| |
Home > Publications > Special reports — Parliamentary > SERPS inheritance provisions > Full report
Full report
Background
Investigation
The development of public and Parliamentary concern
DSS comments on the individual complaints
Compensation for maladministration by DSS
Findings
Background
The state earnings-related pension scheme (SERPS)
1. Additional pension, more commonly known as SERPS, is the earnings-related part of the state retirement pension. It is paid to employees who paid Class 1 national insurance contributions on earnings between the lower and upper earnings limit for such contributions in one or more tax years since 6 April 1978, and who reached state pension age on or after 6 April 1979. SERPS was given effect by the Social Security Pensions Act 1975. Under the provisions in that Act, widows and widowers were to receive the full additional pension earned by their spouses (subject to a maximum amount if they were entitled to an additional pension derived from their own contributions). However, section 19(1) of the Social Security Act 1986 (the 1986 Act) replaced that inheritance entitlement, instead providing 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.
The four individual complaints investigated
2. I received 344 individual complaints in total referred to me by 170 Members of Parliament. Their common basis was that the planned future reduction in a surviving spouse's future pension entitlement had not been referred to in DSS and BA leaflets purporting to explain that entitlement 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. 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 trueposition, they would have made different provision, more advantageous to themselves, which would have better secured the financial position of the survivor.
3. I selected for investigation four out of the many 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. My investigations began in May 1999 once I had received comments on the four complaints and the matters giving rise to them from the Permanent Secretary of DSS. I have not put into this report every detail investigated by me and my staff; but I am satisfied that no matter of significance has been overlooked.
4. I summarise below the accounts of their particular circumstances giving rise to the complaints of the four individual complainants, whom I call Mrs A, Mr L, Mr N and Mr R, respectively.
- Mrs A, whose complaint was referred to me by the Rt Hon Paddy Ashdown MP, said that her husband had been told by the local BA office in 1996, the year he was due to receive his state pension, that she would receive a full widow's pension plus his SERPS pension if he died before her. She had only discovered the impending change in the SERPS inheritance rules from a press report in November 1998. Mrs A said that because her husband had retired he was no longer in a position to bear the cost of making alternative provision to compensate for the reduction in SERPS entitlement which she could expect to suffer if he died before her on or after 6 April 2000.
- Mr L, whose complaint was referred to me by Mr Nicholas Hawkins MP, said that he had made a written enquiry of BA's pensions and overseas benefits directorate in Newcastle upon Tyne on 11 January 1995, requesting an estimate of his wife's pension should he die before her. The pensions and overseas benefits directorate had given an estimate in writing on 13 February, showing that 100 per cent of the additional pension entitlement could be inherited, and had made no mention of the forthcoming reduction to 50 per cent.
- Mr N, whose complaint was referred to me by Mr John Whittingdale OBE MP, said that in November 1995 at age 61 he had been made redundant. He had made an enquiry of DSS, but had not been told about the future changes to SERPS. He had decided to retire and take an enhanced occupational pension with a slightly enhanced widow's pension which, together with the state benefit, would have made what he had considered to be adequate provision for his wife, who is eight years younger than he is. That consideration had been based on the understanding that his wife would inherit his SERPS entitlement in full. It was too late for him to reverse the decision to retire, or to change his occupational pension to secure for his wife a larger widow's pension.
- Mr R, whose complaint was referred to me by Mr Nigel Waterson MP, said that he had made enquiries of DSS between 1989 and 1993, but had not been told about the future changes to SERPS. On that basis in 1990 and 1993 he had made decisions to purchase single life annuities. He had lost the opportunity to purchase a joint annuity to cover a pension for his wife, should she survive him. Mr R said he had also written to DSS on 14 November 1996 pointing out that the 1996 editions of DSS leaflets dealing with pensions differed from earlier editions in referring to the halving of the SERPS inheritance entitlement. By his account, DSS's reply (no copy of which is available) had confirmed the forthcoming change in April 2000 to the SERPS inheritance provisions and had said that the leaflets did not give a full exposition of the law. Through the Member, Mr R had pressed a complaint that he had not been given advance notice of the changes to SERPS. In reply to the Member, the then Minister of State for Social Security had said on 3 April 1997 that it was not possible to cover all eventualities which might result in a change to an individual's potential benefit entitlement, but that the department made every effort to publicise significant legislative changes.
