UK: Pension credits will be trouble-free, MPs told

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UK: Pension credits will be trouble-free, MPs told

By Nicholas Timmins, Financial Times

July 15, 2003

UK - The government's plans for a pension credit are "on track", Andrew Smith, pensions secretary, said yesterday as he tried to reassure MPs that it would not face the administrative foul-ups on implementation that have plagued other tax credits.

The government was using a "tried and tested" computer system and had adopted a new approach of phased implementation for big projects heavily reliant on IT, he said. But the complexity of the credit still left pressure groups for the elderly expressing concern that the helplines would be swamped by people who were not eligible when mass advertising for the credit started in September.

Richard Wilson, incomes policy officer for Help the Aged, said ministers seemed to be "in the business of managing expectations" by assuming that only three out of four eligible households would have claimed by 2006.

Payment of the credit begins in October and Oliver Heald, the Conservative pensions spokesman, said: "How can Andrew Smith claim the pension credit is on track when a million pensioners will still be missing out by 2006?"

Mr Smith stressed that the 73 per cent take-up for the credit was simply a "planning assumption", adding: "I want to beat that."

However, Gordon Lishman, director-general of Age Concern, said the figure was too low. "Targets must be more ambitious and increase year on year," he said.

To guard against the problems of unanswered calls and late payment that plagued both the working and child credits earlier this year, Mr Smith said a fifth of pensioners were being written to ahead of the main advertising campaign in September and 1.1m households were already ready to be paid. In addition, claims could be backdated for a year to October 2004.

"It is a brave person who says nothing can go wrong with large-scale IT systems," Mr Smith said, but "I am not anticipating difficulties".

"Experience of roll-out of new systems shows that a big bang approach that sees everyone trying to ring the same number in a very short space of time increases the risk of breakdown. We are trying to phase the demand."

The credit rewards people who have small private and occupational pensions and earnings by allowing them to claim means-tested help higher up the income scale at an initial cost of £2bn a year.

Average gains would be £400 a year, according to the department, and awards would stand for up to five years, removing the stigma of weekly means-testing.

Mr Smith vigorously defended the credit against criticism that it would harm incentives to save for old age. Those who wanted to scrap it would deprive poorer pensioners with small savings of help, he said. The new credit, he predicted, "will be popular and accepted" and the government saw it as a "permanent part of the pension system".