37. For reasons of clarity and presentation, the position of the Department in relation to these complaints will be set out under three broad headings. The first deals with the Department's position on those issues and facts which are unique to the three individual cases. The second deals with the Department's position on the broad issue of the restriction on the payment of arrears in the case of pensions claimed outside the prescribed time. The third deals with the Department's position in relation to the use of extra-statutory payments in this kind of case. The Department outlined its position (a) through its initial written responses when the complaints were first notified; (b) through its written responses to the notifications of investigation; (c) through the formal interviews which my investigation staff had with senior Department officials and (d) through on-going contacts throughout the period of examination and investigation of these cases. In addition, I had access to the relevant files of the Department. Except where necessary, the precise source of a position attributed to the Department is not cited. It is worth noting here that the underlying position of the Department in relation to all three cases is that the complainants made their pension claims outside the prescribed time; that the 1994 Regulation limits the arrears payable to a maximum of six months prior to the date of actual claim; that each complainant has been paid what is provided for in the legislation; and that these are not cases to which the extra-statutory payment arrangement should apply.
Issues and Facts Unique to the Individual Cases
(A) Mr. John Smith
38. There are two points at issue here. The first is whether it can be accepted that Mr. Smith did - as he contends - call on two separate occasions to the Department to seek information on possible entitlements. The second point at issue is whether, if it is accepted that Mr. Smith did call twice to Oisín House, the Department failed to advise him properly and that as a consequence, he failed to claim the pension at that stage. If the Department were to accept Mr. Smith's contentions then it would seem likely that Mr. Smith would benefit from an extra-statutory payment. This would be on the basis that the Department had failed in its duty to fully inform a client of possible entitlements in a situation where it had a clear opportunity so to do.
39. It proved difficult to establish that the Department has an agreed position on the question of whether or not Mr. Smith called twice to Oisín House to seek information. The relevant Principal Officer in the Pension Services Office conceded at interview that, on balance, he may have called to Oisín House, as he contends. There is no log of his having called to Oisín House. But this is not definitive evidence as not all visitors to Oisín House, during the period 1986/7, would have had their calls logged. In an internal memo from March 1993, the same Principal Officer expressed the view - following detailed enquiries by staff - that "on balance I accept that the 'visits' were made". However, the Director for Long Term Schemes expressed the view at interview that the circumstances as alleged were difficult to accept: namely that Mr. Smith was misled twice within a period of three to six months; that his failure to make a claim was as a result of this; and that he
allowed the matter to rest for another five years before making a claim.
40. The Department expressed a clearer position in relation to the second component in Mr. Smith's contention. The Department argues that, even if Mr. Smith did call to Oisín House, his account of the responses he received is not realistic. The Department says that its standard practice then (and now) was "to advise any person who had paid insurance to make a claim and receive a formal decision on his entitlement". His contention as to how he was dealt with does not, according to the Department, "accord with standard procedures". There is, in addition, an ethos within the Department that, in the event of any doubt whatever, a caller will be advised to make a claim as the best way of resolving an entitlement query. In the course of the investigation my staff interviewed two officials of the Department who had worked in Oisín House during 1986/87. They felt very strongly that an official would not take it upon himself/herself to tell a caller that he/she had no entitlement to a pension
41. My investigators put it to the Department at interview that, if Mr. Smith did call to Oisín House, he must have had the intention to claim whatever entitlement he might have. The Department's position was that it would have to establish that he had been mis-advised before it could accept his calls to Oisín House as amounting to an actual claim for pension. In addition, the Department commented that Mr. Smith is a well-educated man who held a senior and responsible position within a public service body and it would be reasonable to assume that he should have been able to pursue any social welfare entitlement he might have.
(B) Mrs. Ann Brown/Ms. Helen Murphy
42. These two cases may be treated together as virtually identical issues arise.
Both complainants contend that it was lack of knowledge of the social welfare system which was primarily responsible for their failure to claim contributory old age pension on time. And both argue that the Department should have accepted their existing pension claims - widow's pension in one case and invalidity pension in the other - as satisfying the requirement to have claimed contributory old age pension at age 66 years. (In Ms. Murphy's case, the same point may be made in relation to her right to Retirement Pension at age 65 years. It would not have been to Mrs. Brown's benefit to have claimed Retirement pension at age 65 years).
43. It is the Department's position that both complainants would have been notified, in advance of their 66th birthdays, of the possibility of having entitlement to contributory old age pension. In addition to the contributory widow's pension, Mrs. Brown had been receiving a reduced-rate disability benefit for a period before reaching 66 years. The disability benefit ceased at age 66 years but, according to the Department, three months in advance of that benefit being discontinued she would have been sent a standard letter advising her that she might consider claiming either contributory or non-contributory old age pensions at 66 years. Mrs. Brown says she is quite certain that she did not receive any such letter from the Department. The Department, on the other hand, says that while it has no record or other evidence that such a letter was sent in her case, it was the standard practice at the time to issue such a letter. There is no reason why such a letter would not have been sent.
