Home > Publications > Selected cases — Parliamentary > Selected Cases and Summaries of Completed Investigations: April 2001 to September 2001 > Case No. C.1127/01
Selected Cases and Summaries of Completed Investigations
PCA 6th Report – Session 2001-2002
Chapter 1
DEPARTMENT FOR WORK AND PENSIONS
Benefits Agency: error in setting up a child benefit account led to the loss of home responsibilities protection
Mrs O accompanied her husband overseas on his two official secondments sponsored by the Ministry of Defence. Under special arrangements approved by the department Mr and Mrs O both signed a form enabling the payment of child benefit to be made by Mr O’s employer with his salary. The form made it plain that Mrs O remained the claimant; but the Benefits Agency set up the benefit account in the name of Mr O. The consequence was that Mrs O did not enjoy the automatic safeguard of home responsibilities protection (HRP), linked to the “main payee” of child benefit. During the Ombudsman’s investigation the department recognised that they had made an error many years before in setting up the account: in reality, Mr O had merely acted as the agent of his wife. They therefore made arrangements for Mrs O to receive HRP for each tax year in which she had insufficient earnings to make that year a qualifying one for basic state benefit purposes, from April 1978 until her youngest child reached 16 years old.
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Full text
11.1 Mrs O complained that the former Department of Social Security (DSS) – at the time, the Department of Health and Social Security, now the Department for Work and Pensions - failed to tell her, her husband or her husband’s employer about the potential impact of home responsibilities protection (HRP), introduced in 1978. As a consequence she faced the prospect of receiving a basic retirement pension far below what she would have received if she, and not her husband, had received HRP.
11.2 I began my investigation in January 2001 once the Chief Executive of the Benefits Agency, an executive agency of the then DSS, had given her comments on the complaint to the Ombudsman. (In describing departmental action below, I refer to DSS throughout.) I have not put into this report every detail investigated, but I am satisfied that no matter of significance has been overlooked. The Ombudsman has examined the background to the introduction of HRP in another case based on the then surviving departmental papers. I re-present some of that material below to set Mrs O’s complaint into full context.
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Background
Child benefit
11.3 DSS introduced the present system of child benefit on 4 April 1977. Before then there had been family allowances, which were payable only in respect of the second and later children in a family. (For one year between April 1976 and April 1977 interim child benefit was payable for any child of a single parent.) Subject to such matters as the place where the child is living, child benefit is payable in the first instance to the child’s mother. Where the mother gives her written consent, child benefit can be awarded to the father instead. The parent who is awarded child benefit is known as the main payee. For very many years child benefit has been paid by a book of weekly orders encashable at a post office. Since January 1984 DSS have also been able to make payments of child benefit through a bank or building society account. Each time an order is encashed the parent signs a declaration to say that he or she has read and understood the instructions contained in the information pages of the order book, known as “section CH43”. DSS also use section CH43 to publicise changes to benefits and legislation which may affect people.
11.4 When a claimant is resident abroad, child benefit is payable only in limited circumstances. A claimant whose husband is in the armed forces, or in crown service, and is stationed abroad is treated as still being resident in Great Britain for child benefit purposes. Under special arrangements between DSS, the armed services and government departments, payment of child benefit is normally included in the pay of a serviceman (or secondee) overseas unless payment is already made direct into a bank or building society.
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Home responsibilities protection
11.5 On 6 April 1978 the then Government introduced HRP. That was part of a much wider overhaul of the state pension scheme, stemming from the Social Security Act 1975. HRP is designed to help protect the retirement pension position of people who are prevented from going to work because of their responsibilities at home, for example caring for a child. The effect of HRP is to reduce, by the number of complete tax years covered by HRP, the number of qualifying years of national insurance contributions needed for a person to receive a basic retirement pension. Entitlement to HRP is linked to the award of certain “passport” benefits, including child benefit paid for a child under the age of 16. To satisfy the qualifying conditions for HRP while caring for a child, a person must be the main payee for child benefit.
Public announcements
11.6 DSS issued leaflet NP25 in August 1975 under the title “Pensions: Britain’s giant step forward”, which provided a summary of the state pensions scheme’s overhaul stemming from the 1975 Act. According to the leaflet one of the declared main aims was to
“safeguard the pension rights of a working wife while she is away from work bringing up a family”.
In a Written Answer given in Parliament on 9 May 1977 (which was before draft regulations to govern the award of HRP had been laid before Parliament) the then DSS Minister said:
“It is intended that they [the regulations] will prescribe as a year of home responsibility any complete tax year in which a contributor is receiving child benefit for a child under the age of 16, is looking after a relative receiving attendance allowance or constant attendance allowance, or is receiving supplementary benefit to enable him or her to stay at home to look after an incapacitated or elderly relative. Any wider definition of home responsibilities has, for the time being, to be ruled out on grounds of administrative cost.”
