Draft Social Security (Inherited Serps) Regulations 2001

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Mr. Rendel: I am obviously missing something in respect of claims that have already been paid. No one has received a lower pension because SERPS changes have not been made, so the compensation must be for something other than a reduced pension. Will the Minister explain what type of compensation has been paid?

Mr. Rooker: It is in connection with those people who made financial arrangements because they thought that inherited SERPS would drop. However, they did not. We could question why people spent money and made provision for something that was not required. That was wrong in a way, because they could have made better use of their money. It was maladministration. We have to look at the matter in parallel. Such matters have nothing to do with this scheme or the one that we proposed.

However, given that we closed off the other scheme and opened up the one under discussion, we can question those 20,000 people. We had no idea how many people would make claims. That was part of the problem. When the scheme was publicised, the regulations made and the forms designed, we did not know whether 3 million or 10 million people would be involved. All that happened was that 20,000 people made inquiries and said that they had been, or may have been, misled. We sent them information and said, ``If you have wasted money because of what we said to you, let us know.'' I do not know whether more claims will be made. That is the current situation.

Mr. Burstow: The Minister said that he does not know how many people may submit applications for compensation. As part of the publicity campaign that is envisaged under which letters are sent to all existing pensioners, will attention be drawn to the entitlement to a compensation claim on the basis of providing evidence?

Mr. Rooker: That is a good question. We have already taken such action in a way. The original scheme was publicised nationally. A lot of taxpayers' money was spent on the advertising campaign. As a result, we had 20,000 names and addresses on our database. We wrote immediately to those people telling them that, provided they were pensioners, they were secure. We said that we were not proceeding with the inherited SERPS scheme. We asked them if they wanted to make a claim as a result of financial loss due to maladministration. We have had 138 contacts. I do not know what will happen. Some more contacts may indeed be made.

Mr. Rendel: Presumably, the 20,000 inquiries were made by people who suddenly realised that they would not receive the full SERPS pension. The Minister is now talking about compensation for people who had spotted what would happen. I do not expect those people to be among the 20,000, so I presume that they will make inquiries now that the second scheme has been announced.

Mr. Rooker: The age range of those who wrote in was varied. We are in the process of contacting everyone. We have a planned programme. The first thing to do was to write to the 20,000 people—irrespective of their age and circumstances—who contacted the Department and knew about it. We are writing to all existing pensioners to tell them that they have nothing to worry about and that their circumstances are unchanged. They will receive the full 100 per cent. There is also no change for those who become pensioners up to 6 October 2002.

For those who will become pensioners or are within 10 years of pension age—who, one may assume, are still at work and paying into SERPS—the possibilities will be various. I refer to the point made by the hon. Member for Sutton and Cheam. Those in that tranche will get only 80 per cent. because they are close to retirement. We can tell them that they have a bit of time in which to make arrangements to cover the remaining 20 per cent., whether through a tax-free savings account or something else. There is no scheme for that, as such, but those people will have a bit of time in which to make arrangements, and the time increases according to the size of the loss, as the amount received will fall progressively from 100 per cent. to 50 per cent.

We have written to 20,000 people individually and have received 138 claims, but most of those 20,000 fall within the 55 to 64-year-old group and will be contacted separately. They are part of that tranche who are approaching retirement in 10 years. I cannot say now what we will receive from those individual contacts, but we are certainly not writing those people off. We will do them twice. We have already written to them, having caught them through the first database, based on a discrete group of people who had written in. Because of their dates of birth, they will receive another letter in due course, which will tell them where they stand within the 10-year transition period. I do not know what the response to those letters will be.

Mr. Burstow: The Minister is obviously being candid about the letters, because it is impossible to know what is happening until they arrive. However, it would be useful to know whether the letter that is being sent to existing pensioners, which one hon. Member described for us, includes specific information about the ability even of those people to claim for compensation. They may have taken decisions before this generous scheme was introduced that would result in them incurring a loss, although they may be receiving 100 per cent. SERPS. Is there any information on that in the letter, and will all future letters to those on the taper include similar information, so that those people can at least take a decision about whether they have the evidence that would support a compensation claim?

Mr. Rooker: I cannot answer that specifically. The people who made the arrangements to which he refers knew why they had done so. The problem was that most of the public had no idea about the change in the law; they did not know about the measure that was passed in this House in 1986 to come into force in April 2000. A few people received advice from the Department and made arrangements, but their number is small.

I must correct what I have said. Of the 20,000 who wrote in, 16,000 were not affected because they were over pension age, and 4,000 were under pension age. Most of the 138 claimants come from the under pension age group, which is not unreasonable in the circumstances because they would have made those arrangements.