Back to top
The National Audit Office's examination and report
5. The National Audit Office (NAO) have examined details of this matter and the wider lessons for the department. Their report examines the events leading up to the decision to defer the legislation and the establishment of the inherited SERPS scheme; what action DSS have taken since October 1998 to deal with the problem; and whether DSS now have effective arrangements in place to prevent a repetition of these events. The NAO examination has had a different purpose from my investigations. Even so, my staff and those in NAO have been able actively to cooperate in our respective reviews of relevant DSS files and in conducting interviews with DSS staff to establish the sequence of events. My staff have also co-operated with NAO in ensuring that our examinations and investigations have complemented, not duplicated, each other. I am grateful to the Comptroller and Auditor General and to NAO staff for their co-operation.
Back to top
Background to the relevant legislation
6. In June 1985 the then Government published a Green Paper on proposed reforms of the nation's existing social security system. The Green Paper proposed a new structure, the basis of which was said to be the then Government's intention to create a social security system which directed help better to those in need. The objectives also included a simpler benefit system with more sensible rules, a soundly based social security system which the country could afford, and a modern, computerised service. The Green Paper covered the proposed reform of help for people with low incomes and other benefits, as well as pensions. Amongst other measures, it proposed the abolition of SERPS in order to reduce what were felt to be unacceptably escalating costs of the existing scheme, then expected to rise to £20,000 million a year in the 21st century. After consultation, the proposals were modified. A White Paper outlining revised proposals was published in December 1985. The proposed reform by then was substantially to modify SERPS rather than to abolish it. An underlying aim of the proposals was said to be to encourage individuals and their employers to make alternative provisions to SERPS through occupational pension schemes and personal pension plans.
7. The proposals in the White Paper were incorporated into what became the 1986 Act. The 1986 Act introduced fundamental reforms to the social security system, including the introduction of a social fund scheme and the replacement of supplementary benefit by income support. The changes affecting SERPS were:
i) starting with those reaching state pensionable age on or after 6 April 1999, the provision which based an employee's SERPS entitlement on his or her best 20 years of earnings was phased out, with earnings instead to be averaged over the employee's whole working life;
ii) over the period 6 April 2000 to 6 April 2009, the way in which entitlement to additional pension accrued was to be scaled down from an accrual rate of 25 per cent of reckonable earnings to 20 per cent;
and, the focus of this report,
iii) the rate of SERPS that could be inherited by a surviving spouse was to be cut from 100 per cent to 50 per cent, in line with what was said to be the normal practice for contracted-out occupational pension schemes, with effect from 6 April 2000 in respect of deaths occurring on or after that date.
Back to top
Investigation
8. During my investigation members of my staff have scrutinised numerous DSS files and papers on the development and the subsequent implementation of policy on SERPS (although some files which might also have been relevant had been routinely destroyed in the course of time). Jointly with NAG staff, my staff have also interviewed DSS officials who were involved in the implementation of the provisions in the 1986 Act. The conclusions which I reach at the end of this report are based on what has emerged from that programme of work.
Events in 1986
9. What was then the Social Security Bill was extensively debated in both Houses of Parliament in 1986. Briefing notes for Ministers who were to speak in those debates drew attention to the proposed halving of the SERPS inheritance provision as an issue likely to be controversial. The briefing notes said that the then existing provisions were widely regarded as overgenerous and that the proposed changes would bring the arrangements more into line with those in occupational pension schemes, where inheritance at 50 per cent tended to be the norm. The notes added: "People will have plenty of time to make alternative provision for their survivors if they wish." A debate on the proposed amendments to SERPS took place in Standing Committee in the House of Commons. During that debate on 25 February 1986, the then Minister of State for Social Security said: "We have every intention of mounting a major publicity campaign to herald the pension changes contained in the present Bill, should it become an Act..." (Official Report, Standing Committee B, col.451). The 1986 Act received Royal Assent on 25 July 1986.
Back to top
DSS Leaflets
10. DSS produce a wide range of publicly available leaflets, which are updated from time to time, and which give information about social security benefits. The leaflets are readily available at BA's local offices, at post offices, and at other public places such as citizens' advice bureaux; and they are issued to individual enquirers in response to routine enquiries. Most of the leaflets contain a disclaimer to the effect that they have no status in law and should not be treated as a complete and authoritative statement of the law.
