above pension credit. I have lost the winter fuel payment. I do not know what to do. How am I going to get through this winter?” We had a story about someone’s uncle who was also in that scenario, started skipping meals, has not been putting the heating on, and ended up in hospital with pneumonia. These are real people.
Q28 Mr Peter Bedford: The last panel said—I think the quote was—the policy came in too quick, too soon. Do you have anything to say about that? Clearly before the election, none of the main parties mentioned this in the policy.
Jonathan Safir: I would completely agree with that. It should have stayed in place until another option was put on the table for how it would be removed. The messaging around it was short and sudden. It left a lot of anxiety and fear for older people. It was a bit of a shock for many.
Caroline Abrahams: May I just say a word about that? We essentially begged the Government not to do this until at least the spring and ideally not to do it at all. I think the reason for that was that if there had been more time, it would have allowed two things to happen. First, it would have allowed all of us to do even more than we already do in our organisations, locally and nationally, to help people to claim their benefits. As it is, there has been such a rush it has overwhelmed DWP. It has tried very hard and brought new people in, but we know that the system was not built to adjust to a sudden upsurge of demand that was not otherwise expected. It would have helped that.
And I think some older people, if they had known that they were going to have less money later on in the year, would have made some economies earlier on. They might have made some slightly different choices about how they spent their money so that they had a bit more on one side to help defray their bills. As it was, it all happened too late for either of those things to happen. That is why we have been so worried about what happens to people this winter especially.
Q29 Mr Peter Bedford: One of my frustrations is siloed thinking by Government Departments, where one Department makes a decision that has an impact on another. What do you see as the knock-on effect of this on other Departments—for example, on healthcare or social care?
Caroline Abrahams: There is an interesting point about that. We are going to do some more work on this next year, we have just decided. The direction of travel within Government policy, which we absolutely agree with, is to support more older people to live at home for longer. This means fewer older people in hospital—we know why that is important—and fewer people in care homes and nursing homes, unless they absolutely have to be there. Most older people want to stay at home for longer.
What we are not seeing is that understanding then influencing other elements of Government policy. If that is where you are going—I think we will see that in the NHS plan when it comes out as well, quite rightly—you would not do a change like the winter fuel payment. Basically, if you want more older people to live at home for longer, often in quite bad health and dying, then let us keep them warm, and you have to allow them to have the money to keep warm. It applies to housing policy and lots of other policy as well.
Of course, there is no mechanism for joining up policy on older people within Government. There is no Minister; there is no commissioner; there is no strategy; there is no cross-cutting unit of officials. So despite the best efforts often of officials in individual Departments, there is no obvious way of joining these things up.
Q30 Chair: Sorry to interrupt, Peter, but can I ask how aware pensioners are of the extra energy providers that are now providing support—a social tariff, if you want—to pensioners, such as for the case you mentioned? I was really worried about that. That is a new thing over the last few weeks. Surely that would help that family, but how aware are pensioners? There are about 12 energy companies now instead of one.
Caroline Abrahams: Some of the energy companies are indeed doing more to help. Some of them are working with organisations like us, and I am sure with some of my colleagues as well, and there are funds set aside. The main thing that most of them can do is to reschedule your debt. They do have some grants to give as well, although I think they are not being all that public about that. You might argue that they could do more to perhaps advertise some of this. Of course, every energy company is different. It is not like there is a single scheme. It is all a bit of a hotchpotch.
Chair: Do all Age UK offices know about that?
Caroline Abrahams: Yes, definitely. We are working with some of the energy companies. We are delighted to do that. We are pleased with their support, which enables us to do more. It makes a difference.
Chair: It did come up that one did not know, I have to say—
Caroline Abrahams: That probably reflects the fact that it is a hotchpotch. It is not like there is one scheme. Different schemes are doing different things and working in different ways. It is quite hard for people to work out exactly what is there for them.
Q31 Mr Peter Bedford: Finally from me, some of the panel mentioned that a lot of this support is in the community by charities, which you do not get Government support for. What could Government be doing to help you guys deliver some of the reforms that are needed, particularly around recruiting people to pension credit and the winter fuel payment?
Caroline Abrahams: Obviously, we heard about Scotland, where there is Government support, so that is one thing that would be nice to see in England. I think successive Governments have colluded with regard to the fact that lots of older people do not claim their benefits, and they have not been that bothered about it. I do not think anyone has done enough about it. Personally, I think all the savings have been baked into the Treasury model. That is shameful when you realise what that means for individuals who are struggling to get through the week and make their money stretch long enough.
