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National Audit Office report: State Earnings-Related Pension Scheme: The failure to inform the public of reduced pension rights for widows and widower

State Earnings-Related Pension Scheme: The failure to inform the public of reduced pension rights for widows and widower

"It is extraordinary how a simple error can have such severe consequences for individuals and for the taxpayer. And it is particularly alarming that the error could go unnoticed for so long. These were serious lapses in the standards of public administration and must not be repeated."

"It is extraordinary how a simple error can have such severe consequences for individuals and for the taxpayer. And it is particularly alarming that the error could go unnoticed for so long. These were serious lapses in the standards of public administration and must not be repeated."

Sir John

 

A 10 year failure to update pensions leaflets correctly has caused considerable distress to many thousands of people, and will cost the taxpayer at least £2.5 billion, and probably considerably more, according to two reports to Parliament published today.

The two reports* – one by Sir John Bourn, the Comptroller and Auditor General, and the other by Michael Buckley, the Parliamentary Ombudsman – consider different aspects of an extraordinary lapse by civil servants. The Ombudsman focuses on four sample cases out of over 300 individual complaints from people who claim that they made decisions about their future pension arrangements in the light of incorrect information from leaflets and conversations with Benefits Agency staff. Sir John considers what happened and why, the action that has been taken since the problem was identified in late 1998, the costs to the taxpayer and whether the Department has arrangements in place to prevent such a mistake happening again.

The Social Security Act 1986 halved the amount of State Earnings-Related Pension that widows or widowers could inherit on the death of their spouse, should they die after 5 April 2000, and the Department failed to update the information available to the public or ensure staff understood this change. The Department now accept their leaflets were wrong, and also that staff gave incorrect information to an unknown number of people, until as recently as April 1999. This was despite the 14 year lead time for the legislation to take effect, designed to allow people to plan their future pension arrangements. The Government today announced a further 2 ½ year deferral of the change, and a redress package (the Inherited SERPS Scheme), to be set up in 2001, to protect those who were misled.

In his report, the Parliamentary Ombudsman finds the Department guilty of maladministration. He strongly criticises their failure to make their leaflets accurate and complete, and says that the Department compounded this mistake by not recognising the need to check that staff were aware of the change in the law. He says that, on realising the true position, many thousands of people were very concerned that they had not provided sufficiently for their spouses, and have still not been advised of the correct position. Those who had received verbal advice also feared they would not be able to prove they had been misled. Mr Buckley emphasises in his report that, in these circumstances, the burden of proof rests on the Department to show that citizens were not misled, rather than on citizens to show that they were.

In his report, Sir John Bourn criticises the Department for failing to pick up warnings when the matter was referred to in Parliament in 1995, and in correspondence from MPs in 1997 and 1998. They only became aware of the problem when the matter was brought to their attention by the charity, Age Concern in late 1998. Even then it took ten weeks to update staff, some of whom continued to give incorrect advice up to three months later.

Sir John Bourn calls for a range of key improvements, amongst other things, to the way in which pensions work is organised within the Department, to the way local office staff are informed of changes affecting their work, to the way that the Department handles complaints from the public, and to the ways in which they manage the implementation of policy changes. He says some steps have been taken to reduce the risk of similar problems, but major obstacles such as poor internal communications and inadequate IT remain.

Both Michael Buckley and Sir John reserve judgement on the redress package. Mr Buckley has promised to report again when the detailed proposals are published, and Sir John has promised to examine the operation of the scheme as part of his future work on the accounts of the Department.

Michael Buckley said “Citizens are entitled to rely on the accuracy of leaflets published by the Government, and advice from civil servants, and to make their plans accordingly. If the advice is inaccurate, so that the plans go wrong, it is the Government’s duty to provide suitable redress. I shall be examining the Government’s eventual proposals to see whether they carry out that duty.”

 

Publication details:

ISBN: 0105567086 [Buy a hard copy of this report from TSO]

HC: 320 1999-2000

Published date: March 16, 2000