Queen’s Speech 2014 – Pensions

Mr Peter Hain (Neath) (Lab): I wish to speak specifically about the pensions tax Bill and the private pensions Bill in the Queen’s Speech. The Government have proposed the biggest reform to pension tax rules in nearly a century. There is no denying that it is popular to give citizens—especially those with small pension pots—the choice to take lump sums that may be more beneficial to them than eking out a living from the small annual payments on which they would otherwise rely. Paying off a mortgage or a loan on retirement by drawing down a lump sum may well be better for such pensioners, but there is real danger in destroying good annuities. That has been going on for a few decades now, and is bequeathing a nightmare that Government policies are nowhere near capable of preventing.
We have a rapidly ageing population that is dumping a huge additional burden on the young, many of whom are already leaving university with massive debts thanks to this Government’s dysfunctional policies. Now they will be saddled with subsidising through their future taxes older people who are being encouraged to live for today and not protect themselves for tomorrow.

The closure of defined benefit schemes and the shift towards defined contribution schemes has been an utter catastrophe. Accelerated further by record demographic changes, that shift is a worldwide phenomenon and a product of the neo-liberal orthodoxy worshipped by the right hon. Member for North Somerset (Dr Fox), which has gripped Governments from the era of Margaret Thatcher and Ronald Reagan, and which this Government still seem to be in the grip of. In the US, for example, the number of defined benefit schemes halved in under 30 years, while direct contribution schemes tripled. Australia, also worshipping such neo-liberalism, saw an 80% reduction in the number of workers covered by defined benefit schemes from the 1980s.

That is the background, but there are disadvantages to the new pension freedom. For example, people might decide to spend all their pension savings at the point of retirement, dooming themselves to poverty later in life. Having saved into a pension fund, received tax relief for many years and reached retirement with a pot of money, they might be tempted to blow the lot at once, meaning that they will never have the benefit of the extra income that they would otherwise have had as they got older. If that happens, the tax relief they receive would not fund a pension, and employer contributions that they may have received along the way would end up funding immediate consumption, rather than providing a long-term income. We know that some people will do that; we do not know how many but we hope the number will be relatively low. Pensions expert Ros Altmann suggests that about 7% of people currently say that they would spend it all. In truth, it impossible to predict that accurately.

Geraint Davies: I am sure that my right hon. Friend is a supporter, as I am, of the idea of a British investment bank. Does he think that the Chancellor should have set up tax incentives to encourage people who have liberated their pension pots to reinvest in a British investment bank and create jobs and wealth for the future, instead of it being blown on everyday consumption?

Mr Hain: That is a very good point.

The new flat-rate state pension, which is cited in mitigation for this new approach to pensions, still means that a lot of people will fall back on the state having spent all their pension savings. Around 20% of pensioners will still be on means-tested benefits even after the new system starts. People might also try to game the system by taking all their pension money and recycling it into a new pension fund, getting more tax free cash and another lot of tax relief. That could mostly benefit those who are reasonably well-off with high incomes in later life, and it could be costly in extra Exchequer spending on tax relief.

This is mainly a market problem, and it should perhaps have been possible to reform that market without the draconian retreat from annuities proposed by the Government. Would it have been possible to insist that insurers are obliged to treat customers fairly, and ensure they would be liable if they did not carry out suitability checks to identify which type of annuity was best and offer a good rate? Would it have been possible to reform the way annuities work, and allow more freedom but not complete freedom?
What protections will be built into the new system to ensure that unsophisticated consumers are not left at the mercy of product providers offering poor product choices, or higher risk products that people simply do not understand and through which they end up losing significant sums? The Financial Conduct Authority needs to be on top of that right from the start, but judging by past form can we be confident of that? I have very serious doubts.

If guidance is delivered by product providers, those providers are liable to entice their customers towards more poor-value products. Experience shows that they will do whatever they can to try to keep customers’ money, or give them poor value and make extra profit. The annuity market has worked poorly for years, with rising profits to insurers and reducing value for customers. How will the Government ensure that the new products developed finally offer good value, and that the charges are fair and terms reasonable?

