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Lord Higgins: My Lords, I am grateful to the noble Baroness for giving way. Yes, of course, it is true that if people saw the leaflet or if they were wrongly advised by someone who had seen it, they were misled. But it is also true that people who did not see a leaflet for one reason or another thought that the situation was the same as they had originally thought; consequently they, too, have been misled. In other words, anyone who believed that he or she was entitled to widow's SERPS was misled, and that is what the amendment seeks to address.
Baroness Hollis of Heigham: My Lords, the noble Lord refers to his own amendment. I am dealing with the amendment moved by the noble Lord, Lord Rix. If the noble Lord will do me the courtesy of waiting until I have finished responding to the noble Lord, Lord Rix, I shall be happy to engage in the debate on his amendment and perhaps address his point.
The second part of the amendment of the noble Lord, Lord Rix, deals with people who may have received incorrect or incomplete information but who are no longer able to make a claim for themselves for redress because they suffer a severe and continuing mental disability. That is an issue that the noble Lord helpfully raised as part of our consultations.
I am happy to confirm that we accept the spirit of the noble Lord's amendment and want to make sure that such people are covered in an appropriate way that is unambiguous. I am not in a position now to define precisely what the outcome will be. We have work to do on a definition of the people we should wish to include. We also have more to do to decide exactly how we should allow for people in that situation.
I am grateful also to the noble Baroness, Lady Greengross, for her contributions on this subject. I know that she is concerned that the SERPS scheme should work as effectively as possible. The noble Baroness's amendment refers to circumstances in which a person could reasonably have been expected to be informed about the SERPS reduction and that such circumstances should be taken account of when considering whether or not a person satisfies the first test. As the noble Baroness said, she is concerned that those people who made inquiries about their pension entitlement. For example, they may have asked for a pensions forecast but did not specifically ask about widows entitlement--this overlaps with the concerns of the noble Lord, Lord Higgins--and who had a reasonable expectation to be informed about the widows changes.
The amendment as drafted could have a very wide application. I am not sure whether the noble Baroness is arguing the point, but we could not, for example, accept that her amendment embraced those who might argue that they should have been notified individually of the changes in the law. We went over this ground in Committee and I can only repeat that I do not believe that a special case should be made for inherited SERPS. This is only one of three significant changes made to state pensions in the Social Security Act 1986.
If the Government accepted that people had a reasonable expectation of being told about the change to inherited SERPS, would it not mean that the other changes introduced at that time should also not apply to them if they were not personally told about them? Of course, they were not. These changes included, for example, that entitlement based on the 20 best years was no longer to be the case but was to be based on the whole working life; and they included the difference in accrual rates. The provision with regard to widows is of lower financial significance than the 20 best years provision. People were expected to rely on the information in the leaflet, and there was never any suggestion that they should be individually notified about the changes or, if they were not individually notified, that they were entitled to be protected from their impact. The case of inherited SERPS and widows must therefore be aligned with the other changes that took place as a result of the 1986 Act.
I accept the point that inherited SERPS is an exceptional case in that the information was consistently omitted from departmental leaflets for 10 years. Even after it was included, many people were still given incorrect or incomplete information. There is no disagreement about that. I accept also that the noble Baroness seeks to ensure that the scheme operates fairly. But my comments in relation to the noble Baroness's amendment also apply here. We are still consulting. We have not finally decided on the regulations.
What I am concerned to establish is that we should not accept, or appear to accept, the principle that everyone was entitled to individual notification. That has never been the way of government legislation. As we are still consulting, it would be premature to be prescriptive at this stage. However, we shall certainly take account of the views expressed to us on these points. On that basis, I believe that the noble Baroness's amendment is premature and I hope that she will feel able to withdraw it.
As to Amendment No. 75 in the name of the noble Lord, Lord Higgins, on 15th March I repeated the Government's statement about inherited SERPS. The noble Lord was quick to highlight the issue of where the burden of proof should lie in an application for redress under the scheme. He urged, as did the ombudsman, that it should lie with the department. The noble Lord, Lord Goodhart, quoted from the ombudsman's report and urged the Government to accept that the scheme should cater for people who took no action and would have difficulty demonstrating that they would have acted differently if correctly advised.