44. Ms. Murphy had been receiving invalidity pension for a number of years prior to reaching 66 years. The Department says she would have been sent a letter, in advance of her 65th birthday, advising her of the option of claiming retirement pension. And in advance of her 66th birthday she would have been sent another letter alerting her to the possibility of contributory
old age pension. Ms. Murphy says she has no recollection of having received either of these letters. Again, the Department says, while it has no record or other evidence that such letters were sent in her case, it was the standard practice at the time to issue such letters. The Department also made the point that some people on invalidity pension at age 65 years might opt to stay on that pension in preference to retirement pension. This is because, whereas the latter pension is payable at a higher rate, the former carries entitlement to such additional schemes as free travel and free electricity allowance. (But on reaching 66 years this distinction would no longer apply and there would be no incentive for somebody like Ms. Murphy to remain on invalidity pension in preference to contributory old age pension).
45. The Department says it accepts the general proposition that its clients will want to claim whichever social welfare payment is most to their advantage. However, the Department says that the only way it can establish an entitlement is by way of an examination of each case, in response to a claim made, followed by a decision of a deciding officer. Further, the Department says it attempts to be as flexible as possible in treating a claim for one payment as satisfying the requirement to have applied for some other (more advantageous) payment. For example, a claim for non-contributory old age pension will be converted into a claim for contributory old age pension (and vice versa) where necessary. The same would apply between contributory and non-contributory widow's pensions or between deserted wife's benefit and lone parent's allowance. The main point here is that one claim is, broadly speaking, in respect of the same contingency as the other. The Department is clear that it will not accept a claim made a number of years previously in respect of one contingency (eg invalidity) as being a valid claim now in respect of a different contingency
(eg old age). The Department argues that the flexibility inherent in Article 100(1) of the Regulation, in relation to the prescribed manner for making a claim - ("...or in such other manner as the Minister may accept as sufficient in the circumstances") - is not as extensive as is inferred from the two complainants' argument. At the same time, the Department accepts that all information relevant to the contributory old age pension entitlement of both complainants was already available to it at their 66th birthdays; the only obstacle to their being paid arrears is the absence of a specific claim in respect of contributory old age pension.
General Restriction on Payment of Pension Arrears in Late Claim Cases
46. In its written response to the investigations, the Department explained its overall position in the following terms:
"Rationale for Legislation
Provisions requiring claims to be made within prescribed times are a feature of social security legislation in this country and elsewhere. The prescribed time varies having regard to the nature of the scheme and the level of supervision and control which is appropriate. In many cases payments must be claimed immediately [e.g. Old Age (Non-Contributory) Pension, Carer's Allowance...]. In the case of contributory pensions, more generous terms apply, allowing claims to be made within 3 months and within 6 months where there is good cause for the delay.
The regulation of the claims process in this way, apart from the supervision and control aspect, is also necessary for sound financial management and public expenditure purposes. Non-contributory payments are financed out of general taxation while contributory payments are financed on a pay-as-you-go basis from PRSI income and an Exchequer subvention. Provision for social welfare payments in overall Government spending would become much less predictable if significant accumulations of liabilities were allowed by departing from the prescribed time principle. Proper control of claims would also be adversely affectedwith consequential prejudice to the Exchequer and the Social Insurance Fund if claims could be made long after the contingencies arose which gave rise to entitlement. It should be realised that claimants' ongoing
entitlements are constantly and frequently reviewed as part of the Department's dedicated control functions. This function yields savings ofover £100 million a year and is an integral part of any modern socialsecurity administration. It is because controls cannot in general be applied retrospectively, or only with great difficulty, that theprincipleof timely claim application was embedded in the legislation by the Oireachtas......
Insurance Principle
The complaints relate to benefits which depend on social insurance contributions. A pleading common to the complainants is that payment should be made in full because the payment is insurance based. However, social insurance contributions differ in many crucial respects from commercial insurance as follows:
- they are not risk rated;- the benefits are not directly related to the amounts contributed;- the pension (or any) benefits are not funded, monies are not , therefore, accumulated to the credit of individual insured persons as in the case of funded pension schemes;- contributory pensions are financed on a pay-as-you-go basis, this involves social solidarity between generations whereby the current working generation looks after its predecessors, this is done within a social insurance framework which has been characterised since its inception by statutory requirements which have included prescribed times for claiming and loss for failure to do so.It should be mentioned that in fact both insurance based payments and their corresponding non-contributory means-tested equivalents are equally
statutorily based giving statutory entitlement as of right on fulfillment ofthe various statutory conditions. The latter include conditions whichgovern the time limits within which claims must be made. This principleapplies equally to both insurance based and non-contributory schemes."
