Background
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Parliamentary Commissioner for Administration
State earnings-related pension scheme (SERPS) inheritance provisions: redress for maladministration
1. Additional pension, more commonly known as SERPS, is the earnings-related part of the state retirement pension. It was introduced by the Social Security Pensions Act 1975. Under the provisions of that Act, widows and widowers were to receive the full additional pension earned by their spouse (subject to a maximum amount if they were entitled to an additional pension derived from their own contributions). However, the inheritance rules were changed by the Social Security Act 1986 so that widows and widowers would inherit only one-half of the amount of additional pension payable to their spouse if the spouse were to die after 5 April 2000.
2. After the charity Age Concern had publicly raised concerns in Autumn 1998 that the impending change in the inheritance rules was not widely known, I received 344 individual complaints referred to me by 170 Members of Parliament. Their common basis was that the change had not been mentioned in DSS and BA leaflets purporting to explain SERPS entitlements until April 1996, ten years after the 1986 Act had been passed; nor had DSS and BA staff drawn the future reduction to the attention of those making enquiries about pensions. Several of those who complained to me said that they had made financial provisions for the future of their spouse on a misinformed basis. They contended that, if they and their spouse had been made aware of the true position, they would have made different provision more suited to their circumstances and which would have better secured the financial position of the survivor.
3. I selected for investigation four out of the complaints referred to me, because I considered them to be a suitable sample which would allow me to establish the facts and whether there had been maladministration by DSS that had led to injustice. In my report to Parliament on 15 March 2000 (3rd Report for Session 1999-2000 HC 305) I found DSS and BA guilty of maladministration. I strongly criticised their failure to make their leaflets accurate and complete, and commented that they had compounded that mistake by not recognising the need to check that staff were aware of the change in the law. I said publicly that many thousands of people were very concerned both that they had not provided sufficiently for their spouses, and that they had still not been advised of the correct position. Those who had received oral advice also feared they would not be able to prove they had been misled. I emphasised in my report that, in those circumstances, the burden of proof rested on DSS and BA to show that citizens claiming to have been misled would not have acted differently had they not been misinformed, rather than on those citizens to show that they would have acted differently.
4. The Comptroller and Auditor General produced a report on the same day. His report focused on what action DSS had taken since October 1998 to deal with the problem and to reduce the risk of similar problems.
5. Also on 15 March 2000, the Secretary of State for Social Security in a statement to Parliament said that he accepted my and the Comptroller and Auditor General's recommendations. He said that the change to the inheritance provisions due to come into force in April 2000 would be postponed until 6 October 2002; and that the Government would set up a scheme whereby those who had been misinformed and who would have acted differently had they been correctly advised would have their former inheritance rights protected. Since then, DSS have consulted interested parties as they have developed a scheme of protected rights.
6. The Select Committee on Public Accounts took evidence from DSS on 3 April on the basis of the Comptroller and Auditor General's report and produced their own report on 19 July (Session 1999-2000 HC 401). The Select Committee on Social Security took evidence from the Secretary of State on 12 July. The Select Committee on Public Administration took evidence from DSS on 3 May, from the Rt Hon Sir Norman Fowler MP, Secretary of State for Social Security 1981-87, and Sir Christopher France, Permanent Secretary at DSS 1986-87, on 5 July and from the Rt Hon Peter Lilley MP, Secretary of State for Social Security 1992-97, Dame Ann Bowtell, Permanent Secretary at DSS 1995-99, and Mr Peter Mathison, Chief Executive of BA 1995-2000, on 25 October. They published their report on 23 November (Session 1999-2000 HC 433). On 29 November, the Secretary of State published a report by the Social Security Advisory Committee on the proposed scheme of protected rights.
7. The scheme of protected rights would have required individuals, or those authorised to act on their behalf, to complete an application form giving information about the circumstances in which they had been misled, directly or indirectly, by information from DSS or BA; and about what different action, if any, they would have taken had they been given to understand the true position. Among the criticisms made of the proposed scheme of protected rights was that it would in practice be impossible to ensure that all those in the target group, including many vulnerable and infirm people, were properly informed of the proposals or in a position to make claims. Conversely, it would be impossible to ensure that the scheme was secure from fraudulent claims. Furthermore, it offered no comfort to those who were unaware of, and unprepared for, the change enacted in 1986 because they had received no information whatsoever about it. There were also concerns expressed that the administration of the scheme would be so complex as to involve a serious risk of further maladministration.