11. After the 1986 Act received Royal Assent DSS produced a leaflet in September 1986 entitled: "Reforming social security: saving for retirement pensions." It summarised the changes brought about by the 1986 Act. Of the change to SERPS inheritance rules it said: "Widows, and widowers over 65, will be able to inherit up to half their partner's SERPS pension, instead of up to the full amount. This particular change will not happen until the year 2000 and so will not affect anybody widowed this century". After this lapse of time it is not now clear who the intended recipients of the leaflet were, the extent, if any, of its distribution, or for how long it was distributed.
12. On 26 November 1986 the DSS section responsible for promulgating procedures and instructions on long-term benefits, which is based in Newcastle upon Tyne, consulted other DSS sections about a draft amendment sheet intended for insertion into a DSS leaflet NP32. That leaflet was entitled "Your retirement pension". It had first been published in February 1985, and was revised in August 1985 and September 1986. The September 1986 amendments had not covered the changes introduced by the 1986 Act. Leaflet NP32 was routinely included in claim packs sent to prospective state pensioners. The Newcastle upon Tyne section pointed to the need to cover in a proposed revision planned for April 1987 the new rules regarding additional pension calculation (paragraph 7.i above). In a response dated 28 November 1986 the section in London respopsible for policy on the changes to SERPS and on contracting out of SERPS recommended also including a sentence saying that after April 2000 a widow or widower would be able to inherit not more than half of a late spouse's additional pension. That suggestion unfortunately was not acted upon. The papers that survive do not reveal whether any discussion of the London section's suggestion took place, or whether other sections of DSS offered comments on the draft amendment. Nor, after this lapse of time, have the interviews conducted with DSS staff been able to establish that. In the event, the leaflet was not amended by way of an inserted sheet as had been proposed, but by a full reprint in April 1987 which made no reference to the April 2000 changes to inheritable SERPS. There is no indication in the papers that survive that the final version of the text of the leaflet was subjected to any independent quality assurance before printing and distribution. There is also no indication that consideration was given to publishing an amendment to the leaflet before April 1987, so as to reflect the changes in SERPS introduced by the 1986 Act.
13. Apart from the leaflet produced in September 1986 (paragraph 11), none of the many leaflets dealing with pensions published after the enactment of the 1986 Act and before October 1995 (see paragraph 15 below) referred in any way to the future changes to the SERPS inheritance rules applying from April 2000. The reprint of leaflet NP32 published in April 1987 (paragraph 12) covered the first two changes to SERPS detailed in paragraph 7 above, but of inheritance it said: "A widow can inherit the whole of her late husband's pension and add this to her own additional pension ... A widower can also make use of this provision if his wife dies when they are both over pension age." Another DSS leaflet, leaflet NP36, which was entitled "Your benefit as a widow" was revised in September 1986 and that revision said of additional pension: "If your late husband died on or after 6 April 1979, then on top of your basic widowed mother's allowance or widow's pension you may get an additional pension. This is based on your late husband's earnings from 6 April 1978."
14. Leaflet NP32 was superseded in April 1989 by a different leaflet, leaflet NP46, which was entitled "A guide to Retirement Pensions". There were substantial differences between leaflets NP32 and NP46 in their presentation of information. Leaflet NP46 was much more detailed and was primarily intended for the use of advisory bodies such as citizens' advice bureaux, and of members of the public who wanted to know more about state retirement pensions. A simpler leaflet, leaflet FB6, entitled "Retiring" gave basic information on state pensions and was intended for general readership. Of additional pension the section on SERPS in leaflet NP46 said: "Widows and widowers may receive the Additional Pension earned by their spouse. Details are given in the section 'Groups for which there are special provisions' ". That section, in referring to widows who were already receiving a pension at the dates when their husbands died, said: "You will get all of his Additional Pension ...". Revised editions of Leaflet NP46 were published in April 1990 (with an amendment in July 1991), April 1993, August 1994 and April 1995. The wording in respect of the SERPS inheritance rules remained unchanged in each of those editions. Leaflet NP36 (paragraph 13) was superseded in April 1988 by a new leaflet, leaflet NP45, entitled "Widows' Benefits". Revised editions of that leaflet were published in April 1990, April 1992, April 1993 and April 1995. None of those editions made reference to the future change regarding SERPS inheritance. Of other relevant DSS leaflets, leaflet PEC2 entitled "About Pensions", which was published in October 1995, made only brief mention of SERPS without referring to inheritance. A fact sheet NP 39 entitled "Your Additional Pension statement" designed to be read alongside additional pension statements - was published in April 1987. Under the heading "If you are widowed" it said: "you may also be entitled to all or part of your late husband's Additional Pension when you retire". The fact sheet was revised in January 1994 and made no comment on SERPS entitlements for widows. In summary, the leaflet produced in September 1986 (paragraph 11) apart, there was a failure for ten years to refer at all to the future changes in SERPS inheritance provisions in the leaflets DSS were publishing.
