Delivering Benefits in Old Age: The Take up of the Minimum Income Guarantee, by Paul Dornan

Ashgate, Aldershot, 2006, 254pp, hardback, 0 7546 4688 2, £50 

This is a highly detailed report on a research project at the University of York on the non-take-up of social security benefits by older people who are entitled to them, and in particular of the means-tested Minimum Income Guarantee (MIG) (now replaced by Pension Credit). As the author suggests, the MIG was in fact far from ‘guaranteed’, as to receive it pensioners needed to claim it. This is no minor issue, for Pension Credit shares many of the MIG’s characteristics and five million people are entitled to it (p.2).
Dornan lists the negative aspects of means-testing: ‘complexity, fraud, stigma, moral hazard and incomplete take-up’ (p.3). Given that both major political parties now regard means-testing as the foundation of income-maintenance policy, these negative aspects matter – and in the context of pension provision, low take-up of the Pension Credit will compromise the ability of other parts of the government’s pensions plan to ensure income security in old age.
An introductory chapter is followed by a review of existing research on take-up. The finding is that previous studies have concluded that levels of non-take-up relate to the costs of claiming and that the most important factor is that pensioners simply don’t understand the system. This means that ‘the trade off between costs and benefits is not an informed rational process’ (p.35).

Chapter 3 studies the pensioner population in order to understand factors which lead people not to claim benefits to which they are entitled. Dornan finds that increasing numbers are reliant on the means-tested safety net, many with small entitlements – and these are the people least likely to claim. He also finds that the oldest claimants are likely to be the most isolated and therefore, even if entitled to substantial amounts of MIG, the most likely to find it difficult to negotiate the claiming process.
Chapter 4 discusses the Pensions Green Paper, Partnership in Pensions, to which the means-tested Pension Credit remains central, and also the alternative of a simpler non-means-tested system; chapter 5 describes the modeling techniques used in the research project; chapter 6 provides a longitudinal perspective (which shows receipt of means-tested pension benefits to be more volatile than one might expect); and chapter 7 explores the impact of additional income on consumption.
A concluding chapter suggests that, if means-tested provision is to remain at the heart of government policy, then methods must be employed to ensure greater take-up, and particularly a more proactive approach by the Department for Work and Pensions; but, as Dornan suggests, ‘if a radical solution such as the Citizen’s Pension were to be used, solving non-take up would not be technically difficult and at a sweep most of the problems could be dealt with’ (p.197). He also suggests that extending entitlement to the Basic State Pension and increasing its value would reduce the number of pensioners on means-tested benefits and would thus reduce the problem of non-take-up.

This is a highly readable report on a very thorough and highly relevant research project. A similar exercise related to tax credits would be most welcome.