Draft Social Security (Inherited Serps) Regulations 2001

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Mr. Paul Burstow (Sutton and Cheam): I appreciated the manner in which the Minister outlined the regulations. Perhaps more than on any other matter, there must be clarity and certainty about the scheme. As the Minister said, people will not want to have to make further inquiries.

The Minister was right to acknowledge the systemic and chronic failure that led to this position. Everyone has commented on the recognition and acceptance of any blame, if there is blame to be shared. The Minister described the Herculean efforts of the Department to construct a compensation scheme, and to ensure that the scheme is completely snag-free. In November 2000, he and the Government were right to acknowledge the arguments that came from many directions and which were nicely capped by the Public Administration Committee's report on the targeting of the compensation scheme. Under the plan, the burden would still have been on the individual to get in touch and take the matter to its conclusion. Despite the Department's acceptance of the need to publicise widely the existence of such a scheme, that was not an appropriate policy to follow. Therefore, we welcome the way in which the scheme is constructed.

However, one or two issues remain to be clarified. The Minister rightly says that there is no longer a cliff edge for this scheme; the introduction of a taper over 10 years eases the transition and creates for the first time a proper transition period for people who are affected. However, a group of pensioners exists who will be in the first tranche of change—by examining past parliamentary answers, one may calculate that there are as many as 320,000. Over the next four years, they will have to make new arrangements to cover the extra 20 per cent. that they will no longer receive through inherited SERPS. That is a short time in one's working life in which to make alternative arrangements. Therefore, will the Minister say something more about the arrangements for ensuring that those pensioners who will inherit or be the beneficiaries of an 80 per cent. increase in SERPS inheritance will be made fully aware of the fact that it will only be 80 per cent., and that they will have to make alternative provision?

The second issue relates to a point raised by the hon. Member for Beckenham (Mrs. Lait) about compensation. If I remember rightly, in exchanges after the statement in November and since, the Government have acknowledged that some people will have sustained individual loss as a consequence of being actively misled because of inquiries that they made at the Department over the years. Those people will have made investments and decisions about their finances that will result in a loss. Will the Minister answer the hon. Lady's question about the burden of proof? The onus should be on the Department to disprove that the person has been misled. The process that would calculate the extent of financial loss is a different question, but will the Minister tell us something more about the compensation scheme? How will those people who have not made themselves known to the Department but may have every right to compensation, be notified? Will they be notified as part of the general campaign, or will the Department run a separate exercise for them?

Finally, over what period will the publicity campaign run? There is always an initial burst of energy and effort in such campaigns. The Minister referred to the advertising campaign with the working dogs, which had to be reduced for a while. Given that the process spans 10 years, does the Department have a view about whether there might be periodic fresh bursts of advertising to remind people of the existence of the scheme? On the other hand, does the Department envisage using the annual pension statement as the vehicle for delivering that message over time?

The Public Accounts Committee report comments on the Department's uncertainty about its ability to maintain accurate address details for all prospective pensioners. As a consequence, the Department is uncertain whether the message will reach those people through the mail. What impact will that have on the Department's ability to get annual pension statements to them? The most effective way of helping people who want to know how large their pension will be on retirement would be to tell them their entitlement under inherited SERPS at the same time as sending them the statement.

We welcome the regulations, which include everyone who is affected and enable everyone to have some certainty.

10.19 am

Mr. Allan Rogers (Rhondda): I had better declare an interest, in that I am probably the only one in the Room to be affected by these regulations. I make a peculiar observation pertaining to paragraph 2. I am not seeking answers, but merely making an observation. Having received a letter telling me about my entitlement, I confess that I did not have a clue what it meant. I have searched through paragraph 2, and the first thing that I said to my wife was, ``If I cannot understand it, I am blowed if my constituents will.''

The letters going out have an imprimatur from the Plain English Campaign, but I think that the letters are a load of bleeding gobbledegook. This morning I tried to read paragraph 2, but it leaves me cold. I am glad that I am leaving the House and going back to geology—at least that is a simple science, which can be easily understood. I do not know whether the Minister has seen a copy of the letter, but it is not understandable.

10.21 am

Mr. David Rendel (Newbury): I start by apologising to you, Mr. Cummings, and to the Minister and the rest of the Committee for arriving late today. I am afraid I had a domestic plumbing emergency at the last minute, which prevented me from being on time.