15. Following the enactment of the Pensions Act 1995 BA conducted a review of leaflets NP45 and NP46. Both leaflets were revised in the spring of 1996 and this time both covered all the changes to SERPS, including those concerning the inheritance rules. The April 1996 edition of leaflet NP46 said, in a section headed "Widows": "If you are widowed on or after 6 April 2000 you will get half of any Additional Pension... earned by your late husband". The April 1996 edition of leaflet NP45 gave a detailed explanation of how a late husband's additional pension would be worked out for those widowed on or after 6 April 2000. It said: "You [the widowJ will receive half that weekly amount". Leaflet PEC3 entitled "The 1995 Pensions Act" had meanwhile been published in October 1995, and that leaflet said: "The way pensions from [SERPSJ are worked out will be changed for people who reach state pension age or are widowed on or after 6 April 2000. This will mean that people will get less SERPS pension than they would have got without the change." It added: "But if you are already getting a SERPS pension, you will not be affected." Leaflet PEC3 was re-published in January 1996. DSS have since explained that the change being referred to was that in paragraph 7(ii) above, not paragraph 7(iii).
Back to top
Instructions and guidance given internally to DSS staff
16. In December 1987 the then head of DSS's policy group wrote to other senior officials asking them to make arrangements to bring the reforms introduced by the 1986 Act to the attention of DSS staff. As a result of that, in January 1988 internal circulars were issued to all DSS staff holding copies of the following instructions and guidance material: the Pensions Instructions and Procedures Code, the Widows Instructions and Procedures Code and the Pensions Law Code. The two Instructions and Procedures Codes each contained guidance on how staff were to process then current benefit claims. The internal circulars outlined the changes to retirement pension and widow's benefit arising from the 1986 Act, including the change to the SERPS inheritance rules, and said that appropriate amendments to all three codes would follow in due course. The Pensions Law Code was indeed amended in August 1988 to show the change in the SERPS inheritance rules which was to apply from 6 April 2000. Corresponding amendments were not made to the other two codes which were replaced in 1989. Their successor documents took the form of operational guides which gave instructions only on how then current cases were to be processed. Future changes and their implications were not covered at all.
17. In April 1995 a guide to staff entitled "The Benefits Information Guide", and which was based on a guide originally produced for BA's southern area, was distributed to relevant BA staff. The precise extent of its distribution, and the extent to which staff in general were aware of its availability, is not clear from the still surviving papers. The guide included a section headed "Reforms relating to Additional pension (SERPS)" which included guidance saying: "Widows and widowers over 65 will be able to inherit up to half their partner's SERPS pension, instead of the full amount. This particular change will not happen until the year 2000."
18. Not until 12 January 1999 was a "Pensions Bulletin" issued to all BA staff who dealt with pensions. That bulletin contained a recommendation that it should be discussed during the next weekly training session. The bulletin drew explicit attention to the forthcoming halving of the SERPS inheritance entitlement. A further bulletin issued on 23 February said that recent press coverage had "raised the profile" of the, forthcoming change and that a line for staff to take in response to enquiries was under consideration. The line to be taken was set out on 15 March in the form of question and answer briefing in a further bulletin. On redress, it instructed staff to say: "Cases where it is alleged that a customer has been given wrong information are considered under a Special Payments Scheme which we have [see paragraph 30 belowl However, a financial loss has to have occurred before we are able to consider such a complaint". Further bulletins were issued to staff on 18 March and 13 April instructing staff that all customer enquiries on the issue were to be treated with extreme sensitivity, and telling staff that an action plan to deal with it was being formulated. The bulletin of 13 April changed the recommended line to take on redress to: "We are aware of the concern that has been raised and that this may be an issue for many people. We hope to resolve this issue as soon as we can".
