Delivering Benefits in Old Age

The Take up of the Minimum Income Guarantee

Paul Dornan

• Publisher: Routledge
• Year: 2017
• Topic: Social Sciences
• eBook ISBN:
  9781351160148
• Subtopic: Social Work
• Index: Social Sciences

Although means-testing for Social Security transfers is economical, it hasn't proven to be very effective. The Minimum Income Guarantee (MIG) and the Pension Credit initiatives implemented by the Labour Government in the UK have both suffered from low levels of take up amongst entitled pensioners. This book sheds important new light on this pressing problem, examining existing research on take-up and highlighting gaps in understanding. It explores the strengths and weaknesses of the theoretical base, drawing on European theory and applying it to the UK. Socio-economic, demographic and attitudinal trends are analyzed to elucidate the impact they have had, and will have, on the proportion entitled to MIG and its take-up rate. Current policy is also analyzed to explore the importance of take-up for the Labour government and the prospects of improving it. As high take-up would be an important step in combating poverty, this book offers solutions and options to tackle these problems. It is therefore of critical interest to academics and policy makers in the UK and around the world.

Chapter 1
Introduction

Take—up, the process of claiming an entitlement, is the product of a cost benefit analysis conducted, consciously or unconsciously, under conditions of usually incomplete and often inaccurate information. The term 'take—up' suggests a positive action, the antonym being non—take—up, but here it is used to indicate a process as well as an outcome. Perhaps the phrase 'process' is unhelpful, it calls to mind notions of linearity not borne out by research, but it suits the purpose. When costs outweigh benefits the individual will not claim. Increasing the benefits or reducing the costs should increase the likelihood of take—up.

This book is about the non—take—up of social assistance benefits by entitled older people and so to start it off Corden (1999: 137-8) gives us four key reasons for why we should be interested in and concerned about, low take—up.

• Combating poverty: assistance benefits are targeted on those in officially defined poverty.¹ If pensioners fall through the safety net they are at a greater risk of poverty than those who are caught by it;
• Policy failure: if pensioners do not receive the benefits aimed at them the system is not working effectively;
• Financial planning: non—take—up makes it difficult to predict the cost of running and reforming benefit systems — we do not know how many will claim new or reformed benefits;
• Social justice: part of the role of the state is to offer income security. If barriers prevent some groups receiving their benefit this is a social injustice.

In April 1999 the British Labour Government re—packaged Income Support for older people as the Minimum Income Guarantee. Minimum Income Guarantee was central to anti—poverty policy, and represented a point of policy transition where issues of poverty and non—take—up featured heavily. The benefit thus forms a good basis for this study, which seeks to examine this period of policy together with original analysis of take—up trends using concurrent data for what this can tell us of take—up patterns. Analysis of this period of reform and the related problems of non-take—up also informs policy analysis of the Pension Credit, the benefit which subsumed it in October 2003. Since 1999 the value of Minimum Income Guarantee/Pension Credit has been increased substantially both in cash terms and as a percentage of average earnings. Minimum Income Guarantee was sold as income security for the poorest in old age but, despite its promising name, it was far from guaranteed, it required a proactive act of claiming by the pensioner concerned. As the analysis of this book shows Minimum Income Guarantee suffered from low take—up just as, for pensioners, Income Support did, just as Supplementary Benefit did and just as National Assistance did. The discussion in chapter eight discusses the implications of this for the Pension Credit.

Not only was Minimum Income Guarantee the vehicle of choice through which the largest increases in income have been directed, but through this act its profile has risen. In 2001/02 just under a quarter of the pensioner population were in households with an entitlement to Minimum Income Guarantee.² As more of the population have an entitlement, so the assistance benefit has become more prominent. The Institute for Fiscal Studies estimated that when the Pension Credit replaced Minimum Income Guarantee in October 2003 52 per cent of pensioners would be entitled to it and that by 2025 they estimate this would have risen to 73 per cent (see Work and Pensions Select Committee, 2002). Later estimates made by the Department for Work and Pensions has estimated Pension Credit entitlement in 2004/05 to be 4.7 million persons (Work and Pensions Select Committee, 2005).

