Draft Social Security (Inherited SERPS) Regulations 2001
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The Minister of State, Department of Social Security (Mr. Jeff Rooker): I beg to move,
That the Committee has considered the draft Social Security (Inherited SERPS) Regulations 2001.
Members of the House will be aware of the problems surrounding inherited SERPS. I shall not go over the history, save to say that the matter dates back to 1986, when the original legislation was passed. We know that it was not properly advertised subsequently and incorrect information was issued by the Department of Social Security for the first 18 months of the present Government as well as under the previous Administration. Although the problem began in 1986, it continued for a considerable time after that.
The DSS investigated the matter and from 1999 began taking steps to put matters right. In January 1999, a bulletin was issued to all staff. Subsequently, all leaflets on SERPS were checked and revised where necessary. In November 1999, soon after I joined the Department, an amendment was made to the Welfare Reform and Pensions Bill giving the Secretary of State flexibility to modify the inherited SERPS arrangements. In March 2000, we announced a delay in the reduction from 100 per cent. to 50 per cent. for inherited SERPS until October 2002.
We also announced proposals for an inherited SERPS scheme about which we consulted. I pay tribute to members of staff in the Department. At least two to three dozen of them worked as a team for many months advising on the scheme and ironing out all the nuances and snags that anyone could think of, and probably a few that no one would think of. We needed more time because of the amendment to the Bill. We took into account the reports of the parliamentary ombudsman and the National Audit Office, and after listening to points that were made in the consultation process we decided not to proceed. On 29 November 2000, the Secretary of State announced an alternative approach, which is, in effect, the regulations now under discussion.
Leaving aside the lack of publicity, the original plan of the previous Administration to change inherited SERPS from 100 per cent. to 50 per cent. did not allow for transition. It was a 100 per cent. cliff edge arrangement. That, in itself, would have caused problems. The Government accept that such an approach was not fair. It would not have been reasonable to bring in such a change on one set date. We therefore adopted an approach that fully protects the spouses of people who are at or near state retirement age and provides transitional protection for the spouses of people who are within 10 years of retirement age. No spouse of an existing pensioner will be affected by the reduction, nor will the spouse of someone who becomes a pensioner before 6 October 2002. Such people will be completely exempt from the reduction.
The regulations before the Committee will provide additional protection for spouses of people who reach state pension age between 6 October 2002 and 5 October 2010. We consulted widely on the regulations—we had to, because of the history of inherited SERPS, and we could not fail as a Government or Parliament again. We consulted the Social Security Advisory Committee, the Select Committee on Social Security, the Select Committee on Public Administration, which published a devastating critique of our original proposals, the Public Accounts Committee, the National Audit Office and the parliamentary ombudsman. Our proposals have been broadly welcomed by the organisations that we consulted. I am not saying that they agree with every dot and comma, but they accept that we have found a solution to what has been a difficult public administration problem.
As a result of the regulations, following the death of someone who reaches state pension age between 6 October 2002 and 5 October 2010, the surviving spouse will be able to inherit between—I shall explain the language used in a moment—up to 90 per cent. and up to 60 per cent. of the late spouse's SERPS. The exact amount that such people will be able to inherit will depend on when between those dates the SERPS contributor reached state pension age, or would have reached state pension age had he not died.
For example, the surviving spouse of someone who reaches state pension age between 6 October 2002 and 5 October 2004 will be able to inherit up to 90 per cent. of his late spouse's SERPS. The surviving spouse of someone who reaches state pension age between 6 October 2008 and 5 October 2010 will be able to inherit up to 60 per cent. The schedule in the regulations sets out the details.
I used the phrase ``up to'' the percentages involved. It is not an unimportant point, as I am keen to make the regulations clear on the record. As I jokingly—although we should never joke about such matters; we may be dead serious—told my officials this morning, in 10 years' time one of them may be permanent secretary, and if we get this wrong now, another inquiry will be held, as people will say that we did not explain the regulations properly.
As most hon. Members know, a maximum, or cap, has always applied to the amount of SERPS to which an individual is entitled. At present it is £125.30 a week. For someone who has a SERPS entitlement of his own of, say, £60 a week, his spouse's entitlement would not matter. The maximum that the spouse could inherit would be £65.30 a week, to take the entitlement to the maximum of £125.30. That is why I used the phrases ``up to 90 per cent.'' and ``up to 60 per cent.'' The percentage depends on the amount that either partner had had in the marriage. That is not an unimportant point. There is no change; that is exactly how the system currently works.
It is important to tell people about the regulations. They are probably the most advertised and written about regulations that the Department has produced. Problems arose through a failure properly to publicise the original changes, and we have learned from that mistake.
