APPENDIX 2
34th report of the Committee of Public
Accounts - inherited SERPS (pac/00-01/22)
Copy of a letter to the Clerk of the Committee
from the Director of Internal Audit, the Department of Social
Security
The Treasury minute responding to this (and other)
reports was published on 16 November. Since then, as I expect
you are aware, the Secretary of State has announced new proposals
for implementing changes to the rate at which people can "inherit"
additional pension (SERPS) when their spouse dies. He made a statement
to the House on these on 29 November.
In the circumstances we thought we should let you
have a note on the new proposals to assist the Committee in their
consideration of the Treasury minute.
The note attached sets out the new proposals, the
cost of the proposed changes to SERPS and some information about
how we intend to publicise these. In his statement the Secretary
of State said he would bring forward regulations in the New Year
and that they would be subject to the normal consultation. The
regulations will be made under the affirmative procedure.
If you would like further information please let
me know.
Christopher Turner
Director of Internal Audit
Department of Social Security
18 December 2000
NOTE by the Department of Social Security to the
Committee of Public Accounts concerning their 34th report:
State Earnings Related Pension Scheme: the failure
to inform the public about reduced pension rights for widows and
widowers
Background
1. The background to the Department's failure
over a period to provide complete and correct information to the
public about the change to the rules governing "inheritance"
of additional pension (SERPS) is set out in the 34th report of
the Committee of Public Accounts. The purpose of this note is
to bring up to date the Treasury minute responding to the Committee's
report.
Redress
2. On 15 March 2000 the Secretary of State made
a statement to the House of Commons in which he said he would
consult on proposals for redress. On 29 November he made a further
statement to the House of Commons. In this statement he said he
had received a range of representations from Members of Parliament,
Select Committees and the Social Security Advisory Committee.
He said that over the preceding months he had become increasingly
convinced that a protected rights scheme would not work in the
way intended and therefore would not provide a fair and just solution.
He announced new proposals for remedying the situation.
The new proposals
3. The Secretary of State announced that he would
bring forward regulations in the New Year to give effect to new
proposals that would:
- give full protection to every pensioner;
- give younger people adequate notice of the change
to the SERPS rule;
- and provide transitional arrangements for those
approaching retirement age.
4. The proposals are as follows.
- As now, there would be no changes to inherited
SERPS until 6 October 2002.
- Thereafter, the surviving spouse of anyone who
died on or after that date and who was at or above state pension
age on 5 October 2002 would continue to inherit up to 100% of
their late spouse's SERPS. This recognises that men and women
over state pension age cannot generally do anything to restore
their position.
- The changes in the rules would be phased in for
people approaching state pension age. The table below demonstrates
how this would affect people of different ages.
| % SERPS passing to surviving spouse
| Date contributor reaches state pension age
| Date of BirthMen |
Date of BirthWomen |
| Up to 100%
| 5.10.2002 or earlier
| 5.10.37 or earlier
| 5.10.42 or earlier
|
| Up to 90%
| 6.10.2002 - 5.10.04
| 6.10.1937 - 5.10.39
| 6.10.1942 - 5.10.44
|
| Up to 80%
| 6.10.2004 - 5.10.06
| 6.10.1939 - 5.10.41
| 6.10.1944 - 5.10.46
|
| Up to 70%
| 6.10.2006 - 5.10.08
| 6.10.1941 - 5.10.43
| 6.10.1946 - 5.10.48
|
| Up to 60%
| 6.10.2008 - 5.10.10
| 6.10.1943 - 5.10.45
| 6.10.1948 - 5.07.50
|
| Up to 50%
| 6.10.2010 or later
| 6.10.1945 or later
| 6.07.1950 or later
|
The cost of the new proposals
5. The cost of the new proposals will be about
£12 billion (present value) over 50 years. This includes
the cost of deferring the change in the rules to October 2002
(announced on 15 March 2000): this is £2.7 billion. The new
proposals will therefore cost about £4 billion more (over
50 year) than the preserved rights scheme on which the Government
previously consulted.
Publicising the new rules
6. The Department will publicise the new rules
extensively and ensure that the relevant leaflets are clear. The
Department has written explaining the proposals to the members
of the public who wrote to complain of being misled about the
policy change (there were about 4,000 of these). The Department
has also written to the people who had telephoned the helpline
and asked to be sent a protected rights scheme claim form. DSS
staff are being equipped to give correct information to the public
about the new proposal.
People who were given incomplete or incorrect
information
7. About 16,000 people had contacted the Department's
helpline and asked to be sent a protected rights scheme claim
form in due course. More than two thirds of these were already
over state pension age. Most of the remainder will either be able
to pass on up to 100% or will benefit from the tapered introduction
of the changes. However, a small number who will not get full
redress under the new proposals had made plans on the basis of
wrong information and can show that they (or their surviving spouse)
will still suffer loss. Their complaints will be handled through
the Departmental compensation scheme. The Parliamentary Commissioner
for Administration will be consulted on the detailed operation
of these arrangements.
December 2000
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