A highly critical National Audit Office report today exposes major shortcomings in the running of the country’s state pension system.
With some 12 million people relying on the Department for Work and Pensions to calculate their pension accurately the auditors reveal a sorry picture of outdated IT systems, civil servants reduced to making manual calculations and mistakes galore with no proper system to identify the errors in the first place.
The NAO investigation was triggered when former pensions minister Liberal Democrat Sir Steve Webb and Tanya Jefferies of ThisIsMoney.co.uk, last year started to refer a number of cases to the Department of women who had been underpaid. On 26 May 2020 Sir Steve published an estimate of the level of underpayments using the
information obtained from the Department combined with public information from the Family Resource Survey that at least 220,000 women had been underpaid including 131,000 married women, 56,000 widows and 35,000 divorcees.
90 per cent of the losers are women
Now the department has admitted that 134,000 people have indeed been given underpaid pensions and it will cost £1.053 billion to compensate them. This figures excludes those who have already died because the department wipes them from its records after four years
Once again 90 per cent of them are women, and only 10 per cent men.
What is particularly alarming is the summary in the report about the whole pensions system.
It says: ” The errors occurred because State Pension rules are complex, IT systems are outdated and unautomated, and the administration of claims requires a high degree of manual review and understanding by case workers. This makes some level of error in the processing of State Pension claims almost inevitable.
“The Department’s caseworkers often failed to set (and later action) manual IT system prompts on pensioners’ files to review the payments at a later date, such as their spouse reaching State Pension Age or their 80th birthday. Caseworkers also often made errors when they did process prompts because frontline staff found instructions difficult to use and lacked training on complex cases.“
Worse the department seem to have a top down approach to find out about errors – rather than a bottom up from the pensioners themselves who might challenge their pension awards. Therefore it never picks up a large volume of similar complaints.
Wrong assumption that there are no errors
As a result there always been the assumption – and it was taken until now by the National Audit Office- that there was virtually no fraud or error in the payment of the £100 billion plus to pensioners every year. This has now been proved wrong.
The ministry is recruiting 544 people – at a cost of £24.3 million – to chase up and pay out the money to people who have lost out. But it is going to take some two years to do this with priority being given to the over 80s and widows. It has no plan on how to compensate relatives of dead pensioners owed money- and the NAO think it should create one.
Meg Hillier MP, Chair of the Committee of Public Accounts, said
“Many pensioners – most of whom are likely to be women – have been short-changed by thousands of pounds which they are still yet to receive many years later.
“DWP must provide urgent redress to those affected and take real action to prevent similar errors in future.”
A DWP spokesperson said:
“We are fully committed to ensuring the historical errors that have been made by successive Governments are corrected, and as this report acknowledges, we’re dedicating significant resource to doing so. Anyone impacted will be contacted by us to ensure they receive all that they are owed.
“Since we became aware of this issue, we have introduced new quality control processes and improved training to help ensure this does not happen again.”
Fourth pensions scandal to hit DWP
However one must comment that this is the fourth scandal to hit the DWP over the payment of pensions and women are by far the worst treated. First we had the 3.8 million 50swomen not being properly informed about the raising the pension age which the Ombudsman has found there was maladministration. Then we had the complicated story of people losing their guaranteed minimum pension uprating which could affect 11 million people, mainly women. Again the Ombudsman found maladministration but only two people have been compensated. And now we are also having delays for people claiming their pension for the first time in getting paid.
Cynics might conclude the ministry is almost misogynist in its approach – and also all these delays is ensuring more people -particularly in the age of Covid- will be dead before they get the money that is owed to them.
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Successive governments extended a 1983 “men only national insurance subsidy” for 35 years and broke a promise to women born in the 1950s to offer them similar terms
More than 4.65 million men aged over 60 have had the last five years of their national insurance contributions paid by the state, the Department for Work and Pensions has disclosed.
The scale of the payments has been kept quiet by the Department for Work and Pensions for 37 years. It was only revealed last week when Myfanwy Opeldus, one of 3.8 million women facing now a six year delay to get her pension, got the admission from the ministry through a Freedom of Information request. She is a BackTo60 supporter and had been pursuing the government over this issue
The scheme was launched by the Thatcher government in 1983 when it was reeling from large scale unemployment even after its popularity had soared through victory in the Falklands War. Extraordinarily the scheme was only wound up in 2018 just two years ago and 35 years after it was launched.