In another Written Answer given on 24 February 1978 (to coincide with the laying before Parliament of draft regulations) the then Secretary of State for Social Security said:
“These regulations provide that a person can have his basic pension rights protected without the need to pay class 3 (voluntary) contributions in any tax year from 6 April 1978 throughout which he has received child benefit as the main payee [my emphasis]….”
“The protection of pension rights during periods of home responsibilities is one of the main points of the Government’s new pension scheme. For example, it will enable a married woman to have up to 20 years out of the employment field bringing up her family, while still qualifying for a full basic retirement pension in her own right.”
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Practice and policy considerations
11.7 The final operational proposals covering the implementation of and publicity for HRP were set out in a departmental paper dated November 1977, for subsequent approval by DSS Ministers. That paper recommended that HRP be given to broad categories of people without reference to their individual circumstances and wherever possible, automatically. The paper said that for child benefit cases no claim was to be required; also that entitlement to HRP would not in general be established until the termination of the child benefit award or the date the youngest child in the award reached the age of 16, whichever was the earlier. In their paper DSS addressed briefly the position of alternative payees of child benefit under the designation “role reversal cases”:
“An award of HRP will be to the person having entitlement to child benefit but not to an alternative payee. Where a man and wife have both agreed that the wife should forgo title to the child benefit in favour of the husband, any entitlement to HRP on the child benefit condition would be his and not hers.”
11.8 The main exceptions to automatic entitlement were to be those persons caring for someone in receipt of attendance allowance or constant attendance allowance, who would need to apply at the end of each tax year. For potential qualifiers through those two avenues, DSS anticipated that married women without children would be at risk of falling outside the measures they had planned to inform the public about HRP. For that small group they proposed to consider retrospective claims to HRP as and when those affected reached pensionable age.
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Publicity
11.9 The main thrust of the early publicity - primarily about changes in the national insurance contributions option arrangements for married women - was a national press advertising campaign commissioned by DSS during February and March 1977. That was accomplished by running an advertisement in four weekly magazines (three of which were women’s magazines), a Sunday newspaper and two daily newspapers. The programme was designed “to give optimum, cost effective coverage of the main target group, working housewives”. None of the advertisements mentioned HRP. In addition to paid advertising there was extensive editorial news and feature coverage in newspapers, magazines, and on radio and television. According to DSS records the published articles all stressed the importance of married women making decisions on their national insurance contributions position. DSS also issued as press releases the text of the two Parliamentary Answers mentioning HRP (paragraph 11.6). (It has not been possible to gauge the success of those publicity actions but there is some evidence that the Daily Telegraph carried an article about HRP around the beginning of June 1977.)
11.10 To support the press coverage, DSS envisaged that a general publicity campaign for HRP would be conducted when the scheme was introduced. They planned to release new national insurance and benefit leaflets and to revise their existing ones. Apart from leaflet NP25 (paragraph 11.6), DSS distributed three other leaflets, all of which were available at local offices, which publicised HRP to varying degrees. They were leaflet NP27 entitled “Looking After someone at home”, issued in January 1978; leaflet NP31 entitled “New Pensions: a better deal for women”, issued in January 1978; and leaflet NI1 entitled “National insurance guidance for married women”, issued in February 1978.
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11.11 The back page of leaflet CH1 entitled “Child benefit: for all your children”, issued in August 1976, mentioned 12 other family benefits, but not HRP. Section 2 of the leaflet offered certain advice and instruction about who should claim child benefit:
“If you are married and living with your husband you should make the claim. If a husband wishes to claim instead he should get a signed statement from his wife that she does not want to claim herself. Both husband’s and wife’s names will be shown on the benefit order book so that either one can be paid at the Post Office. However, the one making the claim can ask for the other’s name not to be shown.”
11.12 From January 1979 onward leaflet CH1 was revised to include some text about HRP:
“If, in any tax year after April 1978, you stay at home to look after a child under the age of 16 for whom you get child benefit throughout the tax year, you can have your basic pension protected without having to make voluntary National Insurance contributions.
“This provision applies to men and women equally, but:
- a woman will not benefit for any tax year in which she keeps the right to pay reduced contributions. A woman who is considering whether or not to keep this right should read leaflet NI1 (married women) or NI51 (widows). You can get these leaflets at your local security office.
- a husband who wants to have his pension rights protected has to have claimed child benefit himself. To do so, he must produce a signed statement from his wife that she does not want to claim.”
