Official Report: Minutes of Evidence

The Chairperson (Mr Maskey): I welcome the Commissioner for Older People for Northern Ireland (COPNI), Claire Keatinge, and Emer Boyle. Claire, we are in your hands.

Ms Claire Keatinge (Commissioner for Older People for Northern Ireland): Thank you, Chair, and good morning, members one and all. I am delighted to have been invited to provide comments on the Pensions Bill to the Committee. Pensions, as you will all be clearly aware, are fundamental to the confidence of today's and tomorrow's older people to be able to lead a decent and dignified life, with financial security, and to plan for their future and take financial responsibility. The Bill will affect many older people in the coming years.

I have to say first that I am not a pensions expert. Pensions is an incredibly complex area of law and practice. Nor do I represent any pensions organisations or perspective. I have provided written research and statistical analysis undertaken by me and my staff and have reviewed wider analysis of the passage of the Pensions Bill through Westminster. Certainly, during legislative stages of the Westminster Bill, evidence was taken from pensions experts, and, of course, the Committee is free to do the same.

As the Commissioner for Older People, I have a statutory duty to keep under review the adequacy and effectiveness of law and practice as it relates to the interests of older people, and it is in that context that I will make my comments today. I carry an extensive range of duties and powers that provide the statutory remit for the exercise of my functions. You will probably be familiar with my wide-ranging legal powers, which are primarily about safeguarding and promoting the interests of older people, with older people being defined as being those aged 60 and above or, in exceptional cases, those over 50. In the development of the Commissioner for Older People legislation, pensions — financial planning — was one issue that it was prudent for me to consider those aged over 50 as well as those aged over 60. My powers and duties are underpinned by United Nations' principles for older people.

I will move on to the detail of the Pensions Bill. I support the basic principle of a pensions' system that is simpler, fairer and encourages saving, while reducing poverty and reliance on means-testing. Really, that is the nugget in the information before the Committee today. The current system is enormously complex. There is significant under-claiming of means-tested benefits, and we continue to have unacceptable levels of pensioner poverty.

There are, however, elements of the Pensions Bill and pension reform on which I would welcome further clarity. In March 2013, in response to the Department of Work and Pensions (DWP) Pensions Bill, I supported the principle of a single-tier pension. Under the present system, an individual's income comes from state pension as well as pension credit, and, as you will know, I am absolutely sure, from your constituency work, that makes the system incredibly complicated and contributes to pensioner poverty and significant levels of under-claiming of entitlements and support. I continue to support the principles of pension reform, but we need more specific Northern Ireland analysis of pensioner poverty as it relates to pension credit uptake and income levels for older people more widely. Only if that is understood very clearly can there be a targeted focus on the uptake of the single-tier pension alongside tackling pensioner poverty, by having a continuing focus on uptake of means-tested benefits, on which a large number of older people rely today and will rely tomorrow. Making the system fairer and simpler in theory makes the pensions easier to administer, creating savings in cost and time, which should, if reinvested, make the system more financially stable and allow staff to spend more time with individual older people, ensuring that they understand their entitlements, whether they are in receipt of pension or approaching pension age.

The present indications are that the single rate for the state pension will be set above the pension credit minimum guarantee level, which is currently £148·35, with the actual level being set in the autumn of 2015. A discrepancy was noted during the passage of the now Pensions Act 2014 through Westminster between the level of state pension suggested in the Green Paper, which was set at nearly 6% above the pension credit level, and the level suggested in the White Paper, which was just above 1% more than the pension credit guarantee level. That is a significant differential. The lack of clarity and certainty around the actual level at which the pension will be set creates uncertainty, and I support the position of Age UK, which is that the level should be set at at least 5% above the pension credit guarantee level, into the triple-lock commitment, and that that should be in the legislation. I will be monitoring that closely when the level is set in autumn 2015.

It further makes it all the more important for the Department for Social Development and the Committee not to neglect uptake benefit levels for pension credit and other means-tested benefits now. Moreover, it highlights the need to undertake a proactive campaign to provide clear information to the public about planning for retirement and the need to consider additional voluntary contributions and where their information is. You will have seen in the media recently that, in the main, people expect that in the future they will be paid the flat-rate single-tier pension, but it appears that, in the first wave of it, approximately half of those reaching state pension age will qualify, and there is a significant lack of understanding. That will require the continuing uptake of means-tested benefits and clear, transparent information while people still have the time to make those additional contributions.