The scheme- called auto credits – was announced in the 1983 Budget by the late Sir Geoffrey Howe , then Chancellor of the Exchequer, as one of four measures to get down the unemployment count which was over three million.
In his March Budget he announced:
“Some 90,000 men between the ages of 60 and 65 now have to register at an unemployment benefit office if they wish to secure contribution credits to protect their pension rights when they reach 65. From April, they will no longer have to do this.
Even if those concerned subsequently take up part-time or low-paid work on earnings which fall below the lower earnings limit for contributions, their pension entitlement will be fully safeguarded. ( my emphasis)”
Unemployment did fall and was half that level by 2018 when the scheme was dropped.
Yet neither successive chancellors Nigel Lawson, John Major , Norman Lamont,Kenneth Clarke , Gordon Brown or Alistair Darling did anything to repeal it.
In fact under Kenneth Clarke in 1993 the opposite happened. He decided as 50s born women were going to face waiting longer for their pensions, they should get some help. This was adopted by Labour in a leaflet issued in 2002 on pensions which announced it would be extended to 50s women from 2010 when the pension age for women started to rise.
But the Brown government then reneged on this in 2009 after the financial crisis.
Promises to 50s women reneged
An explanatory memorandum to changes in pension legislation said :
“When the Government published its plans for state pension age equalisation in 1993, the intention then was that as women’s pension age increased gradually to 65, autocredits would become available to them on the same basis as for men. This was in part to compensate for the increase in the number of years women would otherwise have to pay National Insurance contributions for in order to qualify for a full basic pension.
” This approach has since been reviewed, for two reasons. Firstly, the qualifying age for Pension Credit (the income-related benefit currently payable to men and women at 60 without jobseeking conditions attached) is set to increase to 65 by 2020 in line with female state pension age. Without the proposed change, autocredits would increasingly apply mainly to people who could afford not to work or claim benefit….
“Secondly, the reduction in the number of qualifying years needed for a full basic pension to 30 and the improvements in the crediting arrangements for carers under the measures introduced by the Pensions Act 2007 will mean that the need for autocredits to protect state pension entitlement will be significantly reduced….
” This instrument amends the Credits Regulations to provide that autocredits will be available to men only for the tax years in which they have reached what would be pension age for a woman of the same age, up to and including the last tax year before the one in which they reach age 65. Men born on 6 October 1954 or later,…, will not qualify for the credits.”
This meant it was phased out in 2018.
Meanwhile the new Tory and Liberal coalition elected in 2010 decided to raise the pension age further to 66 and also planned a new pension raising the qualification period to 35 years. The main architect was the pensions minister , Steve Webb, who moved a top job at Royal London Insurance. In an article in the Telegraph in September 2017 he backed men who could have overpaid NI contributions to claim the money back. He is now a financial consultant with Lane Clark and Peacock.
Yet another scandal
Now this entire scandal is yet another example of unfair treatment to 50s women.
The woman who raised this with the DWP is one of a number who has not got enough national insurance contributions to get a full pension. She falls short by three years and will have to pay them £3000 to make up the years to get another £400 a year.
A man – one of the 4.65 million who was covered by auto credits- would have to pay nothing. That is hardly fair. And he could take a low paid job and still not pay NI contributions as they would be covered by the state.
More seriously it does knock a hole in the DWP case that the raising of the pension age was an equality measure to create a level playing field with men.
It is hardly a level playing field if men on this huge scale are getting their national insurance contributions for free. What started as a measure for 90,000 ended up helping 4.6 million. No wonder the DWP were not happy to have to disclose this.
Roll on the appeal to the judicial review brought by BackTo60. Michael Mansfield could have a field day with these new facts.
The decision by Lord Justice Irwin and Mrs Justice Whipple to dismiss ALL claims of discrimination and failure to inform 3.8 million women born in the 1950s about the rise in their state pension age from 60 to 66 is in total contrast to the decision of Mrs Justice Lang who granted ALL the claims to be heard four months ago.
Obviously there is a big difference between permission for a judicial review to be granted so the case can be argued than a judicial hearing where the arguments are tested.
Nevertheless this startling contrast to me suggests that there are grounds for an appeal because the two judgments are so far apart. That is presumably why the two judges did not ban an appeal.
