Unlike the debate on the previous group, the debate on this short group need not detain us too long. It relates to a feature of the state pension credit system known as the assessed income period. The basic idea was to avoid the need for people on pension credit to keep reporting changes in their circumstance—the basis was that older pensioners in particular have less frequent changes of circumstance. The basic idea of the assessed income period was a perfectly reasonable one but, unfortunately, it has not worked in practice and has raised a lot of issues.
To give an example, if someone in retirement inherits substantial wealth from the generation above them, they can continue to get pension credit for five years or even indefinitely, despite having very substantial wealth. If someone retires, has an assessed income period and then starts to draw a new stream of pension income, they can go on getting pension credit despite the fact that their living standard is well above the level of pension credit. We have given this a good go, and it was a reasonable thing to try, but in practice it has created anomalies, with payments to people who, if they were assessed on their current circumstances, would not be entitled to benefit.
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The Government have taken the view that assessed income periods should not be part of the system in the future, but we accept the need for a transition period. The amendments propose that people who already have open-ended AIPs, such as the oldest pensioners, will be able to continue with them.
I hope I have given an intuitive flavour of the changes, but to be more precise, the purpose of new clause 3 is to provide for the abolition of the assessed income period in pension credit cases from April 2016, while new clause 4 will correct existing pension credit legislation to ensure that the provision relating to indefinite AIPs for people over the age of 80 works as intended. The effect of new clause 3 will be to limit the application of the legislation on AIPs to decisions that take effect before 6 April 2016 so that from that date no new AIPs
will be set. It will also ensure that AIPs set before 6 April 2016 will remain valid beyond that date, thereby transitionally protecting the indefinite status of certain existing AIPs. The amendments also provide for regulations to be made for the purpose of phasing the termination, from 6 April 2016, of all AIPs of five years or shorter in length that were set before that date. Amendment 13 concerns the commencement of the new clause and ensures that the amendment will come into force on the day that Royal Assent is obtained. I commend new clause 3 to the House.
Question put and agreed to.
New clause 3 accordingly read a Second time, and added to the Bill.