11.13 According to the November 1977 departmental paper (paragraph 11.7) DSS also planned to inform the 7.5 million child benefit beneficiaries about HRP by adding a reference in section CH43 in all child benefit order books (paragraph 11.3), once computer-produced order books were introduced in 1979. The first reference to HRP was contained in order books whose first order was dated 25 or 26 December 1978. It was contained within a section headed:
“Information for women with reduced liability for national insurance contributions”
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The first full reference to HRP in section CH43 appeared in order books with the first order dated 5 or 6 March 1979. It read:
“Home Responsibility Protection. A scheme which protects a person’s contribution record for pension purposes during periods when that person is in receipt of child benefit for a child up to the age of 16. For further information ask for leaflet NP27 from Social Security offices.”
A reference to HRP is still included in child benefit books.
11.14 There was a final aspect of DSS’s information strategy for those who might benefit from HRP through being in receipt of child benefit. HRP was mentioned in certain letters about national insurance contributions sent to those liable to pay full rate contributions, but who had not paid enough contributions in the then latest tax year for those contributions to count towards their retirement pension. That reference was first included from the tax year 1978/79.
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Investigation
11.15 A number of papers in Mrs O’s case have been routinely destroyed, including claims to child benefit. Mrs O made it clear to the Ombudsman that her recollection of events, after so long a period, was necessarily vague.
11.16 At all material times the Foreign and Commonwealth Office (FCO) have employed Mrs O’s husband. He served two periods abroad, on secondment to the Ministry of Defence, between 1976 and 1979, and between 1981 and 1984. The family accompanied him on each tour. FCO have confirmed that they acted as agents for DSS and paid child benefit with Mr O’s salary. That accords with the special arrangements (paragraph 11.4).
11.17 Mr and Mrs O had three children, born in December 1973, November 1978 and January 1980. Thus, at the time of the Mr O’s first tour of duty abroad, Mrs O would not have been entitled to any family allowance in respect of her first child. But with the introduction of child benefit, she would have received payment for her second child and, with effect from 4 April 1977 for her first. (That accords with Mrs O’s recollection that the family received arrears of child benefit in respect of her first child, and that she never effectively claimed benefit in her own name.) Mrs O said that she could not remember the periods when they received payment in Great Britain through an order book but that in recent years DSS paid child benefit straight into their (joint) account. It had never occurred to her or her husband that they should change the arrangements made through FCO whereby they received payment in Mr O’s name. She had looked after the children throughout, and the child benefit merely formed part of the family’s income. She had not appreciated the significance of HRP until July 2000 when the Benefits Agency sent her a retirement pension forecast.
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DSS’s comments on the complaint
11.18 The Chief Executive of the Benefits Agency said that instructions sent to Mr O’s employing department in 1976 clearly stated that child benefit would be paid to the husband as agent on his wife’s behalf. Benefit would be paid through his salary and details of how payment could be made to the wife were supplied. As Mr O was seconded to the Ministry of Defence abroad when child benefit was introduced, the award of child benefit would have been arranged with the employing department. The employing department’s procedures on notifying the Child Benefit Centre stated that they were to supply the civil servant's or serviceman’s full details, with those of his children and his wife. The Benefits Agency could only assume, as the case papers had been destroyed, that the child benefit account was set up in Mr O’s name using those criteria. The Chief Executive acknowledged that Mr O being shown as the main payee at that time, 1977, would have had no significance, as HRP was not introduced until 6 April 1978.
11.19 The Chief Executive said that when the family moved back to Great Britain in 1979, the award of benefit and payment responsibilities were transferred to the Child Benefit Centre and payment was made by order book at that time. From March 1979 order books had contained a statement about HRP and referred benefit payees to leaflet NP27 for further information. When a payee signed the counterfoil he or she acknowledged that they were the person entitled to benefit and that they had read and understood the notes contained in the order book. As the claim for the couple’s third child had been destroyed, the Benefits Agency assumed that Mr O had again made the claim as the main payee.
11.20 The Chief Executive said that when Mr O served his second secondment abroad the responsibility for paying child benefit again transferred back to his employing department until his return in 1984. The Benefits Agency records did not show how child benefit was paid on his return, but showed that payment by automatic credit transfer into Mr O’s bank account started on 19 April 1993. At that time, form CH1715 would have been issued to Mr O although until November 1994 that form did not contain a reference to HRP. However, CH1715 notices were sent to credit transfer customers approximately every 60 weeks for them to read and to notify Child Benefit Centre of any changes. Payment continued to Mr O by the same method until 7 April 1997 when correspondence was returned to the Child Benefit Centre undelivered.