19. The consequences were that up to April 1995 few, if any, operational staff within DSS and BA were likely to have been aware of the changes to the SERPS inheritance provisions due to take effect in April 2000. Even after April 1995 the future changes were unlikely to have been in the forefront of the minds of many of them. Indeed, even after the start of 1999 there could still have been some BA staff who had an imperfect grasp of the changes due to take effect in April 2000 and of their implications. During an Opposition Day debate on widows on 24 June 1999 a Member told the House of Commons that evidence existed that as recently as April 1999 one or two inaccurate letters about SERPS had been sent out by BA (Official Report, Vol. 333, col. 1303).
Back to top
The development of public and Parliamentary concern
20. On 14 March 1995, during a debate in the House of Lords on the Pensions Bill 1995 (Official Report Vol. 562, col. 818), Baroness Gould of Potternewton tabled an amendment which would have had the effect of introducing a transitional period of ten years during which the amount of SERPS to be inherited would be reduced in steps of five per cent a year from April 2000. In moving her amendment, Baroness Gould said it was her understanding that there was little public awareness of the forthcoming change, and that the measure would come as a great shock to many people when it happened. The then Minister of State for Social Security replying for the then Government said: "This reduction... will not come as a surprise... 14 years is a more than adequate lead-in period [and] more than enough notice to give people who may be affected when the year 2000 comes." The amendment was withdrawn.
21. On 28 October 1998 the Director General of Age Concern wrote to the then Minister of State for Social Security saying that Age Concern was being contacted by an increasing number of older people who had only recently discovered that the amount of SERPS a surviving widow or widower received would depend on the exact date on which their spouse died. She said that as far as Age Concern knew there had been little general publicity and no attempt to inform individuals contributing to SERPS. Age Concern was said to have heard of a number of occasions when BA staff had given incorrect information in reply to enquirers. In reply, the then Minister of State said on 30 November 1998 that steps were being taken by BA to make sure that all staff received comprehensive briefing on the issue "by the end of the year". He said that publicity about the changes had been included "as part of the information about the 1995 Pensions Act", and that more detailed information had been featured in leaflets NP45 and NP46 from spring 1996.
22. By that time, the issue was already beginning to cause more widespread concern. For example, in a written Parliamentary Question on 3 November 1998 (Official Report, Vol. 318, col. 554) Mr David Rendel MP had asked the Secretary of State for Social Security what measures had been taken to publicise the future halving of the SERPS inheritance provisions, and when the department's leaflets and other literature had first referred to the change. The then Minister of State had replied that the department had arranged publicity about the Pensions Act 1995 with an advertising and direct mailing campaign in the autumn of that year. After further Parliamentary Questions had been tabled, on 16 February 1999 "The Sun" newspaper published an article headed "Biggest pension scandal ever" and subtitled "The Government gave out bad advice for ten years". Other national newspapers including "The Times", "The Financial Times" and "The Daily Telegraph" took up the story in the same week. Since then, articles about the changes have featured in many newspapers and magazines. The subject has also been widely covered on television and radio.
23. On 22 February 1999 a series of further Parliamentary Questions about SERPS was tabled. One of them (Official Report, Vol. 326, col. 170) asked the Secretary of State if he planned to write to all men with SERPS entitlements who had retired between 1986 and 1996 and whose decisions might have been affected by incomplete information from DSS. The Question also asked if the Secretary of State would compensate such men. In reply, the then Minister of State said that the Government was considering ways to heighten general awareness of the 50 per cent reduction in inheritable SERPS; and that existing compensation arrangements could offer redress to those who could show that their financial decisions had been affected to their detriment by misleading information from DSS.
24. On 5 July 1999 the Director General of Age Concern wrote to the then Minister of State for Social Security saying that Age Concern had taken advice from counsel and had been told that there was a strong legal argument that the reduction in a spouse's SERPS entitlement from April 2000 was in breach of article 1 of the First Protocol to the European Convention on Human Rights, having regard in particular to the repeated failure over ten years to notify or publicise the proposed change. On 22 July the then Minister of State replied that, after receiving the letter from Age Concern, the Government had taken legal advice but believed that they were acting in accordance with their legal obligations under the Convention. On 16 September and 22 December the Director General of Age Concern wrote to the Minister of State clarifying Age Concern's view that it was the poor handling of the SERPS change, not the original change in the 1986 Act, that gave rise to the Convention violation. The Director General also said that if the Government did not give an assurance that the principle of preserving accrued rights would be adhered to, Age Concern would have to give consideration to commencing legal proceedings under article 1 of the First Protocol. In reply the Minister of State said that he was confident that the 1986 legislation accorded with the Government's obligations under the Convention, and that any regulations introduced under section 52 of the Welfare Reform and Pensions Act 1999 (the 1999 Act) (see paragraph 33 below) would do so. He added that the Government did not believe, purely as a matter of law, that the Convention required individual notification of changes to state benefits.