To remind people Mrs Justice Lang decided that even though the 1995 Pensions Act was passed 24 years ago the effect of the implementation of the Act was happening now and therefore this issue was subject to judicial review. She also agreed that both age and sex discrimination could be part of the hearing, and the issue on whether government action was contrary to EU directives on social security and whether people had been adequately informed about the changes.
The two judges have rejected all of this and upheld the case put by the Department of Work and Pensions in its entirety. No wonder the DWP is cock a hoop today.
They describe any challenge to primary legislation passed over 20 years ago as ” fatal” and they have published in detail all the attempts by the DWP to inform people. They have included discussions from 1993 onwards about changing the law as part of informing people.
But they abrogate any responsibility on whether the DWP did a good job or not. ” We are not in a position to conclude that the steps taken to inform those people affected by the changes to the state pension age for women were inadequate or unreasonable”.
They have also accepted the DWP’s argument that it was under no obligation to tell people at all and certainly not to individually informing anybody about the change because it was not written into the law.
This ruling should be a red line for MPs to insist in the future that any Parliamentary legislation that affects millions of people must include a clause requiring a ministry to individually inform the people affected in language they can understand and in good time.
Goodwill or good sense is obviously not enough to be left in the hands of individual ministers. It must be made mandatory that people are told.
The arguments over whether government action in handling the rise in the pension age contradicted EU directives amounted to age and sex discrimination or indirect legislation are complex.
But broadly the judges have accepted the DWP’s interpretation of the wording so as to exclude the changes to the pension age from any such directives.
They have also ruled out the role of the UN Convention on the Elimination of Discrimination against Women from having any bearing on the case.
” We have not been assisted by reference to CEDAW, it adds nothing to the claimaint’s case”, they say.
Their main argument is that the 1995 Pensions Act removed an advantage (my emphasis) that women had over men at the time they retired and anyway the decision was part of primary legislation which could not be challenged.
Jackie Jones, Labour MEP for Wales and an expert on CEDAW, says the judges have misunderstood the purpose of CEDAW which could make a possible grounds for appeal.
In her view the Judges did not consider the cumulative effect of unequal laws in the past on this particular group of women who were denied contributing to their own pensions when they worked part time which is one of the issues covered by CEDAW.
The judges also ruled out the recent victories in civil service and firefighters pensions having any bearing on the case because they involved transitional arrangements for work pensions rather than their right to a state pension.
Despite the harshness of the judgement the immediate effect has been to create widespread sympathy for the plight of the 50swomen in the media, among the general public and brought finally to national attention the whole issue.
It has also galvanised campaigners to fight on and with a general election on the horizon to put politicians in all political parties under pressure. It could cost the government, if it does nothing, 3.8 million votes from people who reliably go down to the polling station.
CROSS POSTED ON BYLINE.COM
Last year it looked like the 474,000 expatriates who retired to 27 European Union countries had their pension increases protected forever and a day. A deal which meant the UK would sign up to the EU Social Security Convention guaranteeing pension payments both to British expatriates abroad and EU citizens remaining in the UK.
There was only one caveat “nothing is agreed until everything is agreed,” which would prevent this happening and the government’s aim is the commitment would be reflected in the Withdrawal Agreement with the EU. This was emphasised in the White Paper on Brexit in July.
But now the spectre of a No Deal Brexit is again being raised everything is being thrown into the air. Supporters like Liam Fox talk of a country thriving on new free trade but what about the social cost? What is clear is that without a signed withdrawal treaty Britain appears to fall out of the social security convention – and as EU arrangements superseded most national arrangements the automatic rise in pensions goes as well.
The House of Commons library have just produced two new reports on the issue. One published in July on Brexit and state pensions provides an accurate summary of the present situation. You can download it here. Another published this week provides the latest analysis of frozen pensions overseas. You can get it here.
There is a current official breakdown of the situation for both unfrozen pensions in EU countries and the Channel Islands and frozen pensions elsewhere at the end of this blog.It shows that EU countries make up the vast majority of uprated pensions.
The government has only limited agreements with overseas countries to allow Brits who settle there to get uprated pensions. Outside the EU the UK has agreements with Barbados; Bermuda; Bosnia-Herzegovina; Croatia; Guernsey; Isle of Man; Israel; Jamaica; Jersey; Mauritius; Montenegro; the Philippines; Serbia; Turkey; the United States of America; and, the former Yugoslav Republic of Macedonia. The rest of Europe includes Switzerland and Norway. The US agreement also covers American Samoa, Guam, the Northern Mariana Islands, Puerto Rico and the US Virgin Islands.
