Supplementary report to the Permanent Secretary of the Department of Social Security by the National Audit Office and the DSS Internal Audit Service

• Introduction 

• Audit assurance 

• Key issues 

• Recommendations 

1. Terms of reference and background 

• Terms of reference 

• The inherited SERPS problem – a summary of the case 

• Conclusions about the causes of the problem and why it remained undetected for so long 

2. Findings and recommendations 

• On the organisation of state pensions work 

• On meeting the expectations of the public 

• On communicating with customers 

• On ensuring staff are kept up to date with changes in legislation 

• On the importance of having a systematic approach to implementing legislation 

• On identifying and managing risks to the successful implementation of departmental initiatives 

• On handling problems effectively 

Introduction

1. The objectives of this review were to examine the causes of the failure to provide accurate and complete information on the changes to the level of SERPS that a spouse could inherit on the death of his/her partner, to identify what led to these actions or omissions, and to make recommendations which should help to make any similar failure impossible.

2. The work was undertaken by the National Audit Office, in conjunction with the Internal Audit Services of the Department of Social Security (DSS) and the Benefits Agency (the Agency). This paper discusses the systems and arrangements in more detail than the Comptroller and Auditor General’s published report to Parliament on the inherited SERPS problem. It is presented in the format of an Internal Audit report for ease of use within the Department. The terms of reference for this examination were set by the Permanent Secretary of the Department of Social Security (see paragraph 1.2).

3. Although the report focuses on a specific, apparently narrowly focused problem, we believe this case casts considerable light on a number of key aspects of the way in which the Department conducts its business, and so has far wider significance. The important issues include: how the Department’s structure impacts on the way it delivers its services; how the Department views its role and responsibilities to the public, and communicates with them; how it communicates with, and provides support to, its staff; how it manages the implementation of legislation; and how it identifies risks to successful implementation of policy changes.

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Audit assurance

4. Based on our work on the systems and practices that are currently in place to deal with the problems identified, we feel able to provide only limited assurance overall as to their reliability. In part, this is because in some cases (e.g. the new arrangements for checking the accuracy and completeness of DSS leaflets) the processes have yet to be tested. Given the current IT arrangements, we also have concerns about the ability of the Agency to ensure that all staff have access to up to date and usable information and guidance that they need. And we note the lack of systematic arrangements for monitoring the technical accuracy of the advice given by staff, despite the legal responsibilities of the Department to provide complete and accurate information. In addition, in view of the extensive consideration in 1999 given to the issue of misleading information, we are concerned that from November 1999 to 10 January 2000 contradictory lines were taken in official correspondence and in other sources of information about the legal position after 5 April 2000 following the passing of the Welfare Reform and Pensions Act.

5. However, we also consider that a number of developments currently under way within the Department should help to reduce the possibility of a similar problem occurring in future, and that there is much that can be built upon. In particular:

• the use of more systematic project management arrangements in policy development and implementation should (if followed rigorously) provide greater assurance that everything that should be done, is done in a systematic and timely manner;
  

• the work on risk management practices and the appointment of a member of the Departmental Board to oversee this area indicate that increasing attention is being given to initiatives to help to ensure that risks to successful implementation of policy are identified, monitored and mitigated;
  

• the approach of appointing Senior Accountable Officials, and the developments in establishing end-to-end responsibility for specific initiatives and projects should (if fully understood by all concerned) help to focus the attention of all staff on their roles, responsibilities and accountabilities;
  

• the new arrangements for checking the accuracy and completeness of leaflets should ensure that other `time-bombs’ do not occur in the Department’s literature, and that accountability for published material is clearer; and
  

• initiatives such as the moves towards producing a clearer version of the state pension forecast, with a supporting information leaflet, should help to improve individual pensions information.

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Key issues

6. The inherited SERPS problem arose because a provision in the Social Security Act 1986, not due to come into force until April 2000, was omitted from departmental leaflets for ten years. In addition, an unknown number of people were given misleading information in conversations with departmental staff and in correspondence. Although leaflets were corrected in 1996, staff continued to provide incorrect advice until as late as April 1999. The matter was brought to the Department’s attention by the charity, Age Concern. In 1999 the Parliamentary Ombudsman announced that he would investigate four samples cases of alleged maladministration. During 1999 and early 2000 the Government have sought a solution to the problem.

7. On the basis of our work we have identified seven key areas we believe the Department should focus on in learning lessons from the inherited SERPS case. The first three are of a strategic nature, whilst the other four cover more managerial matters.

Organisation of pensions work

8. At a high level, the inherited SERPS problem was possible because of the absence of end-to-end responsibility and shortcomings in accountability for the management of pensions work. The physical separation of Benefits Agency pensions staff between Leeds and Newcastle appears to create some problems for communication, and may slow down the pace of response and introduce additional stages of consultation. It also leads to some lack of clarity about who is ultimately responsible for particular actions. The Department may wish to examine whether the current arrangements, in which responsibility for pensions is spread between the departmental Headquarters and several parts of the Benefits Agency, are the most suitable. It may also wish to consider whether the handling of state pensions work is so significantly different from the administration of other benefits as to require more unified management. As part of this, it might wish to consider bringing together the central support functions for pensions into one location. This should produce a clearer organisational structure and have positive implications for the quality of service provided to customers.

Defining and meeting legitimate expectations of the public

9. Another theme arising from our work concerns the expectations that the public may have of the Department. The Department is clearly a service organisation, but there seems to be some uncertainty as to whether it provides `information’ or `advice’. Many staff we spoke to consider that the DSS provides information only, although this does not seem to fit with the `Modernising Government’ agenda in general, or recent departmental initiatives involving personal advisers in particular. In addition, it does not seem to accord with the sentiments expressed in the recent Benefits Agency Customer Charter, which promises to provide both advice and information `that is accurate, clear, full and helpful’. In the light of these developments, we consider the Department should examine seriously the implications (legal, cultural and resource) of moving towards a pro-active, advisory role in much of its business.

