Select Committee on Public Accounts Fifth Report


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


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.


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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