Back to top
DSS comments on the individual complaints
25. In May 1999 in her comments to me on the individual complaints I proposed to investigate the Permanent Secretary of DSS accepted that it was clear that departmental leaflets produced in 1987 had contained incorrect and incomplete information about the changes to SERPS and had not been corrected until 1996. She readily accepted that that should not have happened. The Permanent Secretary said that because the changes to the inheritance rules had yet to come into effect there was no question up to that point of individuals having already suffered financial loss. However, she said that Ministers were considering the whole issue.
26. The Permanent Secretary also sent me a detailed briefing note which said that extensive searches of departmental files had already been carried out at the department's records office, but that no papers had been found relating either to publicity or to the reasons for lack of publicity in the period following the enactment of the 1986 Act, insofar as the changes to the inheritance provisions of SERPS were concerned. (In the event some material was found in the course of my investigation and I have drawn on it, particularly in paragraphs 11 and 12 above.)
27. The Permanent Secretary's briefing note also said that in the light of pressure group and press interest in Autumn 1998, investigations had been carried out which had shown that the majority of DSS staff had been unaware of the impending changes to the SERPS inheritance provisions and had therefore been giving out advice based only on the then current position. A bulletin had been issued on 12 January 1999 to staff in districts and at the pensions and overseas benefits directorate describing the future changes to inherited SERPS (paragraph 18). Further bulletins had been issued on 23 February, 15 March, and 18 March. On 18 March BA had commissioned a review of all their leaflets to ensure their accuracy. The review was said to be focusing particular attention on whether leaflets accurately reflected changes already enshrined in legislation but with deferred implementation dates. On 6 April the Chief Executive of BA had written to BA's directors of field operations seeking their assurance that all staff were at that stage giving correct advice on the subject of inheritable SERPS. BA were said to be satisfied that staff were now in a position to give correct advice on the future SERPS position of any customer who made an enquiry.
28. The briefing note contained an assurance that the then current position was that BA were routinely involved in the development of policy, and that policy changes were being managed using project management principles. Key players from all areas of DSS were said to be involved; and issues such as staff training and publicity were being picked up and dealt with.
29. The briefing note said that about 3,000 members of the public had contacted DSS by that stage in the belief that they had previously been incorrectly advised as to their spouses' potential entitlements. BA were said to be recording the names and addresses of enquirers who were asking for additional information or who were unhappy about advice previously received.
Back to top
Compensation for maladministration by DSS
Existing arrangements
30. DSS operate a non-statutory scheme to offer financial redress for maladministration. Under the terms of the scheme, they may make a special payment to any person who has suffered a loss of statutory entitlement or an actual financial loss as a result of maladministration. Actual financial loss is distinguished from financial disappointment, for example when a person has been led by DSS to expect to receive a benefit at a higher rate than that to which he or she is entitled by statute. However, if a person has relied on incorrect information to alter his or her circumstances in a detrimental way, a special payment may be considered for financial loss actually suffered. Documentary or incontrovertible proof of misdirection is not necessarily a requirement for the authorisation of a special payment. The fact that documents might have been destroyed in the normal course of events, or that an officer cannot remember a particular case, will not in itself inevitably justify a refusal to make a special payment. Each case is decided on its individual merits.
Back to top
Proposed redress arrangements
31. On 8 March 1999, in answer to an oral Parliamentary Question from Mr Rendel about financial provision for the bereaved (Official Report, Vol.327, col. 5), the then Minister of State acknowledged that DSS leaflets had not been updated in respect of the inheritable SERPS changes until 1996. He added that the Government would: "consider a claim for compensation from anyone who can establish that he or she received advice that did not reflect the change from April 2000 and, as a result, acted to their detriment". The then Minister of State said that the Government would announce further details shortly.