10. Associated with this is the issue of how far the Department is resourced to provide a `personalised’ service, and whether it should feel under an obligation to update citizens about developments on an individual basis. We consider it would have been reasonable (especially after the passing of the Welfare Reform and Pensions Act in November 1999, and after having accepted responsibility for the incorrect information on inherited SERPS) for the Department to have provided an update on the situation to the 3,500 people who had written, alleging that they had been misled. We understand that this was considered, but that a decision was made not to go ahead on the grounds that an announcement was expected before Christmas.

Changing the culture and mindset

11. This report makes recommendations for changes and improvements to procedures and practices within the Department. Better systems are, however, only one part of the solution. The developments discussed in this report will only work effectively if they are embedded into the culture of the whole organisation. In our view, changes must be associated with a more customer-focused mindset at every level, with assumptions in favour of more, rather than less, information being made available to the public, and with greater openness in communications between parts of the organisation than is demonstrated at times in this case. Part of the shift in mindset should also be greater attention to evaluation, to ensure that lessons are learnt from successful, and less successful, initiatives and projects.

Accountability and end-to-end responsibility

12. Consolidating the organisation of pensions work (paragraph 8) may help to enhance accountability. It is likely that the inherited SERPS problem stemmed, in part, from the absence of end-to-end responsibility, in this case, for updating leaflets. Many staff we spoke to took a fairly narrow view of their responsibilities, and there was a lack of an overview. In the inherited SERPS case, it is unlikely that the detailed content of leaflets was of concern very high up the organisation. And connections do not appear to have been made, so that, for example, when pensions leaflets were corrected in 1996, there does not appear to have been any wider consideration of whether the organisation as a whole was aware of the provision. Thus, a key issue is to develop greater end-to-end responsibility and ownership for all aspects of the progress of initiatives and projects within the Department.

Communications with the public

13. At the start of our work we obtained confirmation of the Department’s legal position with regard to the provision of information to the public. It is clear that if the Department provides information to the public, it has a responsibility to ensure it is complete and accurate. This, and the evidence of the consequences of failing to do this, underline the importance of having ways of ensuring accurate communications with the public. With regard to leaflets, the new arrangements developed in 1999 should, if followed rigorously, enhance accountability and minimise the risk of errors and omissions. To ensure that they are effective, we consider that there would be value in having an independent review of the use of the new procedures, perhaps led by the Department’s Internal Audit Service. We also think there could be value in involving trusted external stakeholders more in consultation on the text of new leaflets and other material. In addition, the Department needs to have ways of monitoring the technical accuracy of information relayed by staff to the public so that it can identify and rectify problems if and when they occur.

Supporting staff in the local office network

14. To provide a reliable and appropriate level of service, staff dealing with the public need up-to- date information. The limited IT systems within the Agency’s local office network present a considerable obstacle to meeting the growing expectations of citizens, and ensuring that staff have adequate support to do their jobs. As is well known, much of the Agency’s IT has changed little since the 1980s. At the same time, the Department’s stated aims have become more ambitious, and broader Government initiatives are driving departments to be more responsive to citizens’ needs. The Department needs to consider whether upgrading the office network should be given higher priority, and whether, without this, it can provide the level of service it is aiming for and promising to deliver.

Project and risk management

15. The development of systematic project management approaches for policy development and implementation, as already deployed in the work on some legislation, offers assurance that all necessary tasks will be identified, planned and executed. The work that the Department already has under way in this field should be pushed to a conclusion and evaluated. It should be introduced in a flexible and non-bureaucratic way, recognising the need to overcome some cultural resistance within policy areas. Risk assessment and management for policy work should also be developed and embedded within the approach to all projects so that it becomes a part of the departmental culture.

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Recommendations

16. On the basis of our work, we recommend that:

1. the Department should examine whether the current arrangements, in which responsibility for pensions is spread between the departmental HQ and several parts of the Benefits Agency, are the most suitable, and whether the handling of state pensions work is sufficiently different from the administration of other benefits so as to require more unified management;
   

2. practices for dealing with correspondence at all levels, and the procedures for ensuring the quality and accuracy of responses, should be reviewed with a view to streamlining arrangements;
   

3. where large numbers of complainants contact the Department, and the matter cannot be resolved quickly, the Department should provide them with updated information where significant developments have occurred towards resolving the matter. While there may be issues around not pre-empting final decisions, there should be a presumption in favour of satisfying legitimate concerns within a reasonable specified timescale;
   

4. the Department should consider whether it has robust arrangements for identifying problems or potential problems notified to it in correspondence, wherever it is received;
   

5. the Department should give serious consideration to the implications for resources, training and public expectations of any shift towards an advisory, rather than purely information providing role. Where the Department considers it has a more limited role, it should ensure that this is made explicit;
   

6. the current work to develop the information provided in the state pensions forecast, and the amount of explanatory material accompanying it, should be progressed as soon as possible as part of wider improvements to the information available on pensions;
   

7. the Department should urgently review its policy and guidance regarding misdirection cases, to ensure correctness and consistency with recent legal advice, and ensure that all staff in the Department are given clear updated information on how to treat claims of misdirection from the public;
   

8. the Department’s new procedures for ensuring the contents of leaflets are complete and accurate should in the future be applied systematically to all publicity material, including electronic sources. Particular attention should be paid to ensuring that information about changes to legislation that do not come into effect for some years is included in publicity material. The need to do this should be included in the forward programme of work arising from legislation;
   

