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Baroness Hollis of Heigham: My Lords, I take the criticism expressed by noble Lords of the degree of transparency here. The point of these regulations is that they are consequential. It is the Lord Chancellor rather than the DSS who is responsible for the administration of the appeals tribunal system. That is why the regulations are bundled together in this way.
The regulations relate to the Lord Chancellor and are consequential on the substantive regulations on housing benefit that we have just discussed. That is because they have implications for the organisation of the appeals system, which is the responsibility of the Lord Chancellor.
We have discussed the subject of inherited SERPS on many occasions in this House. I should like to thank noble Lords for the way in which a constructive discussion has taken place all around the House. I think that noble Lords will accept that the Government have listened to the views expressed here, as well as to others outside the House. I believe that we have now found a solution which, although it will cost the taxpayer considerably more, is none the less workable and fair. That is due in no small part to the contributions of noble Lords. I address not only the Opposition Front Benches, but also the noble Lord, Lord Rix, and the noble Baroness, Lady Greengross, who would normally be present on the Cross Benches. However, I am delighted to see the noble Lord, Lord Rix, in his place. I suspect that he is here to encourage us and to take in the celebrations.
Noble Lords will be well aware of the problems that have arisen over inherited SERPS. I do not propose to go over that ground, except to say that, in 1986, the then Conservative government legislated to reduce the amount of SERPS that a widow or widower could inherit from their late spouse, a change that was due to come into effect in April 2000. But the change was not notified in DSS leaflets for 10 years. The leaflets were corrected in 1996, but there is evidence that, after 1996, in some cases, people continued to be given incorrect or incomplete information by DSS staff. The matter
The DSS itself investigated the matter and, from 1999, began taking steps to put things right. We issued a bulletin to all staff and checked that all leaflets were revised. As a result of a proposal put forward by the noble Lord, Lord Rix, we amended the Welfare Reform and Pensions Bill, giving the Secretary of State some flexibility to modify the inherited SERPS arrangements. In March 2000 we announced the delay until October 2002 of the reduction to 50 per cent. We also put forward proposals for a new inherited SERPS scheme, on which we consulted.
During that consultation, representations were made that, although the scheme was better than none, there would still be unfairnesses and cliff-edge cases. As a result, on 29th November 2000, we announced an alternative approach which I shall now explain.
Quite apart from the problems of communicating the planned changes to the public, the original plans of the previous Conservative administration were seriously flawed. I do not take issue with the proposal that widows should receive half the original pension, but the proposal as envisaged in 1986 contained no transitional arrangements at all. There was a cliff-edge effect where the amount of SERPS that could be inherited was due to drop from 100 per cent to 50 per cent almost overnight. Most noble Lords would accept that that does not reflect good social policy.
The noble Lord, Lord Rix, among others, has been assiduous in pressing the case for existing pensioners to be exempt from the reduction. The main point was that current pensioners who were SERPS contributors between 1978 and recently did not know about the proposals and so did nothing and could do nothing about changing or inquiring into their SERPS position. We understood and agreed with that point. Our proposals, therefore, will completely exempt the spouses of existing pensioners from the reduction. They will continue to receive 100 per cent of SERPS.
We intend to go further. As well as protecting the spouses of existing pensioner couples, we shall also fully protect the spouses of those who are not yet pensioners, but who will reach state pension age by 6th October 2002. Furthermore, we will phase in the reductions in respect of those due to reach state pension age between 6th October 2002 and 5th October 2010, in recognition of the fact that the amount someone needs to save to make up for the reduction increases the closer they are to pension age.
The legislation to protect the spouses of those reaching pension age before 6th October 2002 is already in place. The regulations before noble Lords will provide the legislation for the phased reduction, protecting the spouses of people who will reach state pension age between 6th October 2002 and 5th October 2010. We consulted widely on these regulations with the Social Security Advisory Committee, the Social Security Select Committee, the Public Administration Select Committee, the Public Accounts Committee, the National Audit Office and
Perhaps I may now explain in more detail this large item; it is a £12 billion item. For that reason, it is worth trespassing a little longer on the attention of noble Lords to explain exactly how these regulations will work.
The regulations will mean that where someone reaches state pension age between 6th October 2002 and 5th October 2010, when they die their surviving spouse will be able to inherit between 90 per cent and 60 per cent of their SERPS. The exact amount the surviving spouse will be able to inherit will depend on when between those dates their late spouse reached state pension age or would have reached state pension age had they not died.
For example, the surviving spouse of someone who reaches state pension age between 6th October 2002 and 5th October 2004 will inherit up to 90 per cent of their late spouse's SERPS. A surviving spouse of someone who reaches state pension age between 6th October 2008 and 5th October 2010 will be able to inherit up to 60 per cent. A taper has been put in place between the two. The schedule to the regulations sets out the details.
The problems with inherited SERPS originally arose through a failure, under the previous administration, properly to publicise the changes in the first place--even among the staff of the DSS, let alone the public. The department has learnt from those mistakes and we are determined to make sure that people are aware of and understand the new rules. The spouses of existing pensioners deserve to be reassured that their pension is protected. And people still of working age should get the information they need so that they can consider their position, armed with the facts.
Because people are affected in different ways, depending on their age, we will use different strategies for informing them. I shall welcome the views of noble Lords as to whether they feel that these strategies are adequate.
I shall turn first to current pensioners. The department is writing to all pensioners explaining that the spouses of existing pensioners are not affected by the reduction in inherited SERPS. Secondly, as regards people who will reach state pension age between now and 5th October 2002, we will also write to all of this group, again reassuring them that the spouses of people reaching state pension age between these dates are not affected. As far as concerns people within 10 years of state pension age, we propose to write to all those in the sliding scale group. Currently, we are exploring the options and taking steps to make sure that we can deal with follow-up inquiries.
I am satisfied that these regulations are ECHR compliant. They will mean that the rules on inherited SERPS are prudent, fair and, I think, very decent. The spouses of existing pensioners and of those close to pension age are fully protected and the changes are being phased-in for spouses of people who are due to reach pension age between 6th October 2002 and 5th October 2010, thus preventing the "cliff edge" effect of previous proposals.
Our objective has been to devise a system which will eventually reduce to 50 per cent the amount of SERPS which can be inherited, but in a way which is fair and which recognises the fact that the amount that someone needs to save to make up for the reduction, were they to be aware of it, increases the closer they are to pension age.
Moved, That the draft regulations laid before the House on 26th February be approved. [8th Report from the Joint Committee].--(Baroness Hollis of Heigham.)
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