SP review and change from Category A to Category AB
19. Mrs D complains DWP was wrong to review her individual SP entitlement simply because her husband had died because in her view, their SP entitlements were complete separate.
20. She says her SP has been reduced by over £1,000 a year because upon the death of her husband in 2019, she inherited his CODs. She says this is unfair, and she should have been able to keep her own SP because that is based on what she had earned during her working life. She says the fact her SP was affected by components of her husband’s pension when he died means her SP is means tested, which it should not be. She says while she understands DWP’s explanations about the laws at play, she does not agree with them.
21. She says the basic principle underpinning the laws at play is that contributions made by one member of a legal union entitles to other person in a legal union access to pension entitlement in the event he or she has insufficient contributions to qualify in their own right. She says she does qualify in her own right, therefore she should not inherit anything from her husband.
22. Further, she says DWP’s ‘A detailed guide to State Pensions for advisers and others’ says a widow may be entitled to choose a pension based on her own NI record only without anything regarding her husband being taken into account.
23. We can see Mrs D reached SP age on 14 February 2000. As such, before Mrs D’s husband died in 2019, she was receiving a total of £180.33 per week of Category A SP.
24. When her husband died, DWP reviewed her entitlement. While components of her SP entitlement increased, she inherited her husband’s CODs. This meant her husband’s CODs were applied to her SP, as well as her own CODs.
25. This meant her new SP entitlement now she was widowed was £161.07 per week of Category AB SP. Simply put, on the face of it Mrs D’s weekly SP entitlement went down by around £20 per week.
26. Between 2019 and 2021, DWP told Mrs D her husband’s SP and occupational pension were intertwined because of the process of ‘contracting out’. It said although one part had a negative impact on Mrs D’s SP, the payment via her husband’s occupational pension to recognise his periods of contracting out gave her a higher income. Therefore, she was better off.
27. While Mrs D’s husband was alive, his own CODs applied to his SP entitlement, in the same way Mrs D’s own CODs apply to hers. However, the CODs applied to her husband’s SP were offset by the private pension he received from his former employer. Therefore, the CODs applied to his SP equalled out the private pension he received or left him in a more favourable position (if the private pension amounts paid were greater than the CODs applied).
28. In short, Mrs D’s husband (and subsequently Mrs D) was not financially worse off due to his CODs. This had arisen because he had chosen to ‘contract out’ – for the reasons explained between paragraphs 8 and 12.
29. This means when Mrs D’s husband died, she inherited his CODs and they applied to her SP entitlement. However, she also inherited his private pension. When you include this offset, we can see Mrs D is now in receipt of at least £207.89 overall. This is an overall increase financially of around £27 per week.
30. DWP made these changes in line with the laws that are applicable to widows’ pensions. DWP has told us that if it had not reviewed Mrs D’s SP entitlement when her husband died, she would have inherited only some parts of his entitlement and his CODs. This would have reduced her Category A SP.
31. DWP says it applied the CODs from her husband as it legally had to. If she had retained only her own pension entitlements without the other elements of her husband’s entitlements, her new SP would have been £133.51, instead of £161.07 which DWP calculated she was entitled to after her husband’s death and put her in the best possible financial position. Instead, by reviewing her entitlement, DWP gave Mrs D the ‘best’ pension she could legally receive – she was in receipt of a higher income overall after DWP made the change.
32. The applicable laws are the ‘Pension Schemes Act 1993’ and the ‘Social Security Contributions and Benefits Act 1992’. Collectively, they say a person will inherit the CODs of their spouse or civil partner upon their death and that if a person is entitled to more than one retirement pension, they can only receive one. If a person in this situation does not tell the Secretary of State which category of pension they want, they will be given the one most favourable to them.
33. In other words, the law says a person will be given the more favourable pension available to them when their spouse dies. This information is also reflected in DWP’s ‘Decision Makers Guide Chapter 75: Retirement Pension’.
34. We recognise Mrs D has told us DWP’s ‘A detailed guide to State Pensions for advisers and others’ suggests she had three options available to her as a widow, including her preferred option to receive a pension based on her own contribution record.
35. However, this guidance also explains the impact ‘contracting out’ of the additional SP has on the surviving partner and says, ‘if the deceased spouse or civil partner was contracted out, the inherited additional State Pension may be reduced to reflect this’. As such, it appears DWP was following the law and its own internal guidance when it reviewed Mrs D’s SP entitlement upon her husband’s death.
36. Mrs D has told us the law should be changed so women like her are not worse off. She says that between September 2019 and September 2020 3,690 widows had their SP reduced. We recognise Mrs D’s strength of feeling on this issue and recognise she feels angry.
37. For the reasons set out above, we do not consider there is evidence to indicate DWP acted wrongly when it reviewed her SP entitlement and communicated this change to her. While looking at Mrs D’s SP income in isolation she is correct, it has gone down. However, we must also consider that because Mrs D is also receiving an income from her husband’s occupational pension, which was built up by him ‘contracting out’.
38. While her husband’s CODs were applied to Mrs D’s SP, it is offset by his occupational pension that Mrs D now receives. DWP must have regard for this when it makes its calculations. Overall, the evidence indicates Mrs D is receiving a greater income.
39. Our ‘Principles of Good Administration’ say organisations must comply with the law and should follow their own policy, whether published or internal. We recognise Mrs D disagrees with the laws applicable to this situation and views them as unfair. We also understand she would like us to recommend the law is changed.