9. although the Department is responsible for the quality of its publicity, it should consider how it can engage pressure groups and other interested parties more in consultation on the text of new leaflets and other publicity material. The Department should also ensure that arrangements allow for the handling of ad hoc corrections notified outside the regular review process;
   

10. given the importance of the Department’s explanatory and publicity material, and the risks associated with errors in them, we consider there are strong grounds for the Department’s senior management seeing material of all kinds prior to publication, and for the Department’s Internal Audit Service scrutinising the new arrangements on a regular basis to ensure that agreed practices are adhered to and are working successfully;
    

11. the Department should examine the significance and extent of the risks arising from any departures from a co-ordinated corporate approach to publicity and should ensure that arrangements are streamlined;
    

12. the Agency should make full use of new complaints handling software, to be introduced nationally in April 2000, which will enable local offices to record complaints in a standard format, and allow them to be analysed in predetermined categories and client groups;
    

13. given that it is essential that staff have timely, complete and usable information about changes affecting their work, as part of their review of communications, the Benefits Agency should examine the adequacy of guidance on benefits available to local offices, whether arrangements for disseminating bulletins are sufficiently responsive to the needs of staff, and whether appropriate arrangements are in place to ensure that staff are updated on developments affecting their work after periods of absence;
    

14. the Department should review its IT programme priorities and consider bringing forward the provision of intranet and other standard IT business facilities to staff in the Field, to enable them to receive urgent information, bulletins and benefits guidance manuals on-line;
    

15. the Agency should re-examine the adequacy of its quality assurance work with regard to technical accuracy, including for example, whether benefit could be derived from well focused `mystery shopping’ arrangements, or from the taping of a sample of calls, both of which are used by many other organisations. This is particularly important where it is known that citizens will be making decisions about their future, based on the information provided to them, or where there are greater expectations of an advisory role from the Agency;
    

16. existing initiatives within the Department to develop the use of project management approaches and thinking for the development and implementation of policy should be pursued to a conclusion, and extended where currently not in use. In particular, the Department should work towards a common and integrated approach throughout the organisation, and should pay greater attention to evaluation activity and the dissemination of good practice in this area. In addition, the Internal Audit Service should give increased attention to reviewing procedures and practices in the field of policy development and administration;
    

17. at the end of the main phase of implementation of any policy initiative, a depository of information on outstanding issues should be drawn up, formally handed over to the relevant branch, and included in its work programme, to avoid tasks being forgotten. Responsibility for progressing outstanding work should be assigned to named individuals. A consolidated record of outstanding legislation and action needed should be maintained and reviewed regularly at a senior level (for example, perhaps by a sub-committee of the Departmental Board);
    

18. current initiatives within the Department to develop a rigorous approach to risk management should be pursued, and arrangements put in place to ensure that risk assessment and management becomes a routine element of all policy development and implementation; and
    

19. the Internal Audit Service recommendation, that policy option appraisals include a section on risks, should be implemented.

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1. Terms of reference and background

Terms of reference

1.1 This report has been prepared by the National Audit Office and the Internal Audit Service of the Department of Social Security (DSS), at the request of the Permanent Secretary of the Department of Social Security. It supplements the report by the Comptroller and Auditor General (C&AG) entitled `State Earnings-Related Pensions Scheme: The Failure to Inform the Public of Reduced Pension Rights for Widows and Widowers’, which was published in March 2000.

1.2 The terms of reference for this review are as stated in the letter of 28 October 1999 from the DSS Permanent Secretary to the C&AG. They are:

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The inherited SERPS problem – a summary of the case

1.3 A summary of events relating to the inherited SERPS problem is provided in the C&AG’s report to Parliament. For the purposes of background here, the problem arose from a series of omissions and misunderstandings about the nature of the change in the arrangements for the inheritance of SERPS. In particular:

• details of the change to the arrangements for the inheritance of SERPS after April 2000 were omitted from a departmental leaflet when it was published in 1987, even though the absence was noted when a draft was circulated within the then Department of Health and Social Security (DHSS). The only explanations offered to us for the omission are that the provision was overlooked altogether, or that staff finalising the leaflet considered it more appropriate to place it in publicity material about widow’s benefits. Ultimately, it appeared in neither at this time;

• pensions leaflets were updated in the late 1980s and early 1990s, but the overall accuracy and completeness of these documents do not appear to have been considered, or else the absence of the provision was not considered significant. As a result, the inherited SERPS provision was not publicised in official leaflets between 1987 and 1996, and the omission gave a misleading impression of the size of the pension that a surviving spouse would inherit if their partner died after 5 April 2000;
  

• the Department (and later the Benefits Agency) did not appreciate the implications of not informing the public about the change from the time it became law, even though it was not due to come into effect until 2000. For more than a decade, many of the Benefits Agency’s local office staff provided incorrect information to the public, as they were unaware of the change in the position after April 2000. Several thousand people believe they would have made different choices about their pension provision had they known about the halving of inherited SERPS;
  

• the absence of publicity for the inherited SERPS provision was raised in the House of Lords in 1995, during consideration of the Pensions Bill. Although the Benefits Agency updated its pensions leaflets as a result of this, they do not appear to have appreciated the implications of the change for citizens’ forward financial planning, and thus the necessity for staff to explain the change in the position after April 2000, as well as the current arrangements. As a result, the Agency did not check that staff were aware of the provision, or whether the omission in the leaflet might have consequences in the future;
  

• warnings in correspondence to the Department from two members of the public (forwarded by their Members of Parliament) about the absence of publicity prior to 1996 and the misleading effect of the information provided by local offices were not picked up by the Department, even though these letters received ministerial replies in 1997 and 1998. Only after the charity, Age Concern, wrote to the Department in October 1998 was action taken to assess the scale of the problem and rectify the situation;
  

• subsequently, the Department identified that there was a problem, and in January 1999 issued a brief factual pensions bulletin to staff advising them of the correct position, followed by several updates providing lines to take and answers to frequently asked questions. In March 1999 the Ombudsman announced that he would investigate four examples of alleged maladministration in this case. During 1999 the Government considered ways of resolving the problem. In November 1999, an amendment to the Welfare Reform and Pensions Act ensured that the change to the inheritance of SERPS will not now come into effect in April 2000.