On the differences between men and women receiving state pension, clause 1 of the Pensions Bill states that individuals reaching pensionable age on 6 April 2016 or thereafter will be eligible for the pension, but, because of the staggered implementation of rises in the state pension for men and women, on that date — the implementation date — there will be men and women of the same age receiving different pensions, and the single-tier state pension on that date applies to men born on or after April 1951 and women born on or after April 1953. There are about 19,000 women who fall into that category. I have a Department of Work and Pensions analysis of across the UK that shows that 90% of women would receive more in lifetime state benefits and pension if they had identical pension entitlements to men born on the same date. Therefore, the equality impact of the proposal in the Pensions Bill does not identify the projected numbers of those who would be better or worse off in Northern Ireland, and simply quotes the UK figures. Specific analysis for Northern Ireland would enable more considered judgements to be made about that matter in the Bill.

If you look at qualifying years for a single-tier state pension, again, clause 2 of the Pensions Bill states that individuals are entitled to the state pension, payable at the full rate, if they are at pensionable age and have 35 or more qualifying years of National Insurance contributions. Individuals are entitled to a state pension at a reduced rate when they reach pensionable age if they have made the minimum number of qualifying years of National Insurance contributions, which is stated to be:

At present, the Minister for Social Development, Mervyn Storey, has indicated that 10 will be the number of minimum qualifying years for state pension. That contains a range of implications that could affect older people quite unfairly. Individuals with multiple part-time jobs, who do not earn enough in any of those jobs to reach the National Insurance lower-earnings threshold, which is currently £111 a week, could easily be unfairly disadvantaged by the situation. They could miss out on state pension payments, in comparison with people who, frankly, have worked fewer hours on aggregate. Individuals in that situation may find that they are working long hours to earn aggregate sums that do not reach the qualification threshold of contributing years, and we have an emerging practice in the labour market of zero-hours contracts, which will make that even more of an issue for some people in the future. I think that, if the system does not recognise periods of work as qualifying years, or if it does not take account of other responsibilities that individuals may have had, there will be an unfair impact on certain groups of individuals. There should be greater safeguards built into the legislation for those who are at risk of not meeting the envisaged minimum of 10 years of National Insurance payments or who obtained only a low number of those years owing to caring responsibilities. That is something that could be considered as the Bill goes through the final stages of its scrutiny by the Committee.

The prospect has been raised at Westminster of using the development of what is called real-time information pay as you earn (PAYE) to be able to aggregate income information, and that method could enable individuals to have a National Insurance year treated as a qualifying year if their earnings were greater than the earnings factor for that year. In short, DWP has said that there is a prospect that it will look at that in the medium term. I believe that the Department should assess the feasibility of that measure being used in Northern Ireland without delay. It seems unreasonable to me that somebody who is working but is not qualifying simply on a technicality should be entitled to so qualify.

The setting of the minimum number of qualifying years at 10 should be regularly reviewed, and there should be robust and thorough assessment of the impact on older people of that 10-year qualifying period. On that point, the Executive need to have a clear and continuing commitment in place to reducing pensioner poverty overall. Ongoing monitoring and review of the impact of the reforms will have to take place to ensure that they fulfil the intention of reducing pensioner poverty as outlined in the rationale for legislative reform.

The flexibility for individuals in that situation to make additional class 3A National Insurance contributions in order to receive a higher pension is very welcome, but it will not be a viable option for those who do not have the spare income or capital to make the increases. The option also needs to be made clear and transparent to people in enough time to make the provision.

In debates on the Pensions Bill at Westminster, the Department of Work and Pensions stated that there would be an on-demand, and predominantly digital, state pension statement service. An on-demand statement is not the same as a proactive provision of a pension statement, and although a predominantly digital version is very useful for some, it should be made available proactively and in hard copy or in alternative formats, as required.