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11.21 As well as the notices sent to Mr O, the Chief Executive said that the DSS had adopted a number of issues to publicise HRP (see paragraphs 11.9 to 11.14). From the information they held it appeared that child benefit had been paid correctly and that Mr O had been the main payee throughout the claim. If Mrs O wanted to claim HRP retrospectively, it was a matter for the National Insurance Contributions Office of the Inland Revenue.
Later developments
11.22 In response to enquiries made by the Ombudsman’s staff the Benefits Agency explained that the arrangements to pay child benefit through a serviceman’s (or seconded Crown servant’s) salary stemmed from a proper exercise of the Secretary of State’s discretion under the relevant regulations. Although the Benefits Agency accepted that such arrangements were administratively efficient, they said that there was nothing to stop a spouse from making a claim herself. The Benefits Agency did not accept that child benefit was paid to Mr O for administrative convenience: it was paid to Mr O because it was he who had claimed it.
11.23 For their part the National Insurance Contributions Office told the Ombudsman’s staff that they did not see it as their responsibility to consider a request from Mrs O for the retrospective award of HRP (see paragraph 11.21). That was because the Benefits Agency had confirmed Mr O as the main payee and only they could alter that status. I accept that as being correct.
11.24 The Ombudsman’s staff arranged to interview DSS officials concerning Mrs O’s case and the wider policy implications. In the event, a meeting was unnecessary. DSS said that the Child Benefit Centre had made an error in 1977 in opening the child benefit account in Mr O’s name. They said the form which had to be completed by civil servants who were stationed abroad instructed that, where the civil servant was accompanied by his wife, she should sign as claimant although the payment would be paid through his salary as her agent. It was reasonable to assume that Mrs O had done that and consequently the child benefit account should have shown her as the main payee. Had that happened, Mrs O would have been automatically eligible for HRP from its introduction.
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11.25 DSS said that they would make arrangements for Mrs O to be awarded HRP for each tax year in which she had insufficient earnings to make that year a qualifying one for basic state pension purposes, from April 1978 until her youngest child reached 16 years old. (At the request of the Ombudsman’s staff, the Benefits Agency will be letting Mrs O have a revised retirement pension forecast - see paragraph 11.17.)
Findings
11.26 In the light of those developments Mrs O will not suffer because of the mistake made by the Benefits Agency in 1977. In my view, the conclusions reached by DSS (paragraph 11.24) are entirely right. The copy of the relevant form of authority seen by the Ombudsman’s staff appears to be of an old style. My understanding is that the form has not received any substantial amendment and I am satisfied that Mr and Mrs O completed a very similar one. Both parents were required to complete declarations, and I set out in full that made by Mrs O, together with the preamble:
“For completion by the claimant (in the case of a married officer accompanied by his wife she should complete this section. Allowances will however be paid to the husband on his wife’s behalf).
Warning: to give false information may result in prosecution
I declare that to the best of my knowledge and belief the information is true and complete.
I claim child benefit accordingly.
Claimant’s usual signature……………………………(date)………………”
11.27 On the clear face of the record Mrs O remained the person to whom the award of child benefit was made, and she therefore remained the main payee (paragraph 11.3). I am not able after this passage of time to say why the Benefits Agency took a different view in 1977. Nor have I been able to trace the existence of any staff instructions covering the setting up of child benefit accounts in circumstances like those of Mr and Mrs O. Given the line originally taken by the Benefits Agency (see paragraphs 11.21 and 11.22) I was concerned that the wrong treatment of Mr O as the main payee may not be an isolated case.
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11.28 In the circumstances, I asked the Chief Executive of BA if she would be prepared to examine urgently the child benefit accounts of other people the subject of the special arrangements (paragraph 11.4) and to take any corrective action. I also asked the Chief Executive if she would arrange for suitable guidance to be given to staff about the correct method of establishing the main payee in similar future cases. In reply, she said that similar cases to Mrs O’s could not be identified from the child benefit computer system; that was due in part to the expunging of customer records after five years. The Chief Executive said that there was no evidence to presume that there were large numbers of customers in the same position. The DSS policy section responsible for child benefit would be exploring with operational colleagues the best way forward on this category of customer. Finally, the Chief Executive reported that the department had commissioned a full independent audit of all child benefit literature and procedures to assure all relevant parties that customers were fully aware of their rights and responsibilities on HRP matters.
Conclusion
11.29 I welcome the recent recognition by DSS that the Benefits Agency had been wrong in opening the child benefit account in Mr O’s name. The subsequent action constitutes proper redress to a justified complaint. I also welcome the wider initiatives mentioned by the Chief Executive.
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