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Conclusions about the causes of the problem and why it remained undetected for so long

1.4 From what we can tell, established DHSS procedures for seeking comments about changes to leaflets were followed in 1986. The absence of a reference to inherited SERPS was picked up and reported back to the section responsible for the leaflet NP32. At that stage it appears that, either the proposed change was ignored or overlooked, or that a conscious decision was made that reference to inherited SERPS was more appropriate in leaflets on widow’s benefits. Ultimately, it appeared in neither at this time.

1.5 Fourteen years on, it is impossible to know for sure why the change was not included in the leaflet. The staff involved were experienced, and other proposed changes were incorporated into the text of the revised leaflet. Interestingly, those we interviewed said that the Social Security Act 1986 was the first piece of legislation to which a basic project management approach had been applied. However, there were no tasks planned beyond 1988, so there appears to have been no anticipation of the need to publicise the changes again. A possible contributory factor might have been pressure of work at a time of resource shortages in the section (referred to in minutes we saw from the period), but this combination of circumstances is not uncommon and is only speculation.

1.6 Once the inherited SERPS provision was not included in the leaflets, it appears that, without a major overhaul of the literature, or someone spotting it fortuitously, it was unlikely that the omission would be noticed. Because the provision was not due to come into force for some 14 years (an unprecedented lead time in those days) it disappeared from the view of those involved in pensions as they worked on more urgent developments. It was referred to in the 1985 leaflet `Reforming Social Security’, but not in subsequent revisions to relevant leaflets in the late 1980s and early 1990s, which focused on changes necessitated by new legislation, and so were unlikely to pick up past omissions.

1.7 Only when the lack of publicity for the provision was mentioned specifically in the debate in the House of Lords in 1995, was action taken to correct the omission. At this stage, however, it would appear that although leaflets were changed, no consideration was given to whether staff in the local office network were aware of the provision. Departmental staff may have considered they had discharged their duty in passing on details of the omission. Those involved in updating the leaflets may have felt they had discharged their duty when they made the correction. We have not seen any evidence of wider consideration of the implications of the omission. From our review of departmental papers it does seem that some staff did not appreciate that the matter could not be left until 2000 to be publicised. Thus it appears there was a lack of understanding of the exact implications of the failure to provide advance warning to the public. Whatever the reasons, the Department failed to take sufficient action in 1995-96, or consider the consequences of incorrect leaflets being in the public domain for ten years. Whilst action then would not have prevented the problem, it could have reduced the impact.

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2. Findings and recommendations

2.1 This section summarises the findings from the work undertaken by the National Audit Office and the Department’s Internal Audit Service, as well as recommendations arising from this work. In particular, this section covers:

• the organisation of state pensions work;
  

• meeting the expectations of the public;
  

• communicating with customers;
  

• ensuring staff are kept up to date with changes in legislation;
  

• the importance of a systematic approach to implementing legislation;
  

• identifying and managing risks to the successful implementation of departmental initiatives; and
  

• on handling problems effectively.

On the organisation of state pensions work

2.2 The administration of state pensions currently involves State Pensions branch within DSS - Headquarters Policy Group, Benefits Agency Development Branch for Pensioners (formerly Pension Age Group in Leeds), and Pensions Support Service (formerly Operational Services Directorate in Newcastle).¹ There are also groups of pensions staff within the Field (the local office network), and in the Agency’s Pensions and Overseas Directorate. Our work involved interviews with staff in London, Leeds and Newcastle, and we also looked at a significant amount of correspondence between staff in these locations on the inherited SERPS case.

2.3 The problem of the failure to publicise inherited SERPS raises questions about the way in which the state pensions work is administered by the DSS. At a high level, the problem appears to have been able to occur because of the absence of end-to-end responsibility and shortcomings in accountability for the management of pensions work. We also consider that the physical separation of staff in Leeds (developing a strategy to implement the policy instructions from DSS HQ) and Newcastle (providing operational support to field offices) has created some problems for communication. It can also lead to some lack of clarity about who is ultimately responsible for particular actions.

2.4 In particular, we found that:

• where more than one of the groups were involved in pensions operations, staff were often unclear as to who had ultimate responsibility, or who was accountable for specific tasks, such as updating pensions leaflets. In some cases, responsibility and accountability for many tasks resided at very low levels, without anyone with a broader view playing a role;

• on a number of occasions staff in Leeds did not appear to communicate information to staff in Newcastle, or considered it should be provided on a `need to know’ basis only;

• although pensions work within the Agency has been undertaken on a specifier/ provider basis between Leeds and Newcastle, there appeared (at the time of our work) to be no formal service level agreement or statement of service requirements to clarify what was expected of the different sections involved; and

• staff in Newcastle considered that current funding arrangements, under which they undertake much of their work for others and cannot act without receiving a budget, affected their ability to be pro-active in improving pensions services. Thus, while they might be well placed to see where further work was required, they were often not able to argue for additional funding to carry it out. An example of this was the need to update pensions and widow’s benefit manuals more than once a year, and thus reduce the reliance on bulletins.

