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Sixth Report Session 1998-99
Volume 2
OCTOBER 1998 - MARCH 1999
The full report of selected cases
Summary of selected cases
DEPARTMENT OF SOCIAL SECURITY
Delay by the Benefits Agency in paying arrears of reduced earnings allowance
14.1 Mr H complained that the Benefits Agency (BA) of the Department of Social Security (DSS) stopped paying him reduced earnings allowance in October 1994 and instead awarded him retirement allowance at a much lower rate. BA subsequently reinstated his reduced earnings allowance from 5 October 1994 to 30 March 1996 and paid the resulting arrears, but they refused to compensate him for the loss of use of benefit.
Background
14.2 Reduced earnings allowance (and its predecessor, special hardship allowance, which it replaced in October 1986) is a weekly cash benefit which can be paid to those who, because of the effects of disablement, are no longer capable of continuing in their regular occupation or in other suitable employment of an equivalent standard. The allowance is designed to compensate for loss of earning capacity.
14.3 From April 1989 retirement allowance was introduced for persons who had attained pension age (65 for a man) and were no longer in regular employment or could not be treated as being in regular employment. Retirement allowance is awarded in recognition of the fact that a person who has lost earnings during his working life because of disablement may, as a result, have reduced earnings-related pension rights. Retirement allowance is paid at a lower rate than reduced earnings allowance. The Social Security (industrial injuries) (Regular Employment) Regulations 1990 (the regulations) define regular employment and specify the circumstances in which a person may be treated as remaining in regular employment by virtue of receipt of a prescribed social security benefit including invalidity benefit (later replaced by incapacity benefit). On reaching the minimum retirement age a claimant receiving invalidity benefit could choose whether to claim retirement pension straight away or to remain in receipt of invalidity benefit until reaching the age of 70.
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14.4 Decisions on entitlement to benefit are made by adjudication officers, whose decisions carry a right of appeal to a Social Security Appeal Tribunal and then, with leave, on a point of law, to a Social Security Commissioner (Commissioner). It is not for the Ombudsman to determine a person's entitlement to benefit and my investigation of Mr H's complaint has been concerned only with the administrative handling of his claim.
14.5 When retirement allowance was introduced, the intention was that all recipients of reduced earnings allowance who were over pension age and not in regular employment should be transferred to retirement allowance; and that was the basis on which adjudication officers initially made decisions about eligibility to receive reduced earnings allowance or retirement allowance. However, some claimants appealed against decisions that they were only eligible to receive retirement allowance, leading to two separate Social Security Commissioners' decisions (paragraph 14.4), the second of which determined that a recipient of reduced earnings allowance who was over pension age and who had given up regular employment before 10 April 1989 could not be transferred to retirement allowance.
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14.6 In the light of the Commissioners' decisions, the regulations were amended in March 1996 to reflect the original intention that persons who reach pension age continue to be entitled to reduced earnings allowance only if they remain in regular employment. Once they cease regular employment they lose entitlement to reduced earnings allowance (and may instead become entitled to retirement allowance). BA then undertook a trawl to identify all the cases which had previously been determined in accordance with the original interpretation of the legislation rather than the Commissioners' decisions. The original decisions by adjudication officers on some 3,000 plus cases were reviewed with the result that some claimants had their reduced earnings allowance reinstated up to the end of March 1996 and were paid the resulting arrears.
14.7 Under the terms of the DSS non-statutory compensation scheme, the scope of which the Ombudsman and his predecessors have accepted, DSS may make an ex gratia payment to a claimant who has suffered a measurable financial loss as a result of a clear and unambiguous official error. It is an underlying principle of the compensation scheme that such a payment should aim as far as possible to restore the person to the position he would have enjoyed had the maladministration not occurred, and so it may include an additional payment, calculated on the basis of a standard formula, to compensate for the loss of use of the money which had been erroneously withheld. Where an adjudication officer's decision is overturned as a result of a decision by the appellate authorities, leading to a backdated award of benefit, compensation is only considered for the loss of use of that benefit if the overturned decision was clearly wrong in the light of the evidence available at the time it was made.
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Investigation
14.8
1959-1997
Mr H was awarded special hardship allowance (paragraph 14.2) from 19 August 1959 to 16 August 1960 with further awards of special hardship allowance and then reduced earnings allowance being made for periods of one year in line with standard practice. Mr H was made redundant in June 1980 and he claimed invalidity benefit from 25 September 1982. When he attained pension age on 3 October 1989 he opted to continue to receive invalidity benefit instead of retirement pension (paragraph 14.3). Mr H attained the age of 70 on 3 October 1994 and on 15 September 1994 an adjudication officer awarded him retirement allowance from 5 October 1994 for life.
14.9
1998
Following representations by the Ombudsman's office, and in the light of the Commissioners' decisions (paragraphs 14.5 and 14.6), an adjudication officer reviewed Mr H's case on 20 March 1998 and decided that, as he had been made redundant in 1980 he should be regarded as having given up regular employment then and so should be awarded reduced earnings allowance from 5 October 1994 to 30 March 1996 and retirement allowance from 31 March 1996 for life. However, as benefit is paid on a weekly basis, Mr H was actually paid reduced earnings allowance up to 2 April 1996.
BA's response to the case
14.10 In his comments to the Ombudsman the Chief Executive of BA said that arrears of reduced earnings allowance amounting to £2,213.01 had been paid to Mr H on 27 March 1998 but that BA had decided that compensation could not be paid for the loss of use of those arrears as it had not been the policy intention that a person who gave up regular employment should receive reduced earnings allowance past pension age. However, following further representations by the Ombudsman, BA told the Ombudsman's staff on 22 February 1999 that, as Mr H's case had been missed by the trawl in March 1996 (paragraph 14.6), they had decided to make an ex gratia payment of £159.51 to Mr H to compensate him for the loss of use of his arrears caused by their delay of two years in identifying that they were due to him.
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Findings
14.11 There had been a period of more than two years between Mr H being made redundant in June 1980 and his claim to invalidity benefit from September 1982. Furthermore, as he had remained in receipt of invalidity benefit until his 70th birthday, he had been over pension age when an adjudication officer had transferred his entitlement from reduced earnings allowance to retirement allowance (paragraph 14.8). It was therefore appropriate for BA to arrange for his case to be reviewed in the light of the Commissioners' decisions; and I am pleased to be able to record their subsequent decision to pay him arrears of £2,213.01. I criticise BA, however, for missing Mr H's case in March 1996 when they undertook their trawl of cases affected by the Commissioners' rulings (paragraph 14.6); and I am pleased that, as a result of this investigation, they have agreed to compensate him for the loss of use of the resulting arrears.
Conclusion
14.12 I regard BA's payment of arrears of reduced earnings allowance totalling £2,213.01 and their further ex gratia payment of £159.51 to compensate Mr H for their initial failure to identify those arrears as a satisfactory outcome to a fully justified complaint.
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