I think there is a lot more we could be doing. It is probably about assertive outreach. It is also about simplifying the system, but I suppose that what we have learned over the last few months is that it is very hard to get every older person to claim the thing that they are due. In an ideal world, we should be moving to a system where people are more easily identified as being potentially in need and are then given the money proactively without them having to do something about it. In a world in which you now have very old people living at home, dying with dementia, with all kinds of issues, sometimes without family to help, expecting them to be able to make a proactive step to claim their dues is probably asking too much. I think we knew that at Age UK before what has happened over the last few months, but it is absolutely obvious now.
Morgan Vine: Just to come in on the range of questions that you have asked, Caroline is right that people should have had a bit more notice about the winter fuel payment. The people that we support are often very good at managing their money. They have often had to live on a small budget most of their lives, so they would have tried to make savings, but those savings would have been things like, “I used to eat two hot meals a week. Now I will eat no hot meals a week”. Just to put that into context, the savings are not extravagances that they can cut back on.
Most of the people that we all work with, if they are living on a low income, it is a fixed income. There is not any light on the horizon, where they are suddenly going to have lots of money coming in. For people in their 80s and 90s, it is a very bleak situation. The people that we speak to at the moment feel completely invisible. They feel like the decisions coming from Government are making them feel like they are not being heard and that they are being lumped in an older people’s bracket where all older people are affluent and wealthy. They feel completely voiceless. I think that is important.
With some of the decisions that people are making, we did some nationally representative polling—I do not want to throw too many stats at you—and, for example, nearly half of older people who were going to lose the winter fuel payment said they are going to go to bed earlier to avoid heating their home. Of that group, 15% said they were already going to do that, but 30% said it is because of the winter fuel payment change. People were having a dreadful time anyway and they could not afford to lose any money. The groups that our charity support are, particularly, groups on low incomes and now they are losing this extra money.
As Caroline said, some energy companies have initiatives, but you only get the warm home discount if you are on pension credit, so yet again the group who just miss out—£2 or £5 over the threshold—get nothing from the energy companies.
Every company is different and it is the same in the water space. We are doing a lot on water bills at the moment. Every single water company has its own tariff. You can live somewhere where you get 90% off if you are on a low income, but you live somewhere else and get £5 off. It is literally that different. Some consistency and Government thinking about social tariffs and energy and water would be helpful.
It is also about an income maximisation strategy. How can the Government put in place something public that charities can support and older people can inform that says, “Right, we are going to tackle this. We are in it together and we are going to do something proactive”? As far as I am aware, there is not a public strategy, unlike in Scotland, where there is one. I know there are problems with it, as Adam has flagged, but we do not have anything here. The older people we support have nothing to look at to say, “Oh, you are going to proactively do something,” and then they are seeing the cuts come and it feels pretty brutal for them at the moment.
Q32 Steve Darling: I want to take a couple of steps back and reflect on what you said about the attendance allowance and the naming of that. The personal independence payment does what it says on the tin. What reflections have Age UK or others given to what could be a more user-friendly name for attendance allowance?
Caroline Abrahams: I don’t think we have had that conversation. I am sure we could. Part of the problem with attendance allowance is what we have already talked about, which is that it has to be claimed. It would help if we called it something else, but I do not think that that, in and of itself, would revolutionise the take-up, because all the problems that are in the way of older people claiming pension credit are pretty much there for attendance allowance, except for the issue around stigma, which, as Morgan said, is probably less pronounced.
You still have to take a proactive step as an older person. The problem we sometimes find with claiming attendance allowance is, absolutely understandably, you have to list all the things you cannot do because that is how it works. Some old people find that very difficult to do. They do not want to face up to that; they do not want to acknowledge that. I know of people who have finally been persuaded to claim it, but who took a lot of persuasion because it was not where they wanted to be.
Adam Stachura: Scotland has been on this journey with the devolution of attendance allowance. We started in a pilot sense and as of spring next year, it will be rolled out entirely. It started off as disability assistance for older people and then all of a sudden, in a flash of whatever, it became pension age disability payment, so PADP is the description, because attendance allowance does not mean anything to people. “Have you heard of this?” “No.” Maybe you have, “But what does it do?” “I have no idea.” I think it is that Ronseal approach of saying what it is on the tin.
Probably to some degree using the word “disability” or “disabled” will carry some stigma with people about, “Well, am I disabled?” I know lots of people who have claimed attendance allowance and when we moved on to PADP maybe would not identify themselves as disabled because their idea of what that is is very different to the actual intention of it. Words really do matter. There has been some thinking and there have been public consultations on this already. I recommend DWP and UK Government look at names to help people understand more of what is available to them and why it is important.