2.5 The Agency’s central support for state pensions work requires staff with good pensions experience. This may be obtained through working in Field offices or the Pensions and Overseas Directorate. We were advised, however, that the central pension sections have difficulty in recruiting such staff, mainly because of difficulties having them released. Additionally, the Agency has benefited from the in-depth pensions knowledge of a small group of staff, mainly based in Newcastle. However, a number of them are nearing retirement, and replacements may not be readily available.

On meeting the expectations of the public

2.6 The Department deals with the needs of thousands of people each day, either face to face, by telephone, or in correspondence. The level of service provided by the DSS has important resource implications. Some people we spoke to doubted whether a truly personalised service could be provided, given current funding levels and IT infrastructure. However, the Government has stated clearly in the Modernising Government White Paper (Cm 4310) that public services must be more customer focused. More specifically, the Pensions Green Paper (Cm 4179) makes commitments to enhance the quality of service and information available to state pensioners. But there seem to be different views within the Department as to what the public can reasonably expect from it.

Handling correspondence from the public

2.7 Correspondence is handled by many diverse groups within the Department and the Benefits Agency, and the logic of who handles what is not always clear. Staff in Newcastle and Leeds told us that letters might come to either location for response, sometimes at the request of the Policy Correspondence Unit, or on occasions from Policy Group. There were no hard and fast rules as to who should reply. The Policy Correspondence Unit co-ordinate correspondence from MPs, ministers and `treat official’ cases, and drafts handled by the Benefits Agency from a number of different locations are routed through the Agency’s Parliamentary Branch. This can add to the time taken for replies. There appears to be potential for streamlining these arrangements.

2.8 In dealing with correspondence, the Department must reconcile the expectations of customers for a personalised service, with their organisational capacity to do this. In the case of inherited SERPS, Benefits Agency local offices received more than 3,400 letters during 1999, often from customers who were distressed and concerned about the adequacy of the provision they had made for their partner. Although they received a standard holding reply, they have not been advised subsequently of developments, even though in November 1999 the Government took powers to ensure the halving of inherited SERPS did not occur in 2000. While there may be issues around pre-empting ministerial decisions, or giving only an incomplete story, we consider a standard interim letter, explaining the current position, would have been a reasonable step to take, given the very serious concerns correspondents had, and the fact that the Department had already accepted responsibility for the errors.

2.9 Considerable time was invested by DSS during 1999 to resolve the inherited SERPS problem. At the heart of the problem was the failure to provide correct information to the public about a change in the law. Despite this, we found inconsistency in information provided by the Department in December 1999 and early January 2000 about the legal position from April 2000. Two letters were drawn to our attention, one signed by the Chief Executive of the Benefits Agency, and one by the Minister of State, in response to MPs’ letters. The first one said the change will be implemented in April 2000 and did not mention the effect of the Welfare Reform and Pensions Act. The second stated that inherited SERPS `would’ have been halved from 6 April 2000, but did not refer to the change in the Welfare Reform and Pensions Act or explain the change implied by the word `would’. Although consideration was given to altering letters on this subject, a complete change to the standard correspondence lines was not made in anticipation of an early announcement of the proposed policy solution. This is despite the existence of the explanatory notes issued on the legislation, the accurate advice issued to the Field in pensions bulletin 63/99 dated 23 November 1999, and a statement by the Pensions Minister on television on 2 December that the provision would not come into effect in April 2000. This situation would seem to place the Department at risk of further claims for misdirection.

2.10 We have not been able to establish how many letters were received by the DSS on the inherited SERPS issue prior to the problem being raised by Age Concern. However, we know of two letters which were sent by MPs to the Department, and which received ministerial replies. Much of the value of correspondence is that it can alert the DSS to problems, but in neither of these two cases was a wider problem identified. In 1996, a member of the public advised DSS (via his MP) that he had received conflicting information about the position after April 2000. He wrote again in 1997, pointing out that although changes to SERPS had been legislated for well before he had retired, the change was not referred to in leaflets until 1996. The case was passed to the Benefits Agency, but the problem was not recognised as a result of this letter. In 1998, a letter from a second customer was sent to the Department, concerning incorrect information provided by the Agency on inherited SERPS. The response acknowledged that an experienced member of staff had not been aware of the provision. Again, this does not seem to have been followed up as potentially a broader problem.

Handling the expectations of the public

2.11 The issue of what reasonable expectations citizens might have of government departments, including the DSS, is important, particularly in the light of the Modernising Government initiative. Many citizens have accrued pension benefits with preserved rights, through payment of National Insurance Contributions. Many of these people have expectations of a customer-oriented service, mainly because of the long-term nature of the benefits, and the fact that they have paid contributions (representing their own money) into the state pension scheme. Expectations have also been raised by the example of private sector pension schemes, which are required by law to be pro-active in informing customers regularly about their accounts and changes to scheme regulations, providing pension projections, and contacting customers if mistakes are discovered.

2.12 One aspect of this that came up during our discussions was whether the Department provided `information’ (mainly factual statements) or `advice’ (deemed to involve more judgement and to require taking account of broader circumstances). We have been advised by Pensions Policy staff that the Department’s role is to provide `information’ only. We appreciate that there could be significant implications, for example, in terms of resources between the Department organising itself to offer `advice’ rather than `information’ We are concerned that the view that the Department only provides information seems to sit ill with Modernising Government developments generally, and initiatives being implemented within the DSS more specifically which involve personal advisers, as well as Benefits Agency Customer Charter statements.

2.13 Another aspect of what are reasonable expectations is whether it is acceptable for changes to be made to pension arrangements without contributors to a scheme being advised personally. Members of private sector pension schemes can expect to be notified individually of any significant changes affecting their pension entitlement, and some people have suggested that SERPS services to citizens should be developed in a similar way. This is evidenced by the proposed amendment to the Child Support, Pensions and Social Security Bill that "the Secretary of State shall in regulations make provision for the notification of additional pension contributors of any changes to the additional pension that will materially affect their entitlement."