Amendment No. 75 requires us to presume that all applicants under the scheme received incorrect or incomplete information unless they were specifically given the correct information. That goes much further than the amendment of the noble Baroness, Lady Greengross. It does not allow for the situation in which a person had neither received nor requested any information. The noble Baroness's amendment deals with persons who raised a query being expected to cast a wider net for information.
The noble Lord, Lord Higgins, was logically contradictory. He said that the first test was whether the person would have acted differently, to avoid financial detriment. If one accepts that a person did not know positively about the change--the amendment presumes they were misled--I do not see how the second test of suffering loss could be established, if the individual did not know there was any change that might produce the loss that followed.
On the basis of the noble Lord's case, anybody who did not know about the change would be entitled to compensation--provided they could show financial loss. But if they did not know--and did not know the action they might have taken if they had known--one cannot logically move on to the noble Lord's second step.
The noble Lord is looking puzzled. There are two steps. First, it is expected that the person can show that they were misled. The burden of proof is on the department. If a person claims that they relied on the information to take action--or to decide not to take any action--with resulting financial consequences, they move on to the second step of financial detriment. The noble Lord seems to be saying that somebody who did not know--whether or not they were misled because they had no information at the time--could subsequently show that they suffered financial loss. We cannot know whether they suffered financial loss if they did not know at the time about the changes and the action they might have taken.
Lord Higgins: My Lords, either they were misinformed--that is common ground--or they thought the situation was as originally stated, which was that the wife would inherit the full SERPS. If they did not know about the change, they may not have made provision for their wives as they otherwise would have done.
Baroness Hollis of Heigham: My Lords, how could they know now what they would have done then, if they had known what they did not know? The noble Lord's second position cannot hold. If they did not know, they could not have known what they might have done if they had known. By definition, that has to be true. I will send the noble Lord a note to that effect.
The change to SERPS inheritance was only one of three significant changes in the Social Security Act 1986. The others were the 20 best years calculation, the reduction over 10 years from 25 per cent of earnings to 20 per cent, and the reduction in the survivor's pension from 100 per cent to 50 per cent. In 1995 there were further major changes. The link between SERPS and alternative pension provision was broken and the annualisation formula was introduced--matching a person's earnings to the years in which they were earned. Finally, there was the equalisation of state pension age, so that women would not be able to collect their SERPS until age 65--the same as men.
If the Government accepted that people had a reasonable expectation of being told about the change to inherited SERPS, would that not mean that the other changes that I have outlined would also not apply to people who were not personally told about them? Although the information was contained in the leaflets, the previous administration did not tell people personally about those changes. People who did not pick up the right leaflet would also have remained ignorant of the change to the 20 best years rule.
It has never been the Government's position that they are responsible for people's ignorance of changes to the law. We have here the much narrower situation in which the then government persistently gave misinformation in leaflets. Our changes are intended to redress that situation.
The situation that we inherited was not that people did or did not know about the change but that some--we do not know how many--were misled as a result of the then government's continued propagation of misinformation. We are seeking to correct misinformation, not lack of information. That is the difference between the noble Lord's amendment and our position. The Government have never been responsible for correcting lack of information--only misinformation of which the Government were the author. The inherited SERPS scheme must provide redress to individuals and the regulations that establish it must satisfy various interested parties--including the ombudsman.
I hope that I have addressed the issues raised by the noble Lord, Lord Rix. I have gone as far as I can to meet the concerns of the noble Baroness, Lady Greengross, although they are still for discussion. The noble Lord, Lord Higgins, is asking us to take a step much farther--one that his government would not have contemplated in the 1985 and 1986 Acts--in saying that unless a person was notified by the Government, it must be assumed that they were misled. That has never been the Government's position. No government could adopt such a position. However, where government were the author of misinformation, they have a moral and, in my view, legal and financial obligation to correct the situation--which is what we propose in good faith. With that explanation, I hope that noble Lords will not press their amendments.
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