The terminology used is indicative: the benefit is no longer merely Income Support; it has first become the Minimum Income Guarantee, and now the Pension Credit which includes within it a 'Guarantee Credit'. As the means test has been historically associated with a series of inter—related problems, of which non—take—up is probably most significant, much of the reform recounted in chapter four has been designed to minimise it. Through the repackaging and reform of Income Support its successor, the Minimum Income Guarantee and Pension Credit, has become fundamental to the New Labour pensions agenda. If reform of the means test does not solve these problems then the wider pensions settlement may be undermined.

Non—take—up has been extensively explored elsewhere and this previous effort leads, not unreasonably, to the question why another study? The answer is four—fold and is intended to capture the intent of this study.

• The first justification is the need to bring together and update a dispersed literature. The literature in this area is fast developing; this book brings together and updates this existing base. Traditional studies have focused on calculating numbers of entitled non—recipients and on the reasons why they do not claim. Yet we know surprisingly little about the actual impact of take—up on, and implications of non—take—up for, pensioners and the communities in which they live. This study adds to existing evidence by exploring these aspects.
• Secondly not only do substantial levels of non—take up persist in means tested benefits, but with political and societal change the role of selectivity is becoming more important. There appears no immediate way back. The economic, social and political changes of the last quarter of the twentieth century have fostered a growing implicit consensus between the major political parties about the need for means tested selectivity in social policy. With this rejection of other forms of provision has come the negative aspects of its most obvious alternative, means testing: complexity, fraud, stigma, moral hazard and incomplete take—up. Current policy has substantially extended the role of the means test. The crux of wider New Labour reforms to income maintenance in old age is maximising take—up. If this fails then other pensions policies reliant on an effective safety net will be flawed from the start. Yet without substantial improvements in the working of the means test, the problem of non—take—up will certainly grow numerically and will also quite possibly become proportionally greater.
• The older population is changing in both its socio—economic circumstance and its attitudes — there is a need for analysis that adequately explores the implications this has for the effectiveness of the means test. We have many more pensioners, they are living longer and they have shown signs of a greater political unity than has previously existed. Their income situation is polarised, on average current pensioners are very much richer than their parents were but this masks extremes. Not all pensioners have benefited equally from post—war improvements in living standards and many remain in situations of economic deprivation. Society has changed, with advanced urbanisation there are often greater distances, both social (through relationship breakdown) and geographic (with increased mobility) suggests that family support may prove inadequate to provide for the additional needs of the older population. These factors all have implications for the role and effectiveness of means tested benefits.
• If we accept that a general, if not specific, political consensus exists around selectivity in social policy and that this is here to stay, the logical response is pragmatic: how can the means test be made to work? The goal of improving the effectiveness of the safety net encouraged New Labour to initiate a substantial reform programme central to which was the 1998 Green Paper, Partnership in Pensions (DSS, 1998a). This included new benefits, Minimum Income Guarantee and the successor the Pension Credit, different ways of delivering services, through the Pension Service and a new claiming hotline, together with policy specifically designed to boost take—up: a shorter claim form and several national take—up campaigns. As well as these there are other methods of targeting that ought to be used relying on data matching of existing information sources. This moves towards more individualistic methods of targeting entitled non recipients and maximising take—up.

This study is about policy effectiveness, the ability that current policy has to deal with the problem of non—take—up. The schematic in Figure 1.1 sets out the ground.

Figure 1.1 Policy effectiveness and targeting benefits

The figure is made up of three circles: target, legislation and implementation. The test of effective policy is the degree of overlap. A 'perfect' policy would be represented as a complete overlap, where the target (the political intention) matches legislation (the legal basis) and the implementation (the result). With means tested benefits the system is rather different. The policy target, in this case pensioner poverty, is not always reached because of the legal requirements of formulating the means test. The best example of this is perhaps the capital rules under Minimum Income Guarantee which systematically excluded substantial proportions of officially defined poor because they had more capital than the savings limit, despite having very low weekly incomes. Similarly in a reactive social security program —one in which the onus is on the entitled person to apply — legal entitlement does not always result in receipt of a social security right. The intent, structure and implementation of policy all affect the proportion of entitled persons missing out. This study is about this interaction, how it resulted in one in three pensioners entitled to the Minimum Income Guarantee not receiving this income and how this may change with future policy.

In terms of research questions to frame the study, each broken down and interrogated in subsequent analysis, three are worth stating at this stage since they capture the overall approach:

1. To synthesise research findings from academic, grey literature together with theoretical work on the causes of non—take—up.
2. To update existing take—up analysis by conducting original analysis using secondary data on Minimum Income Guarantee take—up.
3. To use 1 and 2 to test the extent to which the post 1997 reforms have been able to increase take—up, and to explore the potential for improving take—up of Pension Credit.

