Pension Credit, Credit Guarantee, and Savings Credit are not meeting goals because of structural errors, figures and research from the Pensions Policy Institute suggest.
The conclusions are contained in a report submitted to the Work and Pensions Select Committee by the PPI
Pension Credit take-up is still not beyond 74% of eligible households, while data suggests the rate of takeup by new applicants has started slowing.
Guarantee Credit data suggest it is actually helping exaggerate relative poverty.
Guarantee Credit levels increasing annually in line with national average earnings would mean minimum income levels can keep up with the rest of society.
The PPI argues, however, that raising Guarantee Credit levels in line with prices reduces the number of people eligible for the benefit, meaning those left claiming the benefit become poorer relative to the rest of society.
Authors of the report Alison O’Connell and Chris Curry, both PPI directors, say that as Savings Credit take-up levels are very low, there is no ‘spur’ to claiming it, leaving eligible people to drift for some time without knowledge of their need to claim.
They may have claimed once before, been found ineligible and then thought it was not worth claiming again, says the PPI report.
Furthermore, it is not at all clear that people eligible for Savings Credit recognize it as a ‘reward’ due to its confusing nature, which even pension experts find difficult to understand.
Savings Credit was intended as a softening of the means-testing trap, which existed when only Guarantee Credit was in place.
The PPI says that even with Pension Credit in place, the trap still exists.
The institute points out a person on median earnings throughout a full-time career, aiming for a two thirds final salary pension in 2031, would need to save 18% of salary from age 40, on top of S2P.
Some 34% of that person's final salary would come from the private pension. But if nothing were saved, that person would still get about a third of that third of final salary, or some 10% equivalent from Pension Credit.IFAonline
Outlook for income
Chris St John to take over £3bn UK Select Opps