My hon. Friend the Member for Sutton and Cheam (Mr. Burstow) and I welcome the new regulations, as, I suspect, do almost all hon. Members . They are certainly an improvement on the Government's first attempt to overcome this problem. When the Government produced their first attempt to resolve the problem, I was shocked when the right hon. Member for Haltemprice and Howden (Mr. Davis), the Chairman of the Public Accounts Committee, approached me in the corridor and asked, ``Do you realise that you have just cost the Government £8 billion?'' ``What on earth do you mean?'' I asked, and he answered, ``As a result of your putting this issue to the Public Accounts Committee, the Government have had to come up with a scheme costing £8 billion.''

Ascribing the entire scheme to my efforts was a little generous. I simply wrote to the National Audit Office asking it to investigate. Many other people played an important part in getting the Government to right the terrible wrong done to pensioners under the previous Government, not least of whom was the previous leader of the Liberal Democrats, my right hon. Friend the Member for Yeovil (Paddy Ashdown), the first person to send the matter to the ombudsman. The ombudsman also played a major part in the matter.

I am grateful to all those who were instrumental in persuading the Government to change their mind. This is certainly a much better scheme, but I have two questions. On the matter of compensation, how much of the expected cost of £12 billion will be paid to those who genuinely claim to have been misled? Have the Government yet estimated that cost?

Secondly, as I asked when the original scheme was introduced, is it possible for a surviving spouse to make a claim after the person who originally paid the SERPS contributions has died? The problem may not come to light until the relevant person's death, when the surviving spouse realises that he or she may not receive the full SERPS pension that had been expected. At that point, it is important that the possible compensation scheme will not have come to an end, and that the surviving spouse can demonstrate, by producing a letter found amongst their dead spouse's papers, for example, that that person had been misled and that compensation is, therefore, due. I would welcome the Minister's assurance that surviving spouses will still be able to make a claim.

10.24 am

Mr. Rooker: I am grateful to the members of the Committee for the points that they have made, and for the general support that they have given the regulations. I shall do my best to answer the questions raised.

First I shall answer the question asked by the hon. Member for Beckenham. When the issue of inherited SERPS was being actively raised in the House and we were considering what to do, we used advertising to invite people to contribute to a consultation on the scheme. By November 2000, we had received 20,000 letters.

Before writing to every pensioner in the country—8.3 million households—we contacted those 20,000 people on our database directly. We explained the proposed scheme to them. As a result of that consultation, we decided to revert to the burden of proof that would apply in ordinary circumstances. Arrangements already exist to deal with compensation if the Department is guilty of maladministration, giving false information or misleading people in relation to any other benefit. However, different arrangements were going to apply in relation to the inherited SERPS scheme. As everybody said, including the ombudsman, the burden of proof lay with the Government. A citizen would only have to say, ``I was misled'', ``I misunderstood'', ``I read something, I don't know what it was'', or ``I was told by a neighbour across the garden fence'', and he would be able to claim compensation for not having made the necessary arrangements for his spouse. No records, nothing in writing, no letters and no telephone call reports would be necessary. People told us that we would be setting up a scheme that invited citizens to lie, institutionally, to make a claim.

Having scrapped that proposal, we decided on a scheme in which existing pensioners will be fully protected and will receive 100 per cent. provision when there is a death before 2002. The issue is therefore whether there are people out there who can prove, over and beyond that, that they were misled and that they lost out. According to the latest figures on compensations claims, 138 have been issued, 23 claim forms have not been returned, 115 claims have been received, 51 have been cleared, the average length of time taken to clear is 17 days, 64 are outstanding and one has been withdrawn. The current figure for the amount of compensation awarded is £149,000. We have made one award of £2,800 and four awards amounting to £31,000. We have paid out three claims under £2,000, 11 between £2,000 and £2,999, five between £3,000 and £3,999, seven between £4,000 and £4,999 and nine of more than £5,000. The highest amount that we have paid out is £10,500. The lowest is £1,600. The average is just under £4,000.

Those awards are to people who have made a claim and can prove that they suffered a financial loss because they were misled by the Government. That is the normal system of financial redress of maladministration. It happens throughout Government. The burden of proof was to be a wholly different arrangement under the proposed inherited SERPS scheme. There was to be no requirement on citizens to come forward with papers. If they had them, fine, we would make inquiries, but if they had no proof, we would still have to accept the claims if they had made them in good faith.

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