There is a commitment in clause 27 to phase out assessed income periods for those aged 65 to 75. At present, the assessed income periods place a considerable burden on older people to report changes in their circumstances or income to the pension service weekly. I am keen to ensure that the phasing-out of assessed income periods for those between the ages of 65 and 75 will not produce excessive intrusion and burden and that adequate planning is undertaken to mitigate that. Administrative burden and pressure is something that causes considerable anxiety to large numbers of older people.

There is a new bereavement support payment proposed in clauses 29, 30 and 31. That confirms, in keeping with existing practice, that the payment cannot be claimed once individuals reach state pension age, whether they are in receipt of it or not. Of course, as the state pension age increases and the number of individuals over 60 increases, proportionately more older people will be affected. Although the Pensions Bill does propose a move to a more focused payment in the immediate period following bereavement for those below state pension age, it would be useful to undertake further work on the impact on today's and tomorrow's older people in Northern Ireland that has been undertaken for the UK as a whole but is not specific to here.

In conclusion, I support the aims of a single-tier pension to create a simpler and fairer pensions system that provides the opportunity for reducing and tackling pensioner poverty. It can provide a platform for saving and will reduce future reliance on means-testing. I would welcome the Committee giving further consideration to transitional protection, as I would a concerted campaign to help people understand the changes and their entitlement so that they can plan better for the future. However, the complex and widespread changes that are proposed will leave some worse off. There will be those whose expectations are not matched by the reality of the single-tier pension. I am eager that a comprehensive analysis be undertaken on a Northern Ireland-specific basis to determine the beneficiaries and those who lose out, and how that can and should be mitigated. By that, I mean areas such as the discrepancy between men and women, the impact of changes to the bereavement support payment and the difference between what people expect to get and what they actually receive. Significant questions remain in the absence of Northern Ireland-specific data.

I reiterate that the single-tier pension needs to be set at a level that will fulfil its original aims. I suggest at least 5% above pension credit guarantee level. The level of the guarantee should be set into the triple-lock commitment in the Bill. I emphasise the need for an appropriate publicity campaign to be developed that explains the changes in an adequate time frame and promotes better understanding of additional voluntary contributions, as well as the need for individuals to take responsibility for improved pension planning. There remains a need to understand the real levels of benefit uptake and income among older people, which underpins the need for the Executive to continue to take a very active role in monitoring the impact of the proposed reforms, including uptake of additional voluntary contributions, and pensioner poverty and pensioner income levels more widely. Thanks again for the opportunity to provide you with those comments.

The Chairperson (Mr Maskey): Thank you very much, Claire. That was very comprehensive. I remind members that the written submission is included in members' folders, although I see that you are already referring to it.

Claire, have you or your colleagues had a chance to discuss any of the issues with the Department?

Ms Keatinge: We have had a number of conversations with departmental colleagues about pensioner benefits in general, and about the Make the Call campaign and pensioner benefit uptake in particular. There is a particular need for an ongoing focus on benefit uptake as the new single-tier pension is introduced, because one of the obvious dangers, as the targets shift towards compliance with the need for uptake of the single-tier pension, is that there may be less focus on uptake of means-tested benefits. Those conversations have taken place, but we have not discussed the Bill in detail.

The Chairperson (Mr Maskey): Not the entirety of the Bill.

Ms Keatinge: No.

The Chairperson (Mr Maskey): OK. Fair enough. Thank you for that.

You referred to the need for a publicity campaign. We had an evidence session with the Social Security Agency (SSA), which came here before Christmas and presented a programme of public awareness. I do not know whether you have had a chance to see that. I suggest that you have a look at that and see whether you have any comments to make on it that would be helpful for our own deliberations and to see whether it goes any way towards meeting some of the concerns that you have outlined.

We have departmental officials here this morning. Gerry McCann and his colleague are here. No doubt we will need to avail ourselves of their expertise again after this session. On that note, I will open up the session to members.

Mr Brady: Thanks very much for your presentation. I want to mention just a couple of things. The rationale for this, apart from simplifying the pensions system, is to encourage people to save for their retirement. I think that the difficulty there is that the majority of people will not be in a position to do that. A report that came out last year stated that the average disposable income per household in the North is less than half of that in Britain. People here are going to find it much more difficult to put money aside or, through voluntary contributions, get into other pension schemes, because they simply cannot afford to do so.