32. On 14 September 1999 I wrote to the Permanent Secretary, among other matters outlining my preliminary thinking about redress for the maladministration that on behalf of DSS she had already acknowledged. I said that individuals who claim to have been misled or misdirected by information given by a department are normally expected to provide some evidence that they have been misled into acting, or failing to act, in a way that has been to their disadvantage. Only then is compensation considered. However, I questioned whether that approach was tenable in the circumstances of the complaints being referred to me. As I saw it, anyone who had read the relevant DSS leaflets might reasonably claim to have been misled by them. Whatever such a person then did or did not do, it seemed to me that the burden of proof that he or she would not have acted differently had he or she not been misinformed rested on the department. I therefore considered that, whatever the approach the department decided upon in order to make good the effects of their maladministration, it would need to be capable of providing due redress on a global, rather than an individual, basis. I also felt that any evidential hurdles pertaining to eligibility for compensation should have regard to the principles concerning the burden of proof which I had set out.
33. During Parliamentary debates from the end of March 1999 onwards on the Welfare Reform and Pensions Bill 1999, amendments to the Bill were proposed in the House of Commons by Mr Rendel, and in the House of Lords by Lord Rix, Lord Higgins, and Earl Russell. The amendments were designed to reverse or mitigate the effects of the future halving of inheritable SERPS. The government itself proposed an amendment in November 1999. It became section 52 of the 1999 Act, which received Royal Assent on 11 November 1999. Section 52 provides for the Secretary of State to make regulations, subject to affirmative resolution, to do one or more of the following:
- to allow for specified categories of widows and widowers to receive more than 50 per cent of their spouses' additional pensions under SERPS;
- to postpone the reduction to 50 per cent from 6 April 2000 to a later year;
- to set up a scheme to determine who had been misled by incorrect or incomplete information about the reduction to 50 per cent, so as to ensure that the reduction was not applied in such cases.
Subsection (7) of section 52 provides that until regulations as mentioned above come into force, widows and widowers will continue to inherit the full amount of their spouses' additional pension under SERPS.
Back to top
Findings
34. DSS have accepted that the leaflets they put out on retirement pension and widow's pension were incorrect in an important respect from the autumn of 1986 up to the spring of 1996. They have also accepted that most of their staff were unaware, up to the beginning of 1999, of the impending changes to the SERPS inheritance rules. Staff will therefore have given advice to enquirers solely on the basis of the current position at the time of the enquiry. DSS have not been able to give any satisfactory explanation of why that situation went unrectified for so long. I consider that the absence of any reference to the forthcoming change to the SERPS inheritance rules in the leaflets produced by DSS and then BA between September 1986 and April 1996 was a serious omission. Although the then Minister of State told Age Concern and Mr David Rendel MP in November 1998 (paragraphs 21 and 22) that the department had arranged publicity as part of the information on the Pensions Act 1995, DSS have since acknowledged (paragraph 15) that that information did not deal with the SERPS inheritance provisions. It was therefore misleading. It was not until the spring of 1996 that the main leaflets on retirement pensions and widows' benefits (leaflets NP45 and NP46) contained an appropriate reference. It was not enough that DSS publicity should state the then current position in describing SERPS inheritance entitlements, because the future change was one that would influence the actions of many pensioners and prospective pensioners in their financial planning if they knew of it. In a key respect the statements in the leaflets were incomplete, incorrect, and misleading. I strongly criticise DSS for failing to make their leaflets on retirement pensions and surviving spouses' benefits sufficiently comprehensive and up to date in this important respect following the enactment of the 1986 Act, and for their repeated failure to do so until spring 1996.
35. My staff's scrutiny of departmental papers and interviews with relevant DSS officials have produced no evidence that the fact that misleading information was given to the public stemmed from an attempt on DSS's part to conceal relevant facts or to mislead. What was involved was a simple oversight which has had very far-reaching consequences. That oversight was not picked up, because adequate management arrangements of a coherent and systematic kind were not in place to make sure that all the necessary administrative actions had been taken to secure the full and timely dissemination of the provisions in the highly complex 1986 Act. Nor have I found evidence of any mechanism which would provide such independent quality assurance of the legal, technical and presentational aspects of departmental publicity as was necessary to give effect to undertakings given by Ministers at the time about publicity for the legislation (paragraph 9). I have no doubt that the absence of such systematic procedures was one of the main causes of the subsequent problems.
