19. Mr L was transitioned to ESA C in 2012, after DWP migrated his claim from Incapacity Benefit. ESA C entitlement is based on National Insurance contributions and is not means tested. This means a person’s income does not affect the amount they receive. ESA IR is the second component of this benefit, and it is means tested. This means any income a person receives is deducted from their ESA IR entitlement on a pound for pound basis.
20. Claimants can apply for both ESA IR and ESA C. In cases where a person is entitled to claim both components, DWP’s Decision Maker’s Guide states that the higher benefit amount is payable in the first instance. For example, if a person’s ESA C entitlement is more than their ESA IR entitlement, then they are awarded ESA C.
21. As outlined in the report by the National Audit Office, DWP defines an official error as ‘when a benefit is paid incorrectly due to inaction, delay or a mistaken assessment’. DWP has accepted that the way in which it approached the transition from Incapacity Benefit to ESA from 2011 was an official error.
22. Our Principles of Good Administration set out a framework that public bodies should seek to work within. Our Principles say ‘getting it right’ means public bodies should:
• provide an effective service • plan carefully when implementing new procedures • take decisions with the rights of those involved accounted for.
DWP’s assessment of ESA IR in 2012 23. In keeping with our Principles, from 2011 DWP should have ensured that when transferring individuals from old-style benefits to ESA it planned the transition carefully. It should have planned the transition in a way that ensured the rights of these claimants were fully considered. This was particularly important because the nature of the benefit being claimed meant that many of those impacted by changes could be vulnerable and suffer serious hardship if DWP got this wrong.
24. We have seen no evidence DWP considered Mr L’s entitlement to ESA IR when he was migrated to ESA C in 2012. DWP has since accepted that not considering the entitlement of prior Incapacity Benefit claimants to both components of ESA was an ‘official error’. This was following the ruling from the Upper Tribunal in October 2014, which ruled that ESA was a single benefit and claimants should be assessed for both components.
25. We have found that DWP failed to act in line with our Principles of Good Administration because it did not plan carefully for the transition of Incapacity Benefit claimants to ESA and take the rights of those involved, including Mr L, into account. Because of this, it failed to provide an effective service to him between 2012, when he was transferred to ESA, until 2018, when DWP identified he was impacted by error and reassessed his ESA entitlement. This amounted to maladministration.
26. We have considered the impact this maladministration had on Mr L. If Mr L had been assessed for ESA IR as well as ESA C in 2012, his income from his ESA C entitlement would have exceeded the income threshold for ESA IR and so he would only have been entitled to the ESA C award. This meant that, in line with the DWP’s Decision Maker’s Guidance, Mr L was not entitled to ESA IR from when he transitioned to ESA in 2012.
27. As Mr L was not entitled to ESA IR at this time, the events would have more likely than not unfolded in the same way. Because of this we do not consider that Mr L suffered a financial loss during this period. His circumstances changed in 2016, however, and we have considered this further.
DWP’s assessment of ESA in August 2016 28. In August 2016 Mr L was awarded PIP. In line with DWP’s Decision Maker’s Guidance, he became entitled to the Severe Disability Premium at this point, which can only be applied to ESA IR claims.
29. With the Severe Disability Premium applied to Mr L’s claim, his ESA-IR entitlement increased and exceeded his ESA-C entitlement. As per DWP’s Decision Maker’s guidance, when a person is entitled to both components of ESA, the higher amount should be paid. This meant that Mr L should have been notified of this and invited to apply for ESA IR from 30 August 2016.
30. With the Severe Disability Premium applicable to his claim, his ESA C entitlement was £129.24 per week and his ESA IR entitlement, including the Severe Disability Premium, was £189.90 per week. However, DWP did not identify that Mr L’s claim should be changed to ESA-IR and it did not advise him he could apply for this component of the benefit. This was not in line with the Decision Maker’s guidance and was maladministration. We have considered the impact this had later in our report.
Misdirection in relation to Mr L’s pension 31. As outlined above, we already know that Mr L was entitled to ESA-IR from 30 August 2016. Our Principles of Good Administration, say public bodies should inform people about their entitlements, what to expect and what it expects from them.
32. From October 2014 DWP was aware that it had erred when assessing ESA claims and it has accepted it should have considered commencing an exercise in line with the LEAP principles from this point. Whilst it changed its process for new claimants in early 2015, it took no action to address potential mistakes in the claims of those already transitioned from the old-style benefits. This did not happen until 2018 and this oversight significantly delayed implementing processes to ensure claimants, such as Mr L, were in receipt of the correct benefits.
33. This significant delay meant that when Mr L telephoned DWP in November 2016, there were no processes in place to identify him as being entitled to ESA IR and the Severe Disability Premium. We think these processes should have been in place prior to the call in November 2016 because DWP had been aware of the Upper Tribunal’s ruling for over two years.
34. DWP told us that it sent a memo, in December 2017, to all working-age benefits staff to advise them that when PIP is awarded the claimant should also have their entitlement to ESA-IR considered. It also explained that since December 2017 a daily report is generated that identifies ESA claimants who have been awarded PIP and DWP automatically considers these claimants for the disability premiums that can be applied for ESA-IR claims.
35. We consider that, on balance, had DWP not acted with maladministration and delayed in implementing the LEAP exercise, this process would more likely than not have been in place when Mr L was awarded PIP from August 2016. We have, therefore, considered whether this more likely than not means Mr L would have been in receipt of the correct benefits in November 2016 had this maladministration not occurred.