The pension here is probably the meanest in the developed world. I think that that has been accepted. I attended a conference last April about European pensions. It was quite interesting, because in Germany, for instance, pensioners get almost twice as much as pensioners get here. When you talk about the figure of approximately £148, that is interesting again. About five years ago, the British Government were talking about £175, so that figure has gone down. The 5% or 6% level that you mentioned would not necessarily even bring it up to that level.

As for people actually accessing their pension, pension credit is going to go, because the argument is that the amount is now going to be above pension credit level. However, it has to be realised that the pension credit level is subsistence level. It is supplementing the pension. It is same as the old supplementary benefit to income support.

In Scandinavia, on which I know that there has been some research done, there is an automatic entitlement. We were told a few years ago that that could not happen here because there were no postcodes. Of course, there are postcodes, so it would be much easier to develop a system in which, when you reach pensionable age, you automatically get your entitlement based on contributions, your work record, and so on. Doing that would take away all that angst for people in trying to access what they are entitled to. You made the point, which is well known, that approximately £2 million a week in pension credit is unclaimed. I wonder whether you have any thoughts on that.

Ms Keatinge: To start at the far end of your question, I have had a number of conversations with departmental officials over the past couple of years about the question of automatic entitlement. It seems extraordinary to me that we persist with a complex system in which older people of advancing years and degrees of frailty have to make an application for pension credit when, as I understand it, the system holds enough information about people to make an informed decision about whether that person is very likely to qualify. A number of reasons have been given, from computer systems to data protection, for why automatic payment cannot be made. There has also been reference made to a pilot that was carried out in Britain. It was deemed to have been ineffective and made older people anxious by them receiving money that they were not sure that they were entitled to. I am unconvinced by those arguments. I think that, on automatic qualification and entitlement, research by the Department into people's individual circumstances should enable much more by way of automatic payment.

There is very interesting and useful data on additional savings and voluntary contributions. We have continuing levels of pensioner poverty and low pay in a number of sectors. It does not look as though that will be different in the foreseeable future.

We have a significant number of older people who have decent, adequate and significant levels of income and capital resource. The question of additional voluntary contributions, at its simplest, allows people to know what they will be entitled to and to plan with confidence. However, I understand your point very well: there will continue to be a need to focus on making sure that no older person in our society lives below the poverty level.

Mr Wilson: You mentioned the phasing out of the assessed income period. I can understand the point you are making, Claire, which is that depending on what replaces that, it could create a huge administrative burden on people, where they have to report what their income is on a more regular basis. Have you made any suggestions about that? If we are going to move away from an assessed income period, what level of information ought to be sought to ensure that, if somebody is entitled to payments, they get them but, at the same time, they are not overburdened with having to provide information?

Ms Keatinge: That is right. Nobody wants a system where people are overburdened with administrative requirements, and nobody wants a system where people are overpaid and then have to pay money back and are alarmed by that situation. I have not made any particular recommendations about what that looks like. There is expertise in the Department to look at a number of different systems that have been tested over time. It is the responsibility of the Department to create a system that is simple and fair and balances exactly, as you say, people's entitlements with making sure that they are not wrongly paid. I have not looked at the exact level of detail.

Mr Wilson: We are all concerned about how these quite radical changes and their impact are conveyed to people. I, being a technophobe, agree with you that just having the information digitally available is not suitable, especially for the age group that we are talking about. Younger people may be happy enough with that, but is has been shown that the people who will most likely need this information are the ones who are least likely to use the digital format.

Apart from it being on paper, and paper copies being available, it is also about the dissemination of this information. Again, have you made any recommendations, from your experience with older people, about the best means for disseminating the information about the changes, about how people can access pension pots if they wish to and the difficulties that that might entail, and about additional contributions?

Ms Keatinge: This is an interesting question because I am sure that everybody in the room is in the same position, and other people are in the same position. What pension am I going to be entitled to? Is anybody really sure? What does the future look like, because I am not really sure? You hear a lot of people saying that it is in the future and it will be sorted out and it is a long way away. It is a very difficult issue to get people to engage with. The single-tier pension in the first place, for the first time, creates a level of certainty about what people should be able to expect.