36. It is also a matter of concern that even after the need to amend the leaflets was belatedly recognised in 1996, there was no immediate corresponding recognition that the fact that the leaflets up to that point had been wrong and misleading had widespread implications. For example, when in November 1996 Mr R pointed out that the information on inherited SERPS given in the 1996 editions of leaflets differed from that in earlier editions (paragraph 4), the reply which he has said he received was that the leaflets did not purport to give a definitive interpretation of the law, although it confirmed that the change in inheritance provisions was to take place in April 2000. That was an inadequate response to a justified query. Mr R's point was one that cried out as needing to be explored much more fully at the time.
37. DSS's maladministration over the leaflets was compounded by their failure to make sure that staff in local BA offices and at the pensions and overseas benefits directorate in Newcastle upon Tyne were properly informed of the forthcoming change and given appropriate guidance on how to deal with enquiries from the general public. That too was a serious error. Worse than that, the failure continued after the DSS leaflets had been put right in the spring of 1996, so that some staff were still giving inadequate and misleading responses to enquiries from the public up until April 1999. Even after the issue had been raised by Age Concern in late October 1998 and in Parliament the following month, it was not until mid-January 1999 that BA issued a bulletin to all staff drawing their attention to the forthcoming change in the SERPS inheritance provisions; and only in late February were staff briefed on the line to take when dealing with enquiries.
38. Why what did not happen did not happen is a matter of historic interest. Much more significant are the steps which the department have taken and are taking to ensure that past failings are not repeated, and how due redress for the thousands, and perhaps millions, of those who are at risk from those past failings is to be provided. On the first point, the Permanent Secretary has given assurances that action has been and is being taken (paragraph 28). What the department have been and are doing has been the subject of a NAO audit. While Parliament and the public are likely to want assurances that the. improvements promised will be delivered and maintained, there is no further point which I can usefully make.
39. On redress, section 52 of the 1999 Act provides an enabling mechanism for due redress to be given to the many who have sustained injustice as a result of the maladministration identified in this report. I have been given to understand by DSS that the Secretary of State for Social Security intends to make a statement to Parliament in the near future indicating how he proposes that the mechanism should be used. I have also been given to understand that in that statement he will propose
- that the date on which the halving of inheritable SERPS will take place should be postponed from 6 April 2000 until October 2002;
- that in the interim a scheme to provide redress for those who were misled by earlier advice, and suffered injustice as a consequence, should be introduced;
- that a wide range of those concerned with the subject, including me, should be consulted on the details of the scheme; and
- that after that consultation the details will be set out in regulations which will be the subject of affirmative resolution procedure under the 1999 Act.
40. If events take that course, it will naturally be for Parliament to decide whether whatever measures of redress are proposed by the Government are adequate. It seems to me that the contribution which I can most usefully make will be to offer my advice to Parliament on whether the proposed measures, once their details are known, are in principle capable of remedying the various categories of injustice consequent upon maladministration which my investigations have identified. It will still, of course, be open to Members to refer to me individual complaints to the effect that the scheme or its application has not provided an adequate remedy for the complaint.
41. At this stage, I shall therefore do no more than express the hope that any proposals will take account of what I told the Permanent Secretary about the onus of proof (paragraph 32). They will also need to take account of the fact that most of those misled by DSS or BA are likely as a result to have decided that no action on their part was needed, because they had been led to believe that a surviving spouse was secure in an entitlement to full inheritable SERPS. In view of that, it would be wrong to exclude from redress those who took no action; and the proposals will need to recognise that it will be difficult, and in some cases impossible, for claimants to demonstrate that they would have taken a particular course of action had they been correctly advised. The scheme should also, in my view, recognise that many people will have been misled solely by reading inaccurate leaflets, and will have received no further wrong advice, written or otherwise, from DSS or BA. They will need to be catered for in any proposals.
42. Finally, several of those whose complaints were referred to me made no suggestion that they had themselves received misleading or inadequate advice from DSS or BA or had been misled by the leaflets. Their complaint was rather that the changes in the 1986 Act were in themselves unfair. Complaints that the changes in the 1986 Act was unfair are not a matter for me. The content of legislation is a matter for Parliament.
M.S. Buckley
Back to top
|