The spouses of existing pensioners deserve to be reassured that their pensions are protected. People who are still of working age should have the information that they need to enable them to consider their position, armed with the facts. If they realise that they are not covered by the transitional period—that is, the 10 years—they have a chance to do something about it, as they are more than 10 years away from retirement age. People will be affected in different ways.
The Department is writing to all pensioners to tell them that the spouses of existing pensioners are not affected by the reduction in inherited SERPS. We shall also write to people who reach state pension age between now and 5 October 2002, to tell them that their spouses are not affected and will still receive 100 per cent. We propose to write to people within 10 years of state pension age—obviously, the groups involved are getting bigger—on a sliding scale. We are currently investigating the options for doing so and ensuring that we can deal with follow-up inquiries. Writing to millions of people to reassure them that they are not affected and that they will receive the 100 per cent. is different from writing to another group of people to inform them that they are affected and that they will not receive the full amount. The latter group will make inquiries and telephone calls. Therefore, arrangements to deal with their questions must be made before we start to write to them.
The Government are running a comprehensive campaign to inform the general public about pensions. Some hon. Members might have seen the ``working dogs'' advertisements. We are now easing up on some of those advertisements because of the nature of the working dogs that we used—although, when the campaign was being planned, I suggested that not all such dogs work on farms. However, it is important to employ modern means of communication to inform the public about such issues and to alleviate their concerns. We shall also use the internet.
The Government's lawyers are as certain as it is possible to be that the regulations comply with the European convention on human rights. The spouses of all current pensioners, and those who are close to pension age, are fully protected. The changes will be phased in between 2002 and 2010. That will remove the ``cliff edge'' effect: there will not be a sudden drop from 100 per cent. to 50 per cent. We have, I hope, learned the lessons.
I do not propose to explain the details of the changes unless I am questioned about them. There are 11 million pensioners in 8.3 million households. At present, the Government are writing to all those households. By 2 March we had written to 2.8 million households. The letter has been phrased as neutrally as possible. It is accompanied by a letter that explains the situation and is signed by the pensions director at the Department of Social Security. We have also sent a letter explaining the proposals to 90,000 advisers, and an extensive regional press campaign began on 19 February to inform the public whether they are affected. A couple of weeks ago, I saw the advertisements in my local press.
The system has been discussed and, in the circumstances, it is fair and reasonable. I make no apologies that we are continuing the policy inherited from the previous Administration. We are continuing it in a different way. We are reducing inherited SERPS from 100 per cent. to 50 per cent. to make it more akin to occupational pensions in the private sector, but we are doing that over a much longer period of time. That will add a considerable burden of cost to the national insurance fund over the next 30 years: the change from the April 2000 proposals will cost several billion pounds, although I shall not explain the details.
I recommend the regulations, and I will try to answer any questions.
10.8 am
Mrs. Jacqui Lait (Beckenham): I am grateful to the Minister for that clear explanation.
My party has accepted its share of the responsibility for what has happened. We broadly agree with the new scheme. We had concerns about the first scheme, and the Government were sensible to consult everyone who is directly involved and to propose the new scheme. Therefore, my questions are about the details of the scheme, and I am sure that the Minister can answer them.
I am glad that the Government have started sending the letters to the over-65s. Lord Higgins, my party's spokesman in another place, has already received his letter. How long does the Minister envisage that it will take to write to all the over-65s? I am aware that informing them about their situation will provoke responses, so I understand why it is being phased in.
During exchanges in the Chamber on 29 November 2000, the Secretary of State mentioned that of the 20,000-odd people who had contacted the Department, 70 per cent. were over the age of 65. Have all those people been satisfied? I imagine that they have been. The Secretary of State also said that only 3 per cent. of people who had contacted the Department were aged under 50. Have those people been satisfied? The noticeable group that is missing from the Secretary of State's comments is 50 to 65-year-olds. Will the Minister say how many of those people need to be satisfied that no loss has been incurred?
One of the reforms of which I approve is the Minister's introduction of the annual pension statement. I hope that it will roll out. However, will that statement be a vehicle to alert people to the SERPS situation? Will the Minister tell us how the roll-out programme is going?
The matter that causes us most concern is the burden of proof. Yesterday, in the other place, Baroness Hollis of Heigham, the Minister, said that, under the new system, her original statement about the burden of proof is reversed. It is now up to an individual to prove that he or she has been misled and consequently lost money, rather than up to the Department. The Select Committee on Public Administration suggested that, for a small group of people, the Department should accept the burden of proof, rather than the person who loses, but that the need to prove the loss should lie with the person who has lost. Has the Department accepted that argument, or does it insist that, under the new system, the burden of proof on misleading is on the person who claims to have lost? It is rather complicated, but it is difficult to divide the two matters.
Although we believe that the scheme will broadly cover the situation, a small group of people may maintain that they have lost money. What progress has been made to secure compensation for all groups?
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