Government response to Parliamentary and Health Service Ombudsman (PHSO) report
The Secretary of State for Work and Pensions Liz Kendall delivered a speech to Parliament to outline the response to the PHSO State Pension age communication investigation.
With permission, Mr Speaker, I’d like to make a statement on the investigation by the Parliamentary and Health Service Ombudsman into the way changes in the State Pension age were communicated to women born in the 1950s.
Mr Speaker, the State Pension is the foundation for a secure retirement.
It’s why this Government is committed to the Pension Triple Lock – which will increase the new State Pension by more than £470 a year from this April, and deliver an additional £31 billion of spending over the course of this Parliament.
And it’s why Governments – of all colours – have a responsibility to ensure changes to the State Pension age are properly communicated so people can plan for their retirement.
Before I turn to the Government’s response to the Ombudsman’s report, I want to be clear about what this report is about and what it is not.
The report is not an investigation into the actual decision to increase the State Pension age for women in 1995, or to accelerate that increase in 2011.
The Ombudsman is clear that policy decisions to increase the State Pension age in 1995 and since were taken by Parliament and considered lawful by the Courts.
What this investigation is about, is how changes in the State Pension Age were communicated by the Department for Work and Pensions, and the impact this may have had on the ability of women born in the 1950s to plan for their retirement.
I know this is an issue of huge concern to many women, which has spanned multiple Parliaments.
My Hon Friend, the Pensions Minister and I have given the Ombudsman’s report serious consideration and looked in detail at the findings, and information and advice provided by the Department, which was not available to us before coming into Government.
The Ombudsman looked at six case.
He found that the Department provided adequate and accurate information on changes to the State Pension Age between 1995 and 2004 – including through leaflets, pensions education campaigns and on its website.
However, decisions made between 2005 and 2007 led to a 28-month delay in sending out letters to women born in the 1950s.
The Ombudsman says these delays did not result in the women suffering direct financial loss … but they were maladministration.
We accept that the 28-month delay in sending out letters was maladministration.
And on behalf of the Government, I apologise.
This Government is determined to learn all the lessons from what went wrong, and I’ll say more about this in a moment.
We also agree with the Ombudsman’s findings that the women suffered no direct financial loss because of this maladministration.
However, we do not agree with the Ombudsman’s approach to injustice or remedy. And I want to spell out why.
First, the report does not properly take into account research showing there was actually considerable awareness that the State Pension age was increasing.
It references research from 2004 showing 43% of women aged over 16 were aware of their State Pension age.
But it doesn’t sufficiently recognise …
… evidence from the same research that 73% of women aged 45-54 – the very group that covers women born in the 1950s – were aware that the State Pension age was increasing.
… or research from 2006 that 90% of women aged 45-54 were aware that the State Pension age was increasing.
Second, the report says if letters had been sent earlier it would have affected what women knew about the State Pension age.
However, we do not agree that sending letters earlier would have had the impact the Ombudsman says.
Research given to the Ombudsman shows only around a quarter of people who are sent unsolicited letters actually remember receiving and reading them.
So we cannot accept that – in the great majority of cases – sending a letter earlier would have affected whether women knew their State Pension age was rising or would have increased their opportunities to make informed decisions.
These two facts
… that most women knew the State Pension age was increasing and
… that letters aren’t as significant as the Ombudsman says
as well as other reasons, have informed our conclusion that there should be no scheme of financial compensation to 1950s born women in response to the Ombudsman’s report.
The Ombudsman says that, as a matter of principle, redress and compensation should normally reflect individual impact.
However, the report itself acknowledges that assessing the individual circumstances of 3.5 million women born in the 1950s would have a significant cost and administrative burden.
It has taken the Ombudsman nearly 6 years to investigate the circumstances of 6 sample complaints.
For the DWP to set up a scheme and invite 3.5 million women to set out their detailed personal circumstances would take thousands of staff years to process.
Even if there was a scheme where women could self-certify that they weren’t aware of changes to their State Pension age, and that they have suffered injustice as a result, it would be impossible to verify the information provided.
The alternative put forward in the report is for a flat rate compensation scheme, at level 4 of the Ombudsman’s injustice scale.
This would provide £1,000 to £2,950 per person, at a total cost between £3.5 and £10.5 billion.
Given the great majority of women knew that the State Pension Age was increasing, the Government does not believe paying a flat rate to all women – at a cost of up to £10.5 billion – would be a fair or proportionate use of taxpayers’ money.
Not least when the previous Government failed to set aside a single penny for any compensation scheme.
And when they left us a £22 billion black hole in the public finances.
Mr Speaker, this has been an extremely difficult decision to make.
But we believe it is the right course of action and we are determined to learn all the lessons to ensure this type of maladministration never happens again.
First, we want to work with the Ombudsman to develop a detailed Action Plan out of the report, so every and all lessons are learnt.
Second, we are committed to setting clear and sufficient notice of any changes in the State Pension age so people can properly plan for their retirement.
And third, I have tasked officials to develop a strategy for effective, timely and modern communication on the State Pension that uses the most up to date methods.
Building on changes that have already been made … like the online ‘Check Your State Pension’ service, which gives a personal forecast of your State Pension including when you can take it.
Because one size rarely ever fits all.
Mr Speaker, we haven’t taken this decision lightly, but we believe it is the right course of action…. because
… the great majority of the women knew the State Pension age was increasing
… sending letters earlier wouldn’t have made a difference for most
… and the proposed compensation isn’t fair, or value for taxpayers’ money.
I know there are women born in the 1950s who want and deserve a better life.
They’ve worked hard … in paid jobs and bringing up their families.
Many are struggling financially … with the cost of living crisis, and fewer savings to fall back on.
And they worry about their health, and how their children and grandchildren will get on.
To those women I say, this Government will protect the pensions triple lock so that your State Pension will increase by up to £1,900 a year by the end of this Parliament.
We will drive down waiting lists, so you get the treatment you need, with an extra £22 billion of funding for the NHS this year and next.
And we will deliver the jobs, homes and opportunities your families need to build a better life.
I know that – on this specific decision – many 1950s-born women will be disappointed.
But we believe it is the right decision, and the fair decision.
And I commend this statement to the House.