In terms of provision of information and campaign literature and awareness-raising in relation to pensions and older people, say in relation to older people and benefit uptake — there are colleagues around the table with years of expertise in benefit uptake. You all know it — a lot of it is about the clarity of the information, endorsement by reputable, independent-minded people, such as the 'Make the Call' campaign, and face-to-face, high-quality advice from the Social Security Agency and the independent advice sector about people's circumstances.

The other situation that we face now, of course, is how much do and can people trust financial institutions. Do they understand about independent financial advice? What is their level of financial knowledge about individual financial planning? It is a combination of education about financial literacy early on, right through from school, and understanding. For the generation of older people who are about to qualify for the single-tier pension and in the next decade or so, it is about having really clear information through employers, employer organisations, trade unions, the press and other media directly, and through the advice service, and also, I would say, by way of proactivity by the Department writing out early to people, telling them what they can expect and what the opportunities are so that it is very clear and very real to them. At the moment, in the main, it is not. Pensions tend to be something that people do not think of and they wait and then they get it, and then they are either pleased or disappointed with what they get. There has to be that combination of everything from face-to-face information and advice to up-front clarity and transparency.

Mr Wilson: I have one last point to make. You have made a recommendation that the guaranteed pension ought to be at least — this should be in the Bill — 5% above the level that would currently qualify an individual for pension credit. Given the statistics that have come out recently that show that the biggest increase in the social security bill has been the increase in the amount of money paid out on pensions — that is going to get bigger as the population grows — has your research put any figure on what that is likely to do to the total financial cost of the Pensions Bill?

Ms Keatinge: No, I have not, nor would I expect to. I would expect that to be a government responsibility. However, the purpose and rationale in relation to this Bill is that it should create savings in the system and should also aim to tackle and reduce pensioner poverty and create clarity. Increasing amounts of money are paid out in pensions because more people are living longer. There is a responsibility on government, because it is taking National Insurance contributions from people, to manage and deliver that properly.

It is good news that there are more older people living longer. I would refer back to the overall net positive financial contributions that older people make to our society. We hear very often, with a degree of assertion that I do not hear on a lot of other issues, about the financial cost of ageing. Older people have paid into their pension schemes, and it is government's responsibility to manage that. If we add up, just in the Northern Irish context, the volunteering, the caring and the taxes paid by older people over the next 50 years, there will be a £25 billion net positive financial contribution. It is a government matter to plan for the spend that is required. My understanding is that this is a cost-neutral, or should be a saving, proposal within the system. I have not calculated the actual cost; that is a responsibility of government.

Mr Wilson: Finally, some of the evidence we have received so far has been scathing about the opportunity that older people will have when they come to pension age, if they have a private pension, to be able to dip into the pension pot and take out a lump sum. Have you any view on that?

Ms Keatinge: In principle, I would say that we should trust people with the money that they have saved. I would also say, however, that there needs to be very clear and tight regulation of those who are providing independent financial advice and the charges that they can make for those sorts of services. In principle, I say that we should trust people with the money that they have saved.

Mr Dickson: Thank you, Claire, for your contributions. I want to follow up on Sammy's point about clause 43 of the Bill, which provides for disclosure of information about transaction costs. It was shocking to hear, on 'Money Box Live' on BBC Radio 4 last week that some of the first transaction costs have been as high as 90%. So, somebody taking, for the sake of argument, £25,000 out of their pension pot is paying 90% of that in transaction charges. Just simply disclosing the information is not good enough; there has to be further financial regulation and control of how that money is handled by those people.

I share Sammy's concern about this. Currently, people who are under pension age can apply to receive the money. There has been cold-calling going on right across the UK on this by unscrupulous organisations who, effectively, have been scamming people into trying to take money out of their pension pots. There is nothing illegal about it, and that is the scandal.

Ms Keatinge: That is always the other side of things. We have seen enough pensions scandals, I would suggest, in terms of high charging, poor-performing firms that are not delivering what they have promised and are mis-selling. We have seen quite enough of that to know that clarity and transparency of information and clear regulation and caps on charging are vital. There is no question about it. A 90% charge is not decent, and I do not believe it should be legal.

