Pension Credit to have capital cut-off

During yesterday’s Grand Committee stage in the Lords of the Welfare Reform Bill, Lord Freud confirmed that, following the introduction of the Housing Credit into Pension Credit, Pension Credit will have a capital cut-off.  This will apply to the benefit as a whole, not just the housing credit, and will, apparently, replace tariff income for the benefit. It will be set at a higher level than for working age claimants.

Quite extraordinary how they continue to make this up as they go along. However in this case there would surely have to be primary legislation to amend the State Pension Credit Act which I haven’t noticed in the Welfare Reform Bill.

I have seen a case made that the manner in which the Coalition government are proceeding, in contrast to New Labour, reflects their slightly different class background. They believe they can make changes by fiat because that is how they are accustomed to proceed in ordinary life - they grew up with servants. New Labour, while not fundamentally different, were drawn from the managerial class who have to implement decisions and were more cautious about processes of change. Just a thought.

Richard Atkinson

The power is in the act.

74 State pension credit: capital limit
(1) In section 1 of the State Pension Credit Act 2002 (entitlement), in subsection
(2)—
(a) in paragraph (b), the final “and” is repealed;
(b) at the end there is inserted “and
(d) his capital does not exceed a prescribed amount”.

Originally this was expected to apply only to the housing credit.

Dolge - 04 November 2011 01:10 PM

New Labour, while not fundamentally different, were drawn from the managerial class
Richard Atkinson

I thought most of them were in the lawyer class?

Thankyou for that clarification, Gareth.

Here’s the actual test of the “announcement” from the HL Comittee Minutes:

“Lord McKenzie of Luton: I am most grateful to the noble Lord for a number of detailed replies, with some follow-up, but can he just be a little more specific around the capital rules? From his answer, it was very unclear what is intended. We have two systems for housing benefit: we have the cut-off at £16,000, whereas for the pension credit we do not. I am not sure whether those two systems will sit side by side in the new arrangements, or whether there will be some common approach to capital, and whether that will adopt the pension credit approach or the current housing benefit approach.

Lord Freud: My Lords, it will go somewhere in between. It will be a capital limit as opposed to a tariff income approach, but it will be a higher capital limit than that for working-age claimants.

Lord McKenzie of Luton: As I understand it, that will operate for pension credit as well as the housing component.

Lord Freud: Yes, that is correct.”

Four words to announce a fairly fundamental redesign of Pension Credit, not, as far as I know, discussed anywhere and certainly not mentioned in the White Paper. I still find this an extraordinary way of preceeding.

Richard Atkinson

They hadn’t made up their mind; at the beginning they were trying to limit it to housing, I understand.

Even in the Commons committee stage in May, Chris Grayling wasn’t able to say:

“I have made it clear that our aim is for the existing housing benefit rules to be broadly carried across to the housing credit element in pension credit, but the picture is complicated, so it is not quite that straightforward. We recognise that it will be important for pension credit to continue to operate in a way that is clear to both customers and staff once housing credit has been incorporated. We want the power to introduce a capital limit that can be exercised in respect of one or all of the elements of pension credit, allowing for the possibility of simplification through the alignment of the rules. I will be frank. There are ways of doing that. One could establish a much higher capital limit that applied across the board or apply a limit to the individual element of housing.

Let me put this on the record: it is not our intention to apply a capital limit of the kind that exists for housing benefit—the £16,000 equivalent and the group of people it affects—within pension credit. We might put in place a system that applies a flat rate to a much higher level of capital, or we might equally apply a capital limit to the housing element, but it is not our intention for the measures to disadvantage people who have a sensible level of savings. It is our intention to replicate the system that is already there in so far as we possibly can. Therefore, although I do not rule out an approach that might end up with an across-the-board limit for a much higher level of capital than the current level of £16,000 in order to achieve our objectives, it is not our intention to apply a capital limit of the kind that we know now to claimants.”