Means-testing hits pensioners

By Phillip Inman, John Carvel and Rupert Jones

The Guardian, November 20, 2002


A leading pensions charity has warned the government it risks increasing pensioner poverty amid reports of poor take-up of means-tested benefits.

The study, commissioned by Age Concern, was published as workers at a failed steel company receiving a fraction of their pensions consider legal action against the government. The case could open the way to many other, similar claims.

The Age Concern study revealed that the pension system failed to provide a decent standard of living for half of pensioners. The charity said this situation would persist if ministers relied on means-tested benefits to boost retirement income because the benefits acted as a tax on savings, discouraging workers from planning for old age.

The charity's director-general, Gordon Lishman, said the government needed to raise the basic state pension rather than press ahead with changes to means-tested benefits.

"Our pensions system simply isn't working. Too many older people today are not reaching decent incomes in retirement and the position for future pensioners is uncertain."

Pensioners are also failing to claim benefits worth up to 1.9bn a year because they are confused by the "mind-numbing complexity" of the system, the national audit office said. In a report on pensioner poverty, it said tens of thousands of pensioners are entitled to receive an extra 1,000 a year but do not claim because they fail to understand the benefits available or do not like to ask for means-tested support.

The NAO found between a quarter and a third of the 2m pensioners entitled to the minimum income guarantee missed out. A third do not claim council tax benefit and 10% of those entitled to housing benefit do not ask for it. Those claiming such benefits are 22 a week better off on average. Many spend the money on essentials such as nutritious food, heating or transport that non-claimants forgo.

The NAO said the Department for Work and Pensions was not doing enough to encourage pensioners to claim. Estimates suggested 770,000 pensioners under-claimed in 1999/2000, compared with 760,000 when Labour came to power in 1997/8.

Yesterday newspaper publisher Trinity Mirror announced it would be joining more than half of employers in closing its final salary pension scheme to new entrants. The employer had seen its pension contributions almost double from 6% to 11%, with the expectation of a further rise to maintain the fund.

Lawyers at steel union ISTC, representing workers at ASW, were yesterday examining whether it could mount a case following claims by Plaid Cymru that the government is in breach of European law by failing to fully implement a directive on insolvency and the impact on employees. Campaigners say the ASW case highlights a flaw in the pensions system which means workers can see some or all of their entitlement snatched away if their company fails.

The employees at Wales and Kent-based ASW are victims of rules giving priority to those who are receiving their pension when a company goes into insolvency. Their pensions must be paid in full and workers must make do with what is left.

Copyright 2002 Global Action on Aging
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