Stephen Timms
Main Page: Stephen Timms (Labour - East Ham)Department Debates - View all Stephen Timms's debates with the Department for Work and Pensions
(3 years, 6 months ago)
Commons ChamberI wish to raise concerns specifically about the guaranteed minimum pension, which is the subject of the order. Concerns have been raised by the public with the Select Committee. The ombudsman investigated complaints from two people, and concluded that there had been maladministration in introducing the new state pension system in 2016 over its impact on people with a guaranteed minimum pension. The concern being raised in correspondence since is that the problem identified by the ombudsman still has not been properly addressed.
The ombudsman concluded:
“DWP was aware the pension changes could negatively affect people with long periods of contracting out who were due to reach State Pension Age shortly after the new State Pension was introduced…DWP failed to provide clear, accurate and complete information through its pension forecasts, impact assessments and other literature…despite being warned by both the National Audit Office and the Work and Pensions Select Committee that better communication was needed for those with long periods of contracting out…some individuals were not aware that they might need to consider seeking independent financial advice and might need to make alternative provision for their retirement.”
The concern is still being raised that those problems are not yet being properly addressed.
Last August, the permanent secretary at the DWP replied to a letter from the Committee on that subject. He confirmed that compensation of £500 and £750 had been paid to the two people who had raised the complaint with the ombudsman, as the ombudsman had recommended. I asked for an update on responding to being found guilty of maladministration. In response, the permanent secretary wrote that the ombudsman
“also recommended…that we invite others who believe they have suffered a similar injustice as the two individuals to come forward to have their cases considered.”
That was the ombudsman’s recommendation. The permanent secretary wrote:
“We propose to respond…by publishing a factsheet on GOV.UK and I attach a draft. We are currently awaiting the”
ombudsman’s “comments on this.”
The ombudsman will have to decide whether publishing a factsheet meets its recommendations—I must say that I have my doubts—but it certainly falls well short of what the Work and Pensions Committee previously called for. It said:
“Government should not rely on general awareness campaigns or happenchance in promoting that understanding. It should focus on identifying the individuals affected, assessing their potential losses, and communicating with them.”
The permanent secretary also wrote that, in addition, the ombudsman
“recommended that their reports into the matter were shared with the Select Committee and we have sent your office copies of these documents today.”
The report was finalised on 30 September 2019, and it was sent to the Committee on 28 August 2020, and that was only in response to my request for an update.
I also asked how much the Department knew of the negative impact of the policy on individuals and how it was communicated to Parliament. The permanent secretary wrote:
“As was clear from publication of the Government’s White Paper in January 2013, it was an intrinsic feature of the new State Pension that the old regime of additional State Pension and contracting out, along with its various forms over the years, would be replaced by a new, simpler single-tier system. It was a fundamental feature of the changes that the withdrawal of additional State Pension meant also the withdrawal of GMP indexation.”
The ombudsman’s report highlighted that the White Paper did not say that those who had reached state pension age and could no longer add qualifying years would lose out from the changes. The White Paper gave the impression that people would be able to offset the increase in national insurance contributions that they will pay over the rest of their working lives. It implied that people will offset losses through additional national insurance contributions.
The permanent secretary also wrote:
“A detailed account of the change was provided in a response to a”
parliamentary question
“on 6 January 2014 and is attached for reference”,
but that answer does not make it clear that some people would lose out. Even if someone affected had seen that answer, which is unlikely, it would not have helped them to understand the impact on their own pension.
The permanent secretary wrote:
“More generally, the policy, and how it was communicated, was examined by the Work and Pensions Select Committee in its investigation into Understanding the new State Pension in 2016. In addition, the NAO reported on the policy in the same year.”
However, both those events took place after the legislation had been passed, not before. Both concluded that the DWP provided insufficient information to people about potential negative impacts.
The ombudsman, I believe, is right that
“DWP should have acted on the feedback they received through the Work and Pensions Committee and NAO reports. By failing to do so, DWP were not open and accountable and failed to seek continuous improvement…this amounts to maladministration.”
The ombudsman found that the DWP had failed to make its external communications clear and that
“there were some individuals who might financially lose out over the long term from the transition of the second state pension to the new State Pension—specifically in relation to the ending of indexation in relation to the second state pension/Guaranteed Minimum Pension.”
It also concluded that there is an injustice to members of the public who were not aware of the possible negative impacts of the removal of the second state pension and its relationship with the GMP. Up to 2 million people have reached state pension age since 2016. DWP literature has not told them that the 2014 reform could harm them over time. The Department has not fully acknowledged the negative consequences to the pension reforms over the long term. Its literature reassures people that notional losses will be offset and that they will not lose out, but that will not be true for some. The ombudsman says:
“The DWP’s actions, therefore, may have provided false reassurance and reduced the incentive for these people to find out about their future pension situation. This is an injustice for those who wished to plan for the future and might have been negatively affected.”
In addition to compensating the individuals and communicating with the Committee, the ombudsman recommended:
“Within three months of this report, review and report back to us on the learning from this investigation, including action being taken to ensure that affected individuals receive appropriate communication from the DWP about their state pensions. In particular, the DWP should ensure that their literature clearly and appropriately references that some individuals, who have large GMPs and reach State Pension Age in the early years of the new State Pension, may be negatively affected by the changes. The DWP should advise individuals to check their circumstances, and should provide instructions for how to do this; Within three months of this report, review and report back about how other individuals who believe they have suffered an injustice as a result of the maladministration we have found can raise any concerns with the DWP and have them considered”.
Neither of those things has happened so far. It will soon be two years, let alone three months, since the ombudsman published that report. I have given the Minister notice of this question. Can he explain to us how the Department now plans to fulfil its obligations?
There is no doubt that the Department’s claims about the state pension reforms were misleading. They mislead members of the public, potentially seriously, and denied them the opportunity to act to safeguard their position. Can the Minister assure us that the Department has learnt its lessons and that similar mistakes, covering up damaging impacts of its policies on some claimants, will not be repeated in the future?