The Government are right to legislate to permit collective defined contribution pensions, but I warn Ministers about over-hyping the benefits. In principle, such pensions ought to be better for employers than traditional final salary schemes and better for workers than traditional defined contribution schemes, but in practice they still suffer from market and actuarial risks. Ros Altmann points out that lower earners may subsidise higher earners, and younger members may subsidise older members. The new pension freedoms to take most, if not all, of the pension pot in a lump sum, however attractive and justified that may be to certain people, may also mean that people prefer pure defined contribution schemes that they can access in retirement if they wish. Collective defined contribution schemes, admirable as they may be in principle, usually mean that people cannot just take the cash, which means they may well be less attractive for members.

My challenge to the Government is this: rather than leaving the private pension system to market providers and their whims, why not build a new system that works? We need a system with longevity that savers will understand and find confidence in—a lack of confidence in this Government’s approach to pensions is something that I imagine savers and I share. While the Chancellor’s right hand further fragments and individualises pensions through these tax proposals, the pension Minister’s left hand makes legal collective direct contribution pensions. Why should any employer move to that collective system when they can see the Treasury going down precisely the opposite route? I doubt whether many will do so.

The Government are not doing anything like enough to face up to the time bomb of our ageing society and the whole person social care that the shadow Health Secretary eloquently advocated, or anything like enough to face up to the pensions needed to underpin the new life that is rapidly overtaking us, and the whole person care necessary to protect us. The whole Government philosophy of leaving private pensions to the market and saying to citizens, “Effectively, you are on you own” has failed abysmally in the past, just as I believe it will fail abysmally in the future at a terrible cost to all of us—pensioners, taxpayers and the public in general. I urge the Government to look again and come back with proposals that really begin to meet the scale of both the pension challenge and the whole person care challenge that haunts the whole of this country.

Hain condemns ‘astonishing’ decision to remove phones from Ystradgynlais Jobcentre

Neath MP Peter Hain has attacked Iain Duncan Smith, Secretary of State for the Department of Work and Pensions, following the removal of the telephones from Ystradgynlais Jobcentre. In a move he called ‘astonishing’ Mr Hain has demanded that the phones be returned to the Jobcentre as they are ‘a lifeline to many in the community’.

The phones were removed at the beginning of May and in a letter to the Secretary of State the Neath MP said, ‘this is a vital service for jobseekers and people on benefits needing to call the help lines when they do not have access to a phone or cannot afford to call the 0845 numbers that are being used.

‘This will have a hugely negative impact on those already struggling to make ends meet by making it more and more difficult to speak with an official for the help they need. It will further compound problems for people fighting to find work in a fiercely competitive jobs market and who use the phones when looking and applying for jobs.

‘How are people supposed to actively look for work or get help if something has gone wrong with their benefits if facilities like these are taken away? The remote location of the communities Ystradgynlais Jobcentre serves means the phone lines are a lifeline to many in the community.’

Earlier in the year Mr Hain condemned the decision to remove the telephones from Neath Jobcentre and speaking against the DWP decision he said, ‘this is clearly a cost cutting exercise at whatever cost to the public. People are being prevented from accessing the kind of advice and assistance they need to get and are entitled to

“The benefits system is a nightmarish one of complexity and ambiguity. If you deprive claimants of person-to-person contact and force everyone to go online, it’s a recipe for disaster.

“There are fewer and fewer staff to deal even with those claimants able to go online, while there are many especially older clients who are not. This will simply lead to chaos and misery.”

New DWP Demands Hit the Poor Hardest in Neath

Plans introduced today by the Department for Work and Pensions have been heavily criticised by the former Secretary of State for Wales Peter Hain MP who argues they will affect the poorest in Welsh society and are further evidence on the punitive attitudes of the DWP.

Beginning this morning, individuals who receive Job Seekers Allowance and are considered long-term unemployed will have to register with their local Job Centre Plus on a daily basis if they want to keep receiving their social welfare.

However, the plan has already run into a growing body of criticism from leading charities such as Oxfam who claim that you cannot force people to volunteer and will be boycotting the programme altogether to demonstrate their disapproval.