Impact 36. Our Principles for Remedy state that where maladministration or poor service has caused injustice or hardship, public bodies should seek to return the person to the position they would have been in had this not occurred. When this is not possible, our Principles say that public bodies should compensate the person appropriately. DWP’s guidance for financial redress reflects our Principles for Remedy.
37. Mr L says that had he been on the correct benefits when he called DWP in November 2016 and had been told claiming his pension could affect his ESA IR claim, he would not have drawn down his occupational pension.
38. From August 2016, the Severe Disability Premium applied to Mr L’s ESA claim and his ESA IR entitlement exceeded his ESA C entitlement. He was not advised he could claim ESA IR, however, and DWP did not identify this error until 2018. This meant that when Mr L called DWP in November 2016, he was incorrectly advised that drawing down his pension would not affect his ESA claim.
39. DWP accepts Mr L should have received ESA IR from August 2016. So far, DWP has repaid the ESA IR arrears owed to him. It paid Mr L £5,069.64 in arrears of ESA IR in 2018. However, DWP deducted his pension income from these arrears and did not accept its actions caused a financial loss due to Mr L drawing down his occupational pension. We have considered whether the financial loss Mr L claims arose due to DWP’s mistakes and whether DWP should return him to the position he would have been in had the maladministration not occurred.
40. We have found that had DWP not acted with maladministration by delaying initiating the LEAP exercise, by the time Mr L was awarded PIP, from 30 August 2016, it would already have had the processes in place to advise him about his ESA IR claim and invited him to apply for this. Based on the time it took Mr L to return this form in 2018, and the time it took DWP to process this, we think it is more likely than not Mr L would have been in receipt of ESA IR prior to him contacting DWP in November 2016. This means that without DWP’s maladministration, when Mr L contacted it in November 2016, it would more likely than not have told him that claiming his occupational pension could affect his ESA claim.
41. DWP has said Mr L would likely have drawn down his pension anyway. It highlighted that Mr L drew down three different pensions – the weekly draw down in November 2016, and then two further lump sum drawn downs in 2016 and 2021. DWP provided information of additional pension drawdowns that Mr L requested after these events occurred and said this showed he would likely have gone on to draw down his pension, irrespective of the advice from its call centre.
42. We asked Mr L what he would have done if DWP had told him that drawing down his pension early could affect his ESA claim. He told us he would not have drawn down the pension at that time. He says that he would have left his pension to mature and that the second pension was drawn down in 2021 due to a loss of faith in the government after DWP’s actions.
43. Broadly speaking, there are three ways a person can access their occupational pension before retirement. These are:
• taking all or part of the pension as a lump sum cash payment • using the pension to buy a product that will provide regular payments for life • investing the pension to get a regular, flexible income.
44. Pension income is automatically deducted from income-related ESA on a pound for pound basis; however, a lump sum does not affect ESA-IR entitlement in the same way. Drawing down a lump sum from a pension pot is considered the same as cash savings for the purposes of ESA-IR, and savings up to £6,000 are disregarded. This means any lump sum draw down under £6,000 would not have affected Mr L’s ESA-IR claim.
45. Given a regular draw-down of an occupational pension income would be deducted from Mr L’s ESA claim on a pound-for-pound basis, it would have made no financial sense for him to do this in November 2016. He has confirmed he would not have done so. Once he knew what effect a regular draw-down would have on his ESA IR, he made lump sum withdrawals instead. For these reasons, on the balance of probabilities, we consider it is more likely than not Mr L would not have chosen to draw down on his pension in the way that he did in November 2016. In particular, he would likely not have opted for the regular drawdown that would be deducted from his ESA claim on a pound for pound basis.
46. We cannot know, even on the balance of probabilities, how long Mr L would have waited to access his occupational pension had he received the correct advice in November 2016. We do not doubt the sincerity of his assertion that he would have left it to mature until retirement age. That said, he may have decided to draw down on his pensions as a lump sum, in a way that would not affect his benefits due to unforeseen circumstances. We know that he decided to draw on his other pensions as a lump sum after he became aware of how a regular income would affect his benefits.
47. Our view is that had Mr L been aware that drawing his pension down as a regular income would be deducted from his ESA IR claim on a pound for pound basis, resulting in no tangible financial gain, it would have made no financial sense for him to proceed with this. However, we know he went on to draw down pensions as a lump sum after becoming aware of this, which means it is possible he may have done the same with this pension had he been given the right information at the right time.
48. Our view is that the misdirection DWP provided over the telephone in November 2016 caused Mr L a direct financial loss. This financial loss is the loss to his ESA-IR entitlement arising from the regular income drawn down from his pension, but we have not found that this maladministration caused a financial loss arising from the final value of Mr L’s pension. This is because we cannot know, even on balance, what he more likely than not would have done between 2016 and 2029, which is when Mr L will reach retirement age.
49. Mr L also says that DWP’s errors have caused him stress and inconvenience. We agree that the maladministration identified likely caused stress and inconvenience for a period of over four years. He became aware of this issue in December 2018 and DWP has not yet acknowledged the error, nor taken steps to put things right.
50. Mr L cannot be put back in the position he would have been had this stress and inconvenience not occurred due to its maladministration, and we have recommended that DWP compensate him for this.