Q33 Steve Darling: Clearly, pension and independence payment would not work—we already have PIP. The other bit—just briefly, because I know we are running out of time—is that there is conversation about the hotchpotch of opportunities for social tariffs. What would the solution be for that? Is it clearly simplification? Any reflections from any of the panellists would be helpful.
Caroline Abrahams: I will start off and then I am sure others will come in. I think the hotchpotch that I was referring to is more about the additional support that energy companies have on offer this year, which are not really social tariffs; it is additional support for people who are in trouble paying their bills, basically. I think we would all agree that a social tariff for energy would be fantastic. The previous Government got quite close to it, was looking at it and then decided not to press ahead in the end.
Ultimately, it would make an awful lot of sense, not only for older people but for people of all ages who necessarily find it difficult to fund their energy costs, whether that is lone parents with children, disabled people, carers—all kinds of people. Where you draw the line about who is eligible of course is key, as is how you fund it. I cannot see the Treasury wanting to fund it at the moment, which would therefore mean that the cost of it would go on everyone else’s bills. There are some trade-offs there, of course.
I do not know if this was said in the previous session, but for older people, the energy bill has a particular resonance in a way that other bills do not, even though things like water bills are much more expensive than they ever used to be. It is because of older people’s dependence on energy to keep well and warm through the winter, and the fact that if they cannot—and you feel the cold more anyway as you get older—that is a serious problem for your health. It is the sheer scale of the bill and the fact that it has gone up. With what has happened to prices over the last four years, it has gone so mad that it gives it a special resonance. Knowing that there was some certainty and a national scheme around a social tariff for energy would be fantastic.
Jonathan Safir: I would ask that it was also extended to other areas such as broadband and water, so that it is not just voluntary schemes offered by different companies, but that there is a set level that every company signs up to and people know what they can get.
Morgan Vine: It would need to be carefully done because some companies—broadband, water and energy—go above and beyond and are doing very good stuff. It is not just means-tested; they give support to people who are just above the threshold. It would have to be very carefully looked at so that people were not losing anything. I definitely agree that for water, broadband and energy, it would provide consistency for people so they know what is coming.
Q34 Johanna Baxter: We have talked a lot about the change to the winter fuel payment. I am conscious that for a number of years before that change was announced, the payment was subject to a lot of criticism for being quite a poorly targeted measure. In 2016, there was a report on intergenerational fairness by the predecessor Work and Pensions Committee, which described it as a “blunt instrument for alleviating fuel poverty” and provided “a cash payment to many households who did not need it”. The Resolution Foundation’s report “Cold comfort” this year argued that it was poorly targeted as a measure of support with fuel costs. Do you accept that there is, in principle—taking away the concerns about communications—a case for better targeting help with energy costs, which is something other than the winter fuel payment?
Morgan Vine: There is always a case for universal because there will always be people who need money who are not going to receive it the minute you start targeting and means-testing. However, if you want to do something like that with the winter fuel payment, give yourselves longer than three months. For the 1 million people that we know need the money—they are the people the Government have agreed need it; the 1 million who don’t get pension credit—and who are entitled to it, give all of us more time to get them that money, but also give more time to think about the thresholds.
If you want to means-test the winter fuel payment, is an older person who might have an income of £12,000 or £13,000 a year, who could well be a private renter, the right threshold? That is incredibly low. Having a bit more time to think about where those thresholds are set and what they are could have been beneficial.
One thing that we have been thinking about is private renters, which has come up in both sessions. They are a hugely at-risk group. The Government are clear they are on low income. If you get housing benefit, you are defined as on low income. You cannot get it unless you are on low income. We have been saying there are about 380,000 older people who currently get housing benefit and do not get pension credit. Some of them are entitled to pension credit and have not applied. Some of them are not entitled because the thresholds are different, yet they are all on low income.
The Government could identify those 380,000 people very quickly and easily and give them the winter fuel payment because the merger, which you mentioned, of housing benefit and pension credit has been sped up, which is welcome, but I think it is still going to be a couple of years. We know that group are on low income and the Government knows they want to target the people that need the money, so that would be one way that the Government could slightly extend eligibility that would help people.
Q35 Johanna Baxter: I was going to come to what the Government could do. I understand the comments that are being made about timescales and thresholds, but given the criticisms that have been levied at the winter fuel payment in the past, do you accept the principle that there must be a better way of targeting support to those who need it most?
Caroline Abrahams: I think that is difficult with older people, because what we have found out over the last few months is that giving winter fuel payments to those who do not need it is the price we pay for getting it to those who really do need it. There is no other way of getting that money to everybody who needs it unless you do a universal payment. Although I am by nature a pragmatist, and I totally accept that the public finances are in a difficult place and the Government have difficult choices to make, unfortunately, the choice they have made has ended up making a lot of poor pensioners poorer, for all the reasons that Morgan was explaining.