2.14 Finally, we examined the information that citizens can obtain in the state pension forecast (the means by which people are able to obtain a projection of what pension they will receive at state retirement age, based on a series of assumptions). This is designed to help them make informed choices. The Pensions Green paper `Partnership in Pensions’ has promised improvements to the information available to the public. We believe that the current work to develop the information provided in the pensions forecast, and the amount of explanatory material accompanying it, should be progressed as soon as possible as part of the wider improvements to the information about pensions available to citizens.

On the handling of misdirection cases

2.15 As part of our work we examined how officials within different parts of the Department responded to letters from the public complaining about misdirection. The case of one complainant (Mr X), who said he had acted to his detriment because a leaflet was incorrect, was not recognised as a misdirection case by either the then Benefits Management Branch, or OSD in Newcastle, who had drafted a reply to Mr X’s MP on this issue in 1997. This resulted in an inappropriate reply.

2.16 We noted a number of instances where officials took the line that inherited SERPS complainants did not have a case for redress. However, the guidance manual, ‘Financial Redress for Maladministration’, says that if customer have relied on incorrect information to alter their circumstances to their detriment, a special payment should be considered for financial loss actually suffered. In relation to Retirement Pension forecasts, however, it says that care should be exercised when a claim is received in respect of an incorrect Retirement Pension forecast. A forecast is only a prediction and not, therefore, a guarantee of payment. A payment can only be considered in these cases where the forecast made was clearly incorrect in view of the information held, and the customer suffered a financial loss by acting on the information.

2.17 Advice previously given from PFD1C (predecessor to Viewpoint) regarding an incorrect pension forecast was cited by the Benefits Agency, in 1998, as a precedent for the inherited SERPS cases. That advice had been `in relation to those who say that if they had been given correct advice they would have made additional private arrangements to enhance State retirement provision’. The advice was that such claims should be rejected. The line taken by Benefits Agency was that even if there was departmental error, and citizens had been "misled by leaflets, we are (at present) constrained by the policy advice and by the special payments guidelines that redress can only be considered where there is loss of statutory entitlement or actual financial loss". As none of the complainants had died, this appears to have been regarded by officials in this case as sufficient reason to reject complaints, apparently on the grounds that no actual financial loss had occurred at that time.

2.18 This line is not supported by the Department’s guidance manual, which states that a special payment should be considered for financial loss suffered (albeit it does not explicitly say that both past and future losses need to be considered). Consideration should, therefore, have been given to whether the person had already incurred, or would need to incur, additional costs if he was to restore himself to the position that he would have been in had he been given more complete information. Because of this misunderstanding, some letters drafted by officials in inherited SERPS cases implied that complainants had no grounds for redress. They also failed to mention that if, at a future date, their bereaved spouses suffered financial loss as a result of the misdirection, they might then have grounds for redress.

2.19 In 1999 the Department received legal advice as to its potential liability to those who suffered loss as a result of being misled by incorrect information, and as to the nature of the evidence likely to be required by a Court in any proceedings to establish such liability. This legal advice did not, of itself, require a change of policy as the existing guidance provided for that situation, but staff in special payments section were not sufficiently aware of that.

2.20 On 28 January 2000 DSS Viewpoint wrote to all departmental special payment teams referring to the NAO examination of inherited SERPS. This clarified that in some circumstances, financial loss resulting from misdirection may not have arisen at the time that a complaint is received, but may occur at some future date. The note said that the special payments section must, nevertheless, address the impact of the misdirection, and went on to say that Viewpoint planned to revise the special payment guidance to clarify the position. Viewpoint asked recipients to make sure that those responsible for handling complaints were made aware of that clarification. The note did not specifically convey the legal advice relating to inherited SERPS cases.

2.21 The Department’s guidance manual does not give advice on the position of surviving spouses in misdirection cases, or on how officials should reply with regard to actual financial loss at a future date. The Department’s legal advice has highlighted the special situation where bereavement at a future date might trigger actual financial loss for a surviving spouse.

2.22 The Department’s guidance on misdirection has always recognised that redress may be appropriate in cases where a person suffers an actual financial loss as a result of his or her relying on incorrect information and altering their circumstances to their detriment. However, it appears that in the past, officials may not have regarded reading a leaflet on its own as sufficient evidence of misdirection. The Ombudsman has accepted that individuals should normally be expected to provide some evidence that they have been misled into acting, or failing to act, in a way that is to their disadvantage. However, given the particular and exceptional circumstances that applied over this matter, he questioned whether that normal approach was tenable in this case. He also commented on where he felt the burden of proof lay in such matters. The Department’s legal advice and that contained in the Ombudsman’s report both point to the need to review what may be regarded as acceptable evidence of misdirection, and where the burden of proof lies in such cases.

On communicating with customers

2.23 Each year, the Department of Social Security has dealings with millions of people. In this section we consider the arrangements for ensuring the accuracy and completeness of leaflets, and also the role of the Benefits Agency Communications and Customer Liaison Branch (CCLB).

Ensuring leaflets are accurate and complete

2.24 Leaflets about benefits and services are a key way in which the Department communicates with its customers. The Department has a legal responsibility to ensure that such material is accurate and complete. The inherited SERPS problem arose partly because the Department’s leaflets were incorrect between 1987 and 1996. It is estimated that around three million misleading leaflets were issued during this period and were available to the public in Benefits Agency offices, post offices and other public places. We examined the papers relating to the Department’s work undertaken in 1999, firstly, to review all their benefits leaflets, and then to develop new procedures for ensuring that they remain up to date.