I have an answer for my hon. Friend the Member for Rhondda (Mr. Rogers), although he has gone and cannot hear it. There is full ministerial accountability in the DSS. Nothing is sent out to the public without ministerial approval. Much time was spent composing the letter. It bears an official's name. We take full responsibility.

I apologise to my hon. Friend if he was unable to understand the second paragraph. The best ministerial brains in the Department were responsible for the letter and the leaflets, and they will be responsible for the other letters. We received advice from the Social Security Advisory Committee and the Plain English Campaign, but I assure hon. Members that the Secretary of State and I carry the can. We approved the final draft before the letters were sent out. I am sad that my hon. Friend could not understand the letter. We do not wish to frighten people. The second paragraph is comprehensible to me, but I have been living with the issue for 18 months. When the letter drops through the letterbox of 8 million people, they will wonder what it is about, and we have received feedback about that from other hon. Members.

The current compensation scheme is the DSS compensation scheme. The Library holds a copy of the rules. The rules for inherited SERPS were placed in the Library on 31 January 2001. Documentary evidence is important, because it helps the decision maker and it provides an assurance that taxpayers' money is properly disbursed. However, it is recognised that documentary evidence will not always be available, which is why we do not insist on it as a prerequisite for a successful claim. However, it is important to make it clear that the rules that govern such claims are not the same as the rules that would have applied to the inherited SERPS scheme.

The hon. Member for Sutton and Cheam asked that the compensation scheme be publicised. The pensioners' leaflets are being reviewed in the light of new arrangements. A new set of eight has been produced, and we are ensuring that they are up to date. The Department's leaflets programme is being thoroughly reviewed as a result of SERPS, and we shall make our literature more comprehensible.

A surviving spouse will be entitled to claim after her husband's death. There will not be an arbitrary cut-off, and we will not seek to avoid claims on technical grounds. Such claims will be assessed on their merits.

I said that we had sent almost 3 million letters out of a total of 8.3 million. We plan to have sent them all by the end of the month. The letters are not propaganda; they contain neutral information, and there have been no complaints about their terminology. We had to consider such matters early in 2001 because of other Government programmes and advertising. It is impossible to issue 8 million letters in one week.

I hope that I have answered the question about the people who will only inherit 80 per cent. We will write to inform them. Their situation is urgent, as they have less time to make arrangements, but they have a smaller gap to close. A balance must be struck.

The pensions forecast will make the issue of pensions come alive. People will become interested in their circumstances and those of others. However, if we try to build in new and diverse information, it will not be delivered on time and it will not work.

We plan to deliver a combined pension forecast from October 2001, which will be rolled out to 15 million working people within three to five years. It is a big operation, which will be annual and will be done through the employer. We must use the best information technology that we have, which is constantly being improved. It would be impossible and unreliable to give information such as a state pension forecast—including SERPS—and include information about what would happen in the event of the death of the person or their spouse at a certain time. The only information that can be given is the pension that would be received, calculated from a person's national insurance contributions. That is how the system works. However, writing to people who are approaching retirement in 10 years may encourage them to get departmental leaflets or visit the website. Much more information is now accessible than in the past.

The hon. Member for Sutton and Cheam raised the question of addresses. That is a constant problem because a citizen who does not claim benefits is not legally required to tell the DSS their address. We hope that we have pensioners' addresses because they are receiving benefits. People who are approaching retirement in 10 years have only their national insurance record, number and last known address on the database. A person who moves house does not have to tell the DSS that; their record is up to date if national insurance is paid through their employer. Thirty per cent. of the addresses of people who are written to when they are 10 years from retirement may be wrong. Therefore, we must have a call centre or feedback, and a different form of advertising.

The publicity will conclude at the end of March for the first tranche of existing pensioners. Advertising costs and the cost of sending letters amounts to several million pounds, which is part of the cost of the scheme.

The hon. Member for Newbury (Mr. Rendel) asked about the total compensation that is payable for the small group of people who were misled. The total estimate is about £500,000.

Question put and agreed to.


    That the Committee has considered the draft Social Security (Inherited SERPS) Regulations 2001.

Committee rose at thirteen minutes to Eleven o'clock.

The following Members attended the Committee:
Cummings, Mr. John (Chairman)
Atkinson, Mr. Peter
Burstow, Mr.
Coffey, Ms
Davis, Mr. Terry
Lait, Mrs.
Lewis, Dr. Julian
Marshall, Mr. Jim
Mates, Mr.
Michael, Mr.
Moffatt, Laura
Pearson, Mr.
Rendel, Mr.
Rogers, Mr.
Rooker, Mr.
Turner, Mr. Neil

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Prepared 15 March 2001