Most of the analysis here is conducted on Minimum Income Guarantee, since at time of writing the Pension Credit, which subsumed it as the Guarantee Credit, has not been long in existence and insufficient data exists to judge its impact. Instead inferences are drawn from this period of rapid policy innovation as to the longer term settlement and the ability of recent reform to overcome non—take—up.

This book is structured in the following manner. Chapter two contains a synthesis of the literature and explores the considerable amount of research conducted on take—up since the inception of the Beveridge inspired modern welfare state. A marked shift is charted, within understandings of non—take—up, from a client level perspective, suggesting individual failure to claim, to a more sophisticated structural, approach where non—receipt is seen as a system failing to deliver rights.

Chapter three presents an analysis of the pensioner population, exploring demographic and social economic trends, these changes are shown to have combined with policy change to lead to many more pensioners have some — often small — entitlement to means tested benefits.

The New Labour reforms have substantially increased the numbers of pensioners with entitlement to means tested benefits and chapter four is devoted to exploring the policy settlement, focusing particularly on Minimum Income Guarantee but also drawing issues connected with the beginning of Pension Credit.

Chapter five explores what we know about Minimum Income Guarantee entitled non recipients using Family Resources Survey data from 2001-02. This builds a model of the characteristics of entitled non recipients and from this suggests how policy intervention might best target entitled non recipients. The chapter also contains longitudinal analysis, conducted on the British Household Panel Survey, which isolates key factors associated with the take—up of Minimum Income Guarantee and Income Support.

Chapter six uses expenditure data from the then Family Expenditure Survey together with the Poverty and Social Exclusion Survey to explore the effects of non—take—up and, conversely, the impacts we may expect from maximised take—up.

This study is drawn together in chapter seven, which concludes by exploring the relationship between policy and non—take—up and the possibilities offered by policy intervention.

Full take—up could have been achieved by making Minimum Income Guarantee universal, and likewise for the Pension Credit. That this has not happened is illustrative of the central — political — constraint: that of resource. Nevertheless this study argues there are ways to improve take—up. The conclusion evaluates reform options and argues that although non—take—up is an inherent factor within the current means tested system it is not, in itself, intrinsic to targeting. It is not targeting that reduces take—up but the process by which this is achieved.

¹ Usually taken to be below 60 per cent of the median income. Though aimed at the poorest, entitlement criteria do not logically link to the this poverty line, assistance benefits have been set at a level lower than the poverty line and indeed many of the poorest were ineligible to the Minimum Income Guarantee. See chapter five.

² Authors calculation based on current recipients factored up to account for dependants and then increased to account for non—take up (based on 72 per cent take up, the mid—point of the official estimate in 2000-01; DWP, 2003a: 18, table 1.7).

Chapter 2
Research on Take Up: A Review

Non-take up has perplexed researchers, policy makers and advice workers for much of the post war period. Why is it that poor people, defined as such by the state, with entitlement fail to claim it? Take up rates vary substantially between benefits and groups with entitlement; pensioners show particularly low take up. This is made more perverse by a comparison between means tested and insurance benefits. The Basic State Pension goes to all who have made sufficient contributions and has a near 100 per cent take up rate (Corden, 1999: 135; Hill, 1990: 94); DWP analysis for 2002/03 suggest the means tested Minimum Income Guarantee had a take up rate of between 63 and 74 per cent (DWP, 2005a: 19, table 1.7). The problem has sparked substantial research, dating from the 1950s to the current day on causes and solutions of non-take up. Despite this research, and various policy interventions, rates of take up have remained stubbornly low.

This chapter uses research to chart shifts in understanding of the take up problem. Following the definition of take up proposed in chapter one, it is argued that the process of take up is a trade off between ...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• List of Figures
• List of Tables
• Acknowledgements
• List of Abbreviations
• 1 Introduction
• 2 Research on Take Up: A Review
• 3 The Pensioner Population
• 4 The New Labour Pensions Settlement
• 5 Modelling Take Up
• 6 Dynamic Analysis of Take Up: An Exploratory Analysis
• 7 The Impact of Additional Income on Consumption
• 8 Conclusions
• Appendices
• Bibliography
• Index