Had the Government decided to remove eligibility from higher rate taxpayers, we would not have complained and I think that nobody much else would have either, but that is not what they did. They did something much more dramatic and, as Morgan says, the line is simply too low, and far too many people who need that money are not going to get it. That is the problem.
Adam Stachura: There are other fuel poverty measures that exist across the UK that do not work particularly well on their own. Even with the winter fuel payment, 40% of pensioners in Scotland are living in fuel poverty. A quarter are in extreme fuel poverty, and in two years, that jumped from 11%. That universality is incredibly important. From some of our insight research, 86% of pensioners we spoke to who took part in that said it was very important to them, 55% said they cannot manage without it and 94% of those with incomes below £15,000 said that it was important to them, too. It is been baked into the state pension system and I think it has only been in the last six months we have been looking at them as two different things.
For the last quarter of a century, this has essentially been part of the state pension system, and people have relied on this. It helps them through energy costs in the winter time. There is probably more, as Caroline was saying, that you could do in removing some people at the very top. Has the opt-out of the winter fuel payment been successful? No. Less than a dozen people opted out in Scotland two years ago—I think those are the last figures I got from DWP officials. People could opt out. Removing the universality, we have now created a further stigma line for older people. I see this all the time with news reports asking an older person in the street, “Do you need the winter fuel payment?” Of course, they are not going to tell the public, “Yes, I need it,” but it has been part of their finances, it has been part of their entitlement, in that same sense.
I think there is a strong argument for that. The richest people, the millionaires we talk of—of which there will not be huge numbers who are pensioners—will be proportionally a handful compared to everyone else who really needs this. I think we have missed an important beat on this one and got it incredibly wrong.
Q36 Johanna Baxter: It is interesting that the Scottish Government ended up making the same decision as the UK Government. They also had advice suggesting that it was poorly targeted in Scotland. It is interesting that both Governments came to the same conclusion. Obviously, the Scottish Government announced that they would be putting in place mitigation for the winter of 2024-25, but that is £100. That is quite a low level. Do you think they should be doing more if they are looking to mitigate and, if so, what do you think they should be looking at?
Adam Stachura: On your last part first, I think £100 is much better than it would have been, and I am glad that they have listened to the sum of all the parts of the campaign to reinstate a universal element of a winter fuel payment, or the pension age winter heating payment. Their £100 in a year’s time after going from zero is not going to touch the sides on what is required. I think even if you got to £150, similar to what Northern Ireland has, it would only cost another, say, £35 million out of a nearly £60 billion budget, or even £22 billion for health and care. There is more that can happen there. We have missed the timing moment of what else can happen this winter, too.
I also think the Scottish Government came to the conclusion that it should be universal. When this was removed, they had come to the conclusion after the consultation on the pension age winter heating payment that it should be universal. Whether that was because the payment of that was entirely going to come from Treasury, so Social Security Scotland would essentially just enact the same policies and there is not any new money, or whether there were lots of voices saying it should be better targeted—Age Scotland said it should be universal for all the reasons I have mentioned, but there are fewer of us in the older people’s sector than there are everywhere else. We are looking at real lives at the same point. So I think the Scottish Government came to that conclusion of universality.
If I am honest, I think that they spent a little bit too long not thinking about what they could do this winter, if it had gone and it became a fait accompli—“We cannot possibly do anything more”. Time was lost in having a really important intervention for this winter, because there will be more people in hospital, more people eating fewer hot meals and all the rest of it.
Q37 Johanna Baxter: I was going to come on to this winter, because the announcement does only affect 2024-25 onwards. What do you think both Governments could do to support people with their fuel cost this winter?
Caroline Abrahams: We have repeatedly asked for the money to be automatically given to some groups who are on other benefits. Carer’s allowance is one, for example, and housing benefit is another. There is attendance allowance, and of course, you would then give it to some people who would not need it, particularly on attendance allowance, because although people who are disabled and older are much more likely to be in poverty, not all of them are. Again, that is the price you pay for getting it to the people who really need it.
The numbers of people who are going to miss out when they really do need it are so very significant, and despite the efforts of benefit take-up, it is not going to make enough of a difference. We are still looking at really significant numbers of older people who are going to struggle this winter. That is why we have asked the Government to do that. We have probably been asking for that for the last couple of months, but clearly, Government have decided they do not want to do that. I think we have our fingers crossed on what happens over the next few weeks and months.
Chair: Thank you so much, everyone. That concludes our second panel for the first session of the pensioner poverty inquiry.