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Widows&#39 mite

I have been told that the Government might compensate pensioners or

prospective pensioners over Serps. What is this about and do I qualify for

compensation?

Well, as a female – namely, a potential widow – you are more likely to be

affected and qualify than a man.

For both the basic state pension and Serps, there are two types of pension

– category A, based upon your own contributions, or category B, based upon

your spouse&#39s contributions.

In addition, a composite pension of category A and B may be paid to a

widow up to the maximum that a single person can receive.

Under the Social Security Act 1986, the Conservative Government halved the

category B pension payable to a widow or widower in respect of their

spouse&#39s Serps pension from 100 per cent.

This was to take effect from April 6, 2000. If the claimant had already

been widowed by this date, the legislation would have no impact.

For reasons that are not clear, the Department of Social Security did not

bother to update its explanatory leaflets or tell its staff about this

change. As a consequence, many members of the public who contacted the DSS

were misled. Therefore, those who might have been able to take action to

improve their surviving spouse&#39s pension might have decided to take no

action.

Of course, this is hypothetical as they may not have been able to afford

to take action or may have chosen to do nothing when confronted with the

cost.

Men are less affected as they have less to lose. Until the Social Security

Act 1986, men did not receive a widower&#39s Serps pension and, thereafter,

they were only eligible if they were over 65 when their wife died and she

was over 60.

In addition, the widower may elect for a composite category A and B

pension. But, as the maximum basic pension cannot be more than that for a

single person, most men will not benefit.

The Serps&#39 pension paid to a widower is capped at the maximum payable to a

single person at the time of his wife&#39s death, that is, the pension paid to

a single person who had been paid above the upper earnings limit from the

beginning of Serps. Only a small number of men may benefit from this.

For many women with only very limited Serps and basic pension rights, the

loss of 50 per cent of the Serps&#39 pension payable to their husband is much

more serious.

The Labour Government has announced two measures. First, the cut in Serps

will be delayed until October 2002. Its advertisements and press release

did not make this date clear but a Parliamentary statement confirmed that

the cut will take place from October 6, 2002.

Second, those who can show that they were misled can claim redress in the

form of an inherited Serps&#39 scheme.

The phased cut in Serps&#39 accrual rates from 25 to 20 per cent of banded

earnings – lower earnings limit to upper earnings limit – in each year is

not affected and this will be complete by 2010.

The reduction in Serps will continue as the working life of the retired

person continues to increase until 2027.

Interestingly, from April 6, 2010, many of the pension benefits currently

payable only to women will also be payable to men. As a result, some

complex interactions could arise.

It is not yet clear how you will have to prove that you were misled by the

proposals to halve widows&#39 Serps pensions. It may be as little as a signed

disposition, in the same way as a prosecution for perjury is threatened for

false claims.

Of course, if you were not affected by the change – say, by being divorced

– you cannot claim. More information on how to claim will be published

later this year but for now you can register by ringing 0845 600 6116.

I would suggest that the Government needs to adopt the same standards it

required for the private sector in the pension misselling review.

Long-term television advertising should highlight the offer of redress

using the Government&#39s “R U Owed?” phrase. This should be repeated at least

three times – during the launch of the redress scheme, after a year or so

and approximately six months before the deadline.

The Government should also write to all those likely to be affected

explaining their rights to compensation and requesting that they make a

claim. If a response is not received within, say, three to six months, the

Government should write a reminder to all those that have not replied, as

the private sector had to in the misselling review.

In addition, the Government should make further resources available to the

Citizens Advice Bureaux to help members of the public make their claims.

The number of advisers may need to be increased due to a very large number

of people affected by these changes.

Lastly, the guidelines for assessing claims should be published for

wide-ranging consultation within the community. Before being approved, the

guidelines should be agreed by the ombudsman.

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