The work and pensions secretary admitted yesterday that the government’s pension credit was suffering from “a take-up problem” and might act as a disincentive to save for some people, according to today’s Guardian.

Alan Johnson was speaking at a “saver summit” in London, hosted by the Association of British Insurers to debate possible solutions to the pensions crisis after last month’s Pensions Commision report.

Opposition parties attacked the government’s record when Department for Work and Pensions figures revealed that 1.7m people believed to be entitled to the credit had not claimed it by the end of September.

The Guardian said that Johnson claimed the pension credit had “revolutionised” the targeting of state support to poorer pensioners, with more than three million people benefiting from an average of £40 a week extra per household, but he said later that the government “still has a take-up problem on pension credit”.

The paper reported that when pressed about the view that the credit put people off saving because, in effect, it taxed some pensioners at the rate of 40p in the £1, Mr Johnson said: “I would be crazy to say it doesn’t act as some disincentive to some people.”

He fuelled speculation that the pension credit could eventually be dropped in favour of a more generous basic pension when he said: “This is today’s solution for today’s problem.”

Last month the Telegraph reported that pensions minister Malcolm Wicks admitted at a Labour party conference fringe meeting that the pension credit was a “short to medium-term policy only”, and quoted a Department for Work and Pensions spokesman as saying: “We have always said that the pension credit is to tackle pensioner poverty over the short to medium term.”

Andrew Goodall
editor@taxzone.co.uk