2.25 The action taken in the summer of 1999 to review all benefits leaflets appears sensible in view of the potential for further problems. The results of the review provide confidence in the accuracy and completeness of the existing stock of leaflets. In addition, on paper, the new procedures for a regular programme of leaflet review look reasonable, and appear to involve a wide variety of internal stakeholders on a systematic basis. We also believe they should enhance accountability for publicity material, given the allocation of responsibilities for signing off the final proofs. However, they have not yet been tested, and it will be important that they are implemented systematically, rather than in the `patchy’ way officials considered previous arrangements had been followed. Although the Department is responsible for its own publicity material, this case and others, show the value of consulting with external parties.

Ensuring a co-ordinated corporate approach

2.26 In the course of our work, we spoke to a number of staff about the role of the Benefits Agency’s Communications and Customer Liaison Branch (CCLB), which has overall responsibility for external communications, including leaflets. They concluded that the role of the branch appears clear at a high level within the organisation, but that operational areas seem to be less sure, resulting in CCLB being bypassed on occasions.

2.27 CCLB try to maintain a co-ordinated corporate approach across the Agency. However, this can be undermined by other Business Units going directly to Corporate Design Services Ltd (CDS) to get work done. Initial findings suggest that there is no clear channel or uniform approach to external communications. CCLB advised us that OSD commission posters from CDS without their knowledge. District Managers can arrange advertisements in local papers, and have done so, for example, on the Winter Fuel Payments campaign. OSD also commission CDS to amend/develop forms and draft letters. Although the final versions of forms are copied for quality assurance, a copy of the `finished article’ is not provided to OSD.

On monitoring customer feedback

2.28 During our interviews with staff in central offices and our visits to the Field, we asked how the Agency recorded and monitored feedback from citizens, and what use was made of this valuable resource. The Agency is developing a central database to record customer feedback, but there is still some way to go. Each Area maintains its own database, and customer feedback is recorded under a number of general headings. Analysis is undertaken, but results are not pooled centrally to enable senior management to take a strategic view. As a result, the Agency is unable to capitalise on this resource, and potential early warnings of problems may be missed.

On ensuring staff are kept up to date with changes in legislation

2.29 The Department relies on its staff to provide information to the public. It has a legal responsibility to ensure that, where it gives information, it is accurate and complete. But many Benefits Agency staff were unaware of the change to the law on inherited SERPS after April 2000. As a result, some gave out incorrect information to the public for more than a decade. This case underlines the importance of staff having access to up to date information about benefits, and of the Department being able to monitor what information is passed on. We looked at the information provided to staff, and the related issue of the availability of IT at local office level. We also looked at the issue of evaluating the accuracy of advice.

Providing staff with timely and accurate information in a manageable form

2.30 The Benefits Agency remains very much a paper-based organisation. Guidance on benefits is voluminous and not available on-line. Staff we spoke to said they felt `snowed under’ with paper bulletins on technical and work-related developments, and at times had difficulty in picking out key issues. Much of what was included in bulletins was regarded as theory, rather than practice. On pensions, in particular, we were advised that there had been 70 bulletins in 1999. Many staff receive the information via managers and cascade points, not direct. Despite the large amount of new material issued, the pensions guidance manual is only updated once a year. As a result, staff must refer to the bulletins, as well as the manual.

2.31 We are also concerned at the length of time it took to issue the first pensions bulletin on inherited SERPS. Although we were advised that bulletins could be produced and issued almost immediately, it took 10 weeks from the time Age Concern wrote to the Department to produce the bulletin, even though it was short and factual. The importance of publicising the change to staff was recognised quickly, but the need for interaction and agreement between Leeds, Newcastle and London appears to have slowed down progress. Staff to whom we spoke commented that the first bulletin on inherited SERPS did not include a line to take, and that later bulletins did not explain about the importance of advanced planning by pensioners, which was central to the problem.

2.32 Another issue raised in discussions was that staff felt unprepared to respond to the customer enquiries about inherited SERPS, which have followed reports in the media. Many of these enquiries have been from people who were upset and concerned about their partner’s future welfare. Staff would have liked an immediate briefing and line to take communicated to them so that they were not in the position (they felt) of knowing less about the matter than the public. A good example of what should normally be arranged was the accurate briefing provided to local offices at the time of the Minister of State’s appearance on the Watchdog television programme. This point is not restricted to the inherited SERPS issue. Staff advised us that they felt similarly unprepared for questions about the budget statement on television licences for older people.

The availability of IT in the local office network Management Summary 

2.33 Most service organisations now take it for granted that staff will be able to rely on IT systems as the basis for providing the public with information. The limited IT systems within the Agency’s local office network present considerable obstacles to meeting the growing expectations of citizens, and ensuring that staff have adequate support to do their jobs. As is well known, much of the Agency’s IT was designed in the 1980s, and the architecture has changed little since then. At the same time, the Agency’s stated aims have become more ambitious, alongside broader Government intentions that departments provide clear and straightforward information about their services, and that services are more responsive to citizens’ needs.

2.34 The majority of staff do not have access to a PC, although support staff tend to have more access to computers. Many front line staff use `dumb terminals’ that cannot be given word processor and Intranet access. Staff in local offices told us that they relied on one or two designated officers for urgent email information. As a result they felt unable to provide the service expected by customers.

2.35 Staff thought that ideally there should be an intranet system to keep people up to date with developments and ensure consensus. They would also like to have on-line access to the voluminous guidance manuals to which they refer constantly in the course of their work. A basic intranet would be a valuable resource, and we understand this is being piloted in the North East and South West, with on-line guidance and a `What’s New’ section which could be used for urgent messages. However, we understand that it is likely to take some time to be rolled out.