Mr Hain said: “I find it astonishing that the government have gone through with these proposals, it just demonstrates how far out of touch with the daily conditions of people’s lives and the plight of those who are looking for work.”

“In my Neath constituency, which covers a large area in South Wales, the DWP are forcing some of my constituents to spend over half of their Job Seeker’s Allowance payment on just getting to the job centre in the first place, were you to travel from Glynneath to Neath on the bus everyday for a week it could cost you £37, JSA is normally around £55-£65.”

“Today we learn that the long-term unemployed are going to be forced into voluntary work, for which they will not get paid, and if they do not work, the state will stop giving them the pittance which many rely on. Failure to attend these meetings will result in a sanction, it is a vicious circle with only the poor suffering, how is this still social welfare?”

“This is just another effort by the DWP to save money by harming those who do not have a voice, it is the poorest in society who will suffer the most from this.”

“In places like South Wales and the North of England it still will not make a difference, if all of the jobs are in the South East of England then my constituents cannot be helped, we have already seen this with the failure of Ian Duncan Smith’s Work Programme, the only region to benefit was London, everywhere else it was a failure.”

“The cost of living crisis continues and the government pretend it has not happened and worse that it is not happening on their watch.”


Personal Independence Payments (Wales)

Mr Peter Hain (Neath) (Lab): It is a pleasure to serve under your chairmanship, Mr Owen. I apologise at the outset for having to leave immediately after I finish speaking, to undertake an official appointment relating to my duties as a former Secretary of State for Northern Ireland. I will not hear the Minister’s reply, but I will of course read it.

In the short time since personal independence payments have come into force, it has quickly become evident that the system is miserably failing people and leaving some of the most vulnerable in our communities in absolute desperation. My Neath constituency has one of the highest rates of take-up of the old disability living allowance, a legacy of the industrial heritage that once provided livelihoods for many of my constituents, but has now resulted in serious health problems—a heavy price to pay.

New applicants face a system of delay and despair. Many constituents have been waiting six months or longer, having had their face-to-face assessments and been told, frustratingly, that

“the report is in the final stages with a senior healthcare professional.”

For those six months they have been living off savings to help them to adapt to their conditions. The prospect of a backdated payment is of no comfort to them as they struggle with day-to-day tasks that many of us take for granted, while their families suffer under the stress and strain of caring for them.

In some of the cases processed by Capita, health care reports have not been up to standard and further information has been required. That involved going back to the assessor and requesting further information. In one case, a second face-to-face assessment was required, and in one astonishing instance it came to light in March 2014 that despite the assessment being carried out in November 2013, no assessment report had been prepared by the assessor. Those constituents’ misery and distress seems to have no end.

The protracted ordeal is just to get the assessment report from Capita to the Department for Work and Pensions. As the assessment reports start to trickle through to the Department, the emerging trend is of further delays in the final decision after the report has reached the Department. So after months of waiting with Capita, applicants face further delays, and that only adds to their misery.

I raised with Capita and the Department a case that encapsulates the ordeal. A constituent made his original application on 5 July 2013 after suffering a serious brain seizure, a stroke and several other seizures. He returned to work initially, but because of his mobility problems he could not continue. He underwent a home assessment on 15 October 2013, and made numerous calls to the Department for Work and Pensions to chase up the progress of his application. Every time, he was referred to Capita because the report had not been sent, but he was told that

“the report is in the final stages with a senior healthcare professional”.

One event epitomises his situation. He woke up one morning and asked his wife to leave him in bed as he was feeling unwell. Shortly after she left for work at 8 o’clock in the morning, he suffered a series of convulsions that lasted approximately 30 minutes. He had difficulty breathing and removing his continuous positive airway pressure mask, which he has to wear because of obstructive sleep apnoea and the danger of a stroke or heart attack. He was unable to get out of bed for the rest of the day until his wife came home at 4.30. He did not eat or drink all day and had to urinate into a bottle.

My constituent’s wife is caring for him but because he has no income from PIP she is at the point of utter exhaustion. The decision to award the benefit is vital to enable his wife to give him the proper care and supervision he needs. Until a decision is made, the couple cannot arrange that care, and their life is in limbo. In March, my constituent finally received his decision notice, only to be informed at the end of the month that a stop had been put on his payment—a decision that could not be explained when he phoned DWP. It has now been nine months and he has not received a payment. DWP’s decision notice states that he is owed a back payment of more than £5,000. He has been let down by Capita and the Department for Work and Pensions as his anguish goes on.