The Chairperson (Mr Maskey): I think that that is to do with the Pension Schemes Bill. It is a different kind of issue.

Mrs D Kelly: Apologies for my late arrival. I am looking at your briefing, Commissioner. You indicated that there will be some gender inequalities in the system. You suggested some mitigating factors between men and women born between April 1951 and April 1953. Do you have any idea of what the numbers are in relation to that? How would you see some of the useful mitigating factors? Do you have any suggestions, for example?

Ms Keatinge: Anything to do with pensions is incredibly complex. I am not an expert in pension detail, but every time you turn over one stone or answer one question, you uncover another. Certainly, there are a number of ways in which there are gender differences.

There is analysis of the differential impact on men and women, but it is a UK analysis only. There is insufficient data to extrapolate for Northern Ireland to allow you to take an informed view. I suggest that you should look for very clear data that lets you know what the impact is, because the DWP data is insufficiently detailed. If you extrapolate from the DWP data, it suggests that 19,000 women in Northern Ireland fall into that category of differential.

Mr Wilson: The next paragraph shows that, because of early retirement, 90% of the women who fall into that category receive more from their pension over their lifetime.

Ms Keatinge: Yes, but nobody should be penalised for living long and healthy.

Mrs D Kelly: In Northern Ireland, we have a higher number of informal carers and women who have opted-out to mind children or grandchildren. I wonder about those numbers or schemes to help people who have taken on those roles. You talked earlier about the future number of voluntary hours. How are those figures obtained and measured?

Ms Keatinge: Those figures are Department for Work and Pensions figures. There is not enough Northern Ireland-specific data to help us. You are absolutely right about informal carers: they need to seek the credits for their caring responsibilities. Increasingly, with that 10-year minimum qualifying period and the 35 years before you get the full single-tier pension, it is absolutely vital that informal carers are credited for their role and contribution.

The Chairperson (Mr Maskey): No other members are indicating to ask any questions. Claire, are you happy enough that you have covered what you wanted to cover this morning? Clearly, the process for us will be to have departmental officials here, led by Gerry. We will take them to the table in a few minutes, when you are finished. If you want to try to quickly respond to some of those issues, we will obviously then have to assess what we have heard from all the stakeholders in the next week or two.

Mr Wilson: The last point that Claire made is an important one. We are all aware of it. There are huge difficulties in doing what exactly you indicated, Claire. How do you credit people who are informal carers? Some of them may well be in receipt of carer's allowance, which is one way of knowing that they are giving care, but some of them might not be in receipt of any allowance. We can all think of stacks of people who drop out of work and stay at home to look after their parents or whatever. What about the logistics of how you credit people? First, you assess that they are not working and they are not making any contributions because they are caring, yet they are outside state support as carers. Have you given any thought to how that might be put into practice?

Ms Keatinge: There are a number of issues. You are absolutely right: an awful lot of carers do not identify themselves as carers and do not fall into a system of having their needs as carers assessed and certainly do not claim or apply for any state benefit in relation to their caring role. Therefore, they will not be credited as carers in terms of National Insurance contributions.

That is significant. To get to the point where more informal carers are recognised, those informal carers need a greater degree of clarity about the importance of claiming it and therefore regularising it.

I go back to a report that I published last year, which looked at the very, very poor level of uptake of carers assessments by older carers in Northern Ireland, and that means that those carers are not formally identified in the system as being carers. It means that their needs as carers are not assessed, unmet need cannot be measured and, again, the contribution record cannot be credited. That applies also to people under pension age who are taking on that caring role, particularly people who care for older people. It is a significant issue. It is not enough just to say that carers should get credited, because that presumes that everybody who is a carer is identified as such. You need to get back down underneath it to make sure that people who provide that incredibly valuable love and support to people to allow them to lead a dignified life at home understand the importance of being recognised as a carer and the implications for their future.

The Chairperson (Mr Maskey): Thank you, Claire and Emer, for your attendance and your presentation and for dealing with some of the queries from members. We will consider all of that in the round when we finish our stakeholder evidence sessions and look at our written submissions.

Ms Keatinge: My pleasure. Thank you very much, Chairman, members and colleagues.