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Pensioners (Living Standards)

Volume 489: debated on Monday 16 March 2009

3. What additional steps the Department has considered taking to support pensioners who are dependent on interest from their savings accounts to maintain their standard of living; and if he will make a statement. (263315)

As well as protecting pensioners who are savers by preventing the collapse of the banks, this year we also added £60 to pensioners’ Christmas bonus, increased winter fuel payments and tripled cold weather payments.

I thank my right hon. Friend for her answer. She is right—we have done quite a bit for pensioners, but many still have problems with their savings. In some cases, with interest rates going down, savings will not match the needs for which they have to pay. What do the Government intend to do to help those people? Is there more in the pipeline for them? Will she assure me that, even though half do not pay tax, the rest will be looked after, and that we will ensure that they do not suffer, especially towards the end of the year when winter approaches again?

I understand my hon. Friend’s concern. Obviously, we all feel sorry for people who are affected by the economic downturn. I confirm that half the pensioners who are over 65 do not pay tax. We have taken a series of measures to get real help to people now, when it counts. That is why we focused especially on the extra money for the winter fuel payments and the Christmas bonus. Although last year approximately £8 million was paid out in cold weather payments, the figure this year is £209 million.

Is the Minister satisfied and happy about the balance between the pain that borrowers endure and the pain that savers suffer during the recession?

As I said, we have tried to get help to pensioners, especially through the extra winter fuel payments and the Christmas bonus. Compared with 1997, when the Government came to power, the average pensioner is about £1,600 a year better off and the most vulnerable pensioners are about £2,200 better off. If we had continued with the 1997 Tory Government’s policies, we would spend £13 billion less on pensioners.

There has always been a mismatch between the assumed income that pensioners can receive from their savings and the interest that they could receive. Now that interest rates are so low, has the time come for the Government to re-examine pensioners’ assumed income from their savings? Obviously, there is no way in which they will get the assumed amount.

My hon. Friend is talking about the 10 per cent. rule—the social tariff. The Conservative Government introduced tariff income in legislation in 1987. It was never linked to interest rates; an assumption was made about a sum that could reasonably be expected to contribute to weekly income. Instead of assuming £1 for every £250, as the Tory Government did, we assume £1 for every £500. In addition, under the Conservative Government, no savings over £6,000 were allowed. We have raised that so that there is no limit on the amount of savings people can have if they are to access savings credit.

May I join the Minister down memory lane? Does she remember these words:

“The current system penalises pensioners who have prudently built up capital…by assuming pensioners get unrealistically high returns”?

She should recognise them, because they were in her Government’s consultation paper in 2000. Will she now revisit that unfair rule, which is causing extra hardship to hundreds of thousands of pensioners who have been prudent enough to save during their working lives?

I am not sure whether the hon. Gentleman was in the House when the regulations were introduced or whether he opposed them under the previous Conservative Government. I do not remember that, so perhaps he will correct me if I am wrong. We felt that the previous system was unfair, particularly the £6,000 cut-off point, at which no savings were taken into account, so we ignore the first £6,000 of savings. We ask people to contribute a small amount above that, but we have also made the rules more generous than they were under the previous Conservative Government.

What does my right hon. Friend say to pensioners who had low incomes during their working lives, who put something aside for a rainy day and who use the interest on savings to make essential repairs, but who otherwise live a hand-to-mouth existence? How is she promoting all the work that she says she is doing to make them feel that it is not as unfair as they feel it is?

One of the things we have done is raise personal allowances for older people, so that more than half of all people over 65 do not pay any tax. In addition, through the pension credit system we have tried to target money on the most vulnerable—those who perhaps saved a little bit, but who were penalised under the previous Government because of the little bit of money they had saved. We have changed the system so that it does not a punitive effect on the very people whom my hon. Friend talks about.