In another case, the application was made in June 2013. The report from Capita was eventually received by DWP on 13 February, but a decision has still not been made. The claimant told me:

“I have no confidence that the process will ever end, there is always one more stage, one more delay.”

That sentiment is felt by many who have lost faith, which is a dreadful stain on the Department for Work and Pensions, where I served as Secretary of State.

The excruciating stress and anxiety is hitting people seriously, including cancer sufferers and ex-servicemen with post traumatic stress disorder. Ministers should be ashamed of the system, which is punitive, nasty and causes abject despair to far too many people.

Kevin Brennan: To emphasise the dilemma facing our constituents, I should say that in a similar case in my constituency a women who suffered a stroke made an application in June 2013, and has just received the benefit. Her husband elected to reduce his hours at work as a result of which they lost the tax credits that they were entitled to, so they went into even deeper problems as a result of the unacceptable delays.

Mr Hain: My hon. Friend makes an important point. I am not going to make personal attacks on Ministers because they probably believe they are doing a professional job, but I sometimes wonder whether they have any idea of what is happening on the ground as a result of their policies.

If the Atos debacle taught us anything, it is the importance of getting the decision right in the first place—in my constituency, the local welfare rights unit had an 80% success rate with its appeals against Atos’s decisions—but that should not mean waiting unacceptably long times such as six, seven or eight months for a decision that could dramatically affect somebody’s life and income. Action must be taken immediately to address this inexplicably lengthy and prolonged system that is causing misery and despair for applicants. The turnaround of applications must be drastically accelerated by both the assessment provider and the Department.

Disability Assessments ‘Delay, Despair And Misery’ Says Hain

Unacceptably long delays for disabled people being medically tested for the new Personal Independence Payment have been decried by Neath MP Peter Hain who condemned the assessment system for bringing ‘delay, despair and misery to many’.

Personal Independence Payments replaced Disability Living Allowance last summer with new applicants applying for PIP while existing DLA recipients will migrate over to the new system when their awards are due to be renewed.

Mr Hain has already raised concerns over the lengthy delays applicants have experienced and speaking in a Westminster Hall debate he said, ‘In the short time that Personal Independence Payments have come into force it has quickly become evident that the system is miserably failing people and leaving some of the most vulnerable in our communities in absolute desperation.

‘What new applicants are facing though is a system of delay and despair. Many of the constituents have been waiting six months or longer; they have had their face to face assessment and are frustratingly told that ‘the report is in the final stages with a senior healthcare professional’. For those six months they have been living off savings to help them adapt to their conditions. The prospect of a backdated payment is of no comfort to them as they struggle with day to day tasks that many of us take for granted while their families suffer under the stress and strain of caring for them.

‘More recently it has emerged in cases I have been involved in that the health care reports are not up to standard with further information required. This involved going back to the assessor and requesting further information but in one case a second face to face assessment was required. In one astonishing instance it came to light in March that despite the assessment being carried out in November no assessment report had been prepared by the assessor. For these constituents their misery and distress is prolonged.

‘But this protracted ordeal is just to get the assessment report from Capita to the Department of Work and Pensions. As the assessment reports start to trickle through to the Department of Work and Pensions the trend emerging is of further delays on the final decision stage after the report has reached the DWP. So after months of waiting with Capita they not face further delays only adding to their misery.

‘The stress and anxiety this is causing people who are seriously ill including cancer suffers and an ex-serviceman with  post traumatic stress disorder, is excruciating.

‘If the Atos debacle taught us anything it is the importance of getting the decision right in the first place but this should not mean waiting unacceptably long times like six, seven or eight months for a decision that could dramatically affect someone’s life.

‘Action must be taken immediately to address this inexplicably lengthy and prolonged system causing misery and despair for applicants. The turnaround of applications must be drastically reduced by both the assessment provider and the Department of Work and Pensions.’

Full speech here