Evaluation of the accuracy of advice given to the public

2.36 Given the Department’s legal responsibilities to provide accurate and complete information, it is essential that it is confident about what information staff provide to the public and its accuracy. Although OSD receive feedback through evaluation sheets, advice lines, incident management lines, Area Directorate Focus Groups and Quality Support Teams, there does not appear to be a structured approach to addressing feedback, either within OSD or up the line through to policy teams in HQ. Staff competence and technical expertise is assessed as part of the Performance Appraisal Review (PAR) process. Process managers review performance of their staff in advising the public, but there is no certainty that managers are in a position to assess technical competence. Customer Service Managers in the Field are not charged with assessing the technical accuracy of advice given out by their staff.

2.37 Business measurement systems are focused on measuring customer quantity and service quality, rather than assessing the technical accuracy of information. There is a need to feed messages on the technical accuracy of advice into the development of training and guidance. Although in the past, the technical accuracy of advice was assessed by way of a `mystery shopper’ assessment process, the Agency stopped this in 1996 on the grounds of cost. However, no compensatory controls appear to have been put in place. We understand that consultants are developing a system for the assessment of performance against Customer Charter standards. Their plans include assessing the technical accuracy of advice. Options are being piloted, with planned implementation due for April 2000. Their preferred option is `mystery shopping’, but we understand this has been ruled out on the grounds of cost and some staff resistance.

On the importance of having a systematic approach to implementing legislation

2.38 The inherited SERPS case underlines the importance of having a systematic approach to implementing Government legislation, to ensure that everything that needs to be done is done in a timely and accurate manner. Given the complexity of legislation, the many internal and external stakeholders involved, and the need to ensure proper accountability and end-to-end responsibility, it is important that there is intelligent application of agreed project management approaches and techniques.

2.39 We held a workshop of around a dozen experienced policy managers and operations staff to discuss the use of project management approaches in policy implementation. Departmental staff informed us that various approaches to managing policy work had been used over the years, although they suggested that more formalised project management approaches had been patchy and inconsistent, with the approach taken dependent on individual policy managers. In addition, they considered there was some cultural resistance amongst some policy managers to the use of the language and approaches of `project management’. Staff from the Benefits Agency considered the `project’ mindset was more embedded into their work than it was within policy staff in Headquarters. There are cases of the use of a systematic approach to policy development and implementation. For example, we examined the work that was undertaken for the delivery of the Pensions Act 1995, and note the favourable report by DSS Internal Audit on the project management of this piece of legislation.

2.40 We are aware of the more general work under way in the Department to take forward the intelligent application of systematic project management approaches for the development and implementation of policy. These include an intensive review of project management arrangements. A report was completed in late 1999. We strongly support the development of project management approaches for policy development and implementation. We consider it should be done in a non-bureaucratic and flexible manner, with a view to developing a common and integrated approach to projects throughout the Department.

On identifying and managing risks to the successful implementation of departmental initiatives

2.41 The inherited SERPS case is an extreme example of what can happen when a Department fails to carry out certain apparently routine actions. It emphasises that risks to successful achievement of objectives can take many forms, and that identifying and managing them is essential throughout the implementation phase of a policy initiative. The Department has been developing its risk assessment work, but needs to push this further. In the time available we were not able to undertake a detailed review of work in this area. Colleagues at the NAO are currently carrying out an examination of existing practice in risk management across government, which should be published later in 2000.

2.42 Our workshop with policy and operations managers discussed the use of risk management techniques within the Department for policy work. In these discussions we were told about the work they did to identify all risks to successful policy implementation, and assess potential impact and likelihood. Our attention was drawn to the risk assessment work undertaken, for example, for the Pensions Act 1995. Benefits Agency staff also emphasised that risks to projects were routinely considered by project boards as a standing item. We are also aware of the higher level work on risk management, including the appointment of a member of the Departmental Board as the accountable official taking this work forward.

2.43 In general, participants in our workshop expressed some concerns as to whether risk was accorded high enough priority, including at senior management level. Some felt the Department was getting better at risk assessment, but that there was still a dynamic which was about meeting milestones, and that those who raised problems were not always welcomed. Some felt that, whilst risk assessment was better at project level, the organisation as a whole did not consider risk enough.

On handling problems effectively

2.44 The inherited SERPS case has had a significant impact on the Department. Resolution has taken up considerable amounts of senior management and ministerial time. There is no doubt that it is a very tricky problem to solve, but we have concerns about aspects of the way in which the Department have responded. These relate to the speed with which actions have been taken, and the co-ordination of the Department’s response.

2.45 On the issue of speed of response, we have already referred to the fact that it took ten weeks to produce the initial pensions bulletin for staff, updating them on the correct legal position on inherited SERPS after April 2000. In addition, we note that it was not until towards the end of March 1999 that the Benefits Agency had information on how widespread was the lack of knowledge about the inherited SERPS provision within the local office network. We also understand that even in December 1999 a database of all the names and addresses of the 3,500 people who had written to the Department had not been completed. Without this, it would have been very difficult to have sent out the kind of standard interim letter suggested above.

2.46 Even when it became apparent through Ministerial correspondence, Age Concern and the Ombudsman, the Department were slow to organise a co-ordinated response. In particular, no one senior official was appointed to oversee the response to the problem, and HQ and Benefits Agency activity at times remained focused on particular aspects of problem, and not the whole range of inter-related issues. The initial briefing provided to the Permanent Secretary on what information was available from files was incomplete, and during the reviews by the NAO and the Ombudsman, additional information was discovered. Although, not a regular occurrence when a problem of this magnitude arises, the Department should ensure a person with clear authority and accountability for co-ordinating the response is appointed.