For those who could be confined to a frozen pension the results can be dire. And they get worse the longer you live. An expatriate living to the age of 90 in Canada would have to live on just £41.15 a week while someone who went to live in Canada in 2015 would be on just over £110.15 a week.
Ian Andexser, chairman of the Canadian Alliance of British Pensioners, said:
“The UK continue to adopt a 70 year old policy which makes no sense, is unfair and in violation of the Commonwealth charter. If you are British and live in Niagara Falls USA, you get a fully indexed pension. If you live 400 yards away in Niagara Falls , Canada, you do not!”
An even more complex situation exists in Australia where they have a means tested pension and even getting Britain to pay up part of your state pension if you have already left the country is problematic.
The latest Commons guide on frozen pensions shows campaigners – once they have lost their case for any uprating – are unlikely to get it back. Successive British governments have refused to change the rules on grounds of costs and the spurious claim that the rises caused by British inflation rates should not apply to other countries which had different rates of inflation. If that were the case the same would apply to people living in the European Union or Mauritius where people do benefit from British inflation.
The cost to do this is about £500 million a year and opposition parties – notably the Liberal Democrats – have backed the change only to renege on it once they got into office. Indeed the only change that followed the Pensions Act that created the new pensions system was a minute extension of the uprating to pensioners who had retired to Sark in the Channel Islands.
So Brits in the EU better keep abreast of what does happen in the EU negotiations. They need to ensure that there is an agreement with the EU. The expatriates in Australia, Canada, South Africa and Jamaica, to name few of the frozen pension states can only get redress by either pressurising British politicians or by pressuring their newly adopted country to demand Britain fulfils its obligations by refusing to sign a trade deal until it does.
CROSS POSTED ON BYLINE.COM
The fact that 50s women were robbed of their pensions by raising the pension age is undeniable. But the biggest argument against putting this right has been the cost – a fact perpetually used by the present pensions minister, Guy Oppenman, who quotes the £70 billion plus figure.
Recently I discovered that successive governments had taken a decision NOT to top up the fund as originally proposed by William Beveridge when the welfare state was set up in 1948.
What I did not know was how much money was lost. Now thanks to an extraordinary paper prepared for the National Pensioners Convention by a social security expert Tony Lynes,and still on the web, I now know. And it is staggering. You can read it here.
The paper written 12 years ago by a man I personally knew as a fount of all knowledge on the benefit system when I was social services correspondent on the Guardian. He sadly died, aged 85, in a car accident in 2014. There is an appreciation of him in The Guardian here.
His calculation from beyond the grave is that for every year that the government decided not to contribute to the fund it was deprived of £11.3 billion. As he says: “Restoring the supplement at its pre-1981 level would bring an extra £11.3 billion a year into the Fund, enough to meet the gross cost of a £109 per week basic pension.”
We now know that virtually no money was paid into the fund by the Treasury for around 24 years from 1990 to 2014. I calculate – and this will be a conservative estimate – because it doesn’t count the reduced contributions post 1981 – that an amazing £271 billion yes billion extra would have been in the fund.
This would pay more than three times over the money due to the women – and even allowed higher state pensions for everybody else now.
Why this didn’t happen is because politicians of all three major parties took a decision not to do this. They took the decision knowing that their Parliamentary and ministerial pension pot would mean they would be some of the wealthiest pensioners in the land when they came to retire. And the taxpayer would foot their bills.
They decided the pain should fall on the electorate instead. In 1995 they knew all the arguments about people living longer and that money paid out in state pensions would go up.
They could have changed the rules and informed the Government Actuary Department that they would deliberately build up a surplus in the fund – so it could pay out as people lived longer without changing the pension age.
Instead they chose the cheapest route – raise the pension age so they won’t have to subsidise the fund- but try and keep mum so the women wouldn’t realise what they were doing.
The villains are the late Lady Thatcher, John Moore, Kenneth Clarke, Sir John Major, Tony Blair, Gordon Brown, Steve Webb and Guy Opperman. There are many others who stood by and did nothing. That is why 50s women have been left in this situation today.