40. In our role, we cannot give a view on legal matters or make a change to any law a person may consider to be unfair. Instead, it is the role of the courts to consider legal matters, and changes to the law are debated and made by Parliament. In our role, we consider whether an organisation has acted in line with the law, its own internal guidance and our principles.
41. With all the above in mind, we do not consider there are any indications of failings by DWP. DWP appears to have acted in line with the law and its own internal guidance. As such, it appears to have acted in line with our principles, and we will take no further action.
DWP’s communication
42. Mrs D complains DWP did not tell her that her SP would be reduced upon the death of her husband, and widows will receive less. She also complains DWP does not make this public knowledge which means it comes as a shock to widows like her during a sad moment in their lives. We recognise Mrs D’s point of view.
43. We have set out our view above, that the evidence shows Mrs D is receiving more, not less, from her husband’s SP and periods of contracting out. In relation to communication, DWP’s ‘Our customer charter’ says it will provide its customers with the correct information and explain things clearly. Our ‘Principles of Good Administration’ also say we expect public organisations to give people information that is clear, accurate, and complete.
44. We have also considered the explanation DWP gave to Mrs D when it reviewed her SP, and its subsequent explanations. DWP wrote to Mrs D on 16 December 2019 to tell her it had revised her SP following her husband’s death. The letter was brief and, on the issue of why it reviewed her SP it said:
‘…we have revised your State Pension following the death of your spouse. The weekly amount of your State Pension has gone down to 161.07…this is because you have inherited your spouse’s Contracted Out pension of 46.82, which is payable by your spouse’s private pension provider. You may have inherited other parts of your spouse’s State Pension which will be shown on the entitlement notice that we have sent out separately.’
45. We consider DWP’s explanation to have been sufficient because it tells Mrs D she is getting less, why this has occurred, and directs her to the information which sets out the elements of her entitlement.
46. Mrs D was entitled to ask DWP for further information and express her concerns, which is what she did and, upon receiving her correspondence, DWP gave her more detailed explanations. In these explanations, DWP has repeatedly explained to Mrs D she is receiving a more favourable income when looking at the overall picture.
47. With this in mind, we consider DWP’s communication to be in line with its Charter and our Principles. We recognise Mrs D disagrees with this view and remains focussed on the fact her SP entitlement has reduced. However, as previously outlined, this is a matter for the courts and Parliament, and we will take no further action.
DWP’s compliance with ICE’s recommendations
48. Mrs D complains DWP did not carry out all the ICE recommendations by the completion deadline of 11 January 2024.
49. ICE recommended DWP:
• apologise and make a £200 consolatory payment to Mrs D in recognition of the failings it had identified • write to Mrs D with a written comparative calculation that showed what she would receive if she reverted to her own SP, against SP which included her husband’s entitlements which she was receiving at the time • provide Mrs D with instructions about how to revert to a SP based only on her own entitlements if she wishes to do so.
50. ICE said DWP would carry out the recommendations by 11 January 2024.
51. However, DWP did not meet this deadline. Mrs D did not receive the £200 financial remedy payment until one day after the deadline, and she did not receive the apology letter until 4 days after the deadline. In the apology letter, DWP said it would send the comparative calculation recommended by ICE within 14 days.
52. However, DWP did not send its comparative calculation to Mrs D until 1 February 2024 – three weeks after ICE’s deadline, and a week later than the 14-day timescale it made Mrs D aware of in the apology letter.
53. Our ‘Principles of Good Administration’ say organisations should do what they say they are going to do and if they cannot, they should explain why as soon as possible. Our ‘UK Central Government Complaint Standards’ also say organisations should apologise when things go wrong.
54. We have not seen evidence DWP contacted Mrs D when it failed to meet its own 14-day extension in providing the comparative calculation. When DWP did write to Mrs D on 1 February 2024, it did not explain why it had not provided the comparative calculation within 14 days of its letter dated 10 January 2024. It also did not apologise for failing to do so.
55. With this in mind, we consider there to be indications DWP failed to act in line with our principles and complaint standards.
56. We think these delays would have been frustrating for Mrs D, and left her feeling like DWP was not taking her seriously. Our ‘Principles for Remedy’ say we expect organisations to put people back in the position they would otherwise have been in had it not been for their failings. Where this is not possible, we expect them to compensate them appropriately, whether financial or by other means.
57. Level 2 of our ‘Severity of Injustice Scale’ is sets out instances where the impact of an organisations failings cannot be put right solely by an apology. Our scale says impacts in this level are ones we expect a healthy adult to be expected to deal with on a regular basis without external support, such as annoyance, frustration, or worry lasting from a week to six months. The financial remedy range in level 2 is £100 to £450.
58. In the course of our enquiries DWP recognised its complaint handling in this regard had been poor and we asked it to take action to put things right. DWP has agreed to write to Mrs D by 19 June 2024 to:
• apologise for the emotional impact of its poor handling of ICE’s recommendations and its communication about this • pay her £100 in financial remedy.
59. We consider this is enough to put things right for Mrs D because these actions are in line with our ‘UK Central Government Complaint Standards’, ‘Principles for Remedy’, and ‘Severity of Injustice Scale’. With this in mind, we will take no further action. We trust Mrs D has found the information and explanations in this statement helpful.