Data is the key to supporting Britain’s poorest pensioners
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
This article is the latest part of the FT’s Financial Literacy and Inclusion Campaign
Ofgem’s energy price cap announcement on Friday couldn’t have come at a worse time for chancellor Rachel Reeves. The unwelcome news that average annual energy bills are set to rise this winter by 10 per cent has intensified anger at the withdrawal of winter fuel payments from 10mn UK pensioners.
Her controversial decision to means-test energy support means only the poorest pensioners — those eligible to receive pension credit — will get the annual payment of £200-£300 from now on, saving an estimated £1.5bn.
I’ve previously argued that universal fuel subsidies are poorly targeted — wealthier pensioners do not need the money, and Reeves is right to reform the scheme so help reaches those who really need it. But charities warn the cut-off point is too low, plus 880,000 low-income pensioner households stand to miss out this winter because they are not claiming pension credit. This is a political disaster in the making, and the government’s new awareness campaign, while welcome, is not going to solve the problem.
A quicker and more effective way? Rather than blithely telling pensioners to claim, let’s make better use of existing government data to identify and contact the 880,000 households we know should be getting extra help.
There is a very simple way of doing this, says former pensions minister Sir Steve Webb. Change the laws about data handling, and up to 250,000 missing claimants could be identified “at a stroke” and awarded benefits.
How? If pensioners apply to their local authority for means-tested assistance, such as housing benefit or a council tax reduction, Webb argues the law should be changed so the same data could populate an automatic assessment for pension credit by the Department for Work and Pensions at the same time.
There is a growing body of evidence from councils around the UK that nudging pensioners on one means-tested benefit to apply for another is an effective way of targeting those who miss out (more on this later). But the simplicity of Webb’s method would go further, removing a layer of bureaucracy and ending the current need for pensioners to complete two lengthy yet similar benefits applications to get the help they are entitled to.
There’s just one problem. The average pension credit claim is worth £3,900 per year. So if this method is as effective as Sir Steve claims, it could jeopardise the chancellor’s expected £1.5bn of winter fuel savings.
Reeves stressed this week that she wants pensioners “to get the support they are entitled to” and making smarter use of data would do just that. But this is not the only way targeted insights could be used to help identify claimants.
Poor take-up of pension credit has been a persistent issue for years, and raising awareness is only one part of solving the problem. Charities say the sheer complexity of the UK benefits system (and how different parts of it interact) is a major barrier. Those who are entitled to claim benefits often encounter problems with the application process, compounded by digital exclusion. Overlaying all of this is a generational stigma that prevents many older people from asking for what they see a handout.
The DWP has yet to reveal the results of its own data-sharing pilot with 10 UK councils, which sent “invitation to claim” letters to pensioners who were already claiming housing benefit, yet were not in receipt of pension credit.
Other schemes of this type have been hugely successful, according to research by the charity Independent Age.
For example, the London Borough of Islington ran three targeted pension credit campaigns using proprietary benefits analytics software to crunch local authority and DWP data sets, identifying hundreds of low-income households that could be eligible, but were not already claiming it. So far, this has unlocked £1.6mn of new annual benefit entitlement.
Glasgow City Council focused on boosting applications for attendance allowance. Those who qualify often become eligible for pension credit, as it substantially raises the minimum income threshold needed to make a claim (the same is true for other disability benefits and carer’s allowance, though many people are unaware of this).
So Glasgow used its own data and DWP records to target pensioners with letters stating a date and time when a benefits adviser would call. It wasn’t unusual for people to call the helpline, intending to cancel the appointment, but then decide to proceed after learning about the level of support they could potentially receive. By February 2023, residents who were supported were on average over £6,000 a year better off than before.
Joanna Elson, chief executive of Independent Age, says local authorities have a key role to play in connecting with communities on the ground, calling on the government to boost funding for data-led projects.
Other councils have sent draft letters raising awareness to local GPs or housing associations, which can use their own data sets to target older patients and tenants. The number of new pension credit claims in Wales jumped by 26 per cent when a leaflet was sent out to pensioners renewing their bus passes (note that Wales has a commissioner for older people).
A very important lesson from these trials is older people’s extreme wariness of being scammed. Being contacted out of the blue by someone offering to boost your income by thousands of pounds a year sounds too good to be true, and it takes time and effort to build trust.
Frequently, face-to-face contact is required to help elderly residents overcome the hurdles to submitting an application, and this costs money. Is it right that we rely on charities like Independent Age, Citizens Advice, Turn2Us, Age UK and others to provide this?
I will leave you with two thoughts ahead of October’s Budget. Even if the chancellor stops short of legal reforms, she should earmark some of the winter fuel savings towards funding more data-sharing initiatives.
And if we do see a large uptick in benefit claims, what kind of extra resource might the DWP — a department already infamous for backlogs — be given to process them in a timely manner?
Pension credit applications will need to be filed by December 21 in order to qualify for the winter fuel payment. Let’s hope pensioners in need don’t have to wait until next spring before they receive it.
Claer Barrett is the FT’s consumer editor; claer.barrett@ft.com; X @Claerb; Instagram @Claerb
Letters in response to this article:
Let’s make the winter fuel payment a taxable benefit / From David Baulcombe, Norwich, Norfolk, UK
Data can open up a new frontier in welfare reform / From Andrew Forsey, National Director, Feeding Britain, Newcastle upon Tyne, UK
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