47. In the interviews with senior officials of the Department the position, as set out above, was discussed in detail. In relation to the issue of sound financial management and public expenditure control, the officials made the following points. Social insurance payments operate on a "pay-as-you-go" basis and, unlike commercial insurance companies, there is no invested fund. Being able to predict accurately the level of demand on the Fund is a key requirement. Under present arrangements the Department - which manages the Fund - is reasonably placed to predict outflows for each succeeding year. To have debts accruing - in the form of unclaimed pension entitlement - would hinder the ability of the Department to predict the level of liability in any year. The Department has made some effort to estimate the additional liability in the event of its abolishing the late claim rules. On the basis of a limited exercise in relation to the level of late contributory pension claims (old age, survivor's and retirement) received in one month, the Department reckons a rough estimate of the potential cost of a full relaxation of the rule might amount to £5.6 million per year.
48. The Department argues that it is difficult to exercise proper control of claims which are made late. By this is meant that, in the case of a late claim, it may not be possible to acquire accurate information in relation to the various eligibility requirements. This is perhaps most obvious in the case of means-tested payments where it can be difficult to conduct a means test retrospectively. In relation to contributory pensions claimed late, the officials accepted that there is no particular problem in establishing personal rate entitlements. However, there could be problems in establishing
entitlement to adult dependant payments (was the spouse a dependant during the arrears period?) and, in the case of a survivor's pension, establishing that the claimant was not cohabiting during the arrears period. Overall, it is the Department's position that claims made outside the prescribed time cause significant administrative problems.
49. The Department's written response refers to annual savings of £100 million arising from the application of its "control functions". It appears these savings arise primarily in the area of means-tested payments. In relation to social insurance payments, the control function does yield some savings in the areas of unemployment benefit, disability benefit and invalidity pension; but there is no significant saving made in relation to contributory old age pension, retirement pension or survivor's pension.
50. The officials made the point that social insurance is a scheme based on law and that the law provides for certain eligibility requirements. These include a requirement to claim at a particular time with the concomitant loss of potential pension where a claim is not made in time. The officials argued that the three complainants have each received their entitlement in law; what they are seeking now is more than their legal entitlement.
51. The role of the Department, as the manager of the Fund, was discussed at the interviews. In particular, the officials were asked if the role of the Department was to act as guarantor of the rights of the contributors. The officials made the point that social insurance is not a savings scheme or an insurance scheme (in the ordinary meaning of that term). The Department's role is to administer the Fund in accordance with law. It is not for the Department to make that law. This is a matter for the Oireachtas. The question then arises of whether the Oireachtas ever intended that arrears be limited to six months in the case of late claimants. The officials respondedthat the Oireachtas intended that the Minister would set whatever limit should apply. They accepted that the Oireachtas would expect the Minister to act reasonably in setting a limit on arrears.
52. Unfortunately, the Department could not shed any light on the basis for the original decision to limit arrears to a maximum of six months. The present rules are essentially the same as those first made by regulation in 1952; it appears the limits set then have been retained through a series of amendments and consolidations over the intervening 44 years. The Department's file on the original 1952 regulation is no longer available. The Department says there is nothing on file in relation to the subsequent amendments and consolidations to indicate the thinking behind the setting of the six month limit. The Department's files in relation to the Social Welfare Act, 1952 - which is the authority for the 1952 regulation - are available but the Department says they shed no light on the decision to set a limit of six months on the payment of contributory pension arrears. In effect, the Department has continued a particular restriction in operation over a 44 year period but is no longer able to explain why that particular restriction (for example, why not a twelve month limit, a three year limit or a five year limit?) was originally decided upon.
53. Finally, the Department informed me that it is in the process of reviewing the arrangements in relation to the backdating of late pension claims. However, the officials did point out that any change of practice would have cost implications. For this reason, the review would have to take account of other proposals across the full range of the Department's activities and any decision would be in the context of overall budgetary considerations.
Use of Extra-Statutory Payments Arrangement
54. Interest here focuses in particular on the sanction to make extra-statutory payments where the Minister is satisfied this should be done "in equity or to avoid undue hardship".
55. In general, the Department will not initiate enquiries in order to ascertain that undue hardship exists. If a client seeks arrears and argues hardship as a ground, then the Department will look into the case. Even though people may not be aware of this hardship clause, the Department takes the view that if there is real hardship then this will be brought to its attention. In the cases of Mrs. Brown and Ms. Murphy, the Department did not consider the hardship clause as the issue was not raised by the claimants. The issue of hardship arose indirectly in the case of Mr. Smith but the Department concluded that, as he had a pension of about £18,000 per year, there were no grounds for using the clause. Overall, the Department appears not to have any specific criteria for deciding on hardship. It suggested that an income below the Supplementary Welfare Allowance rate - the lowest level of social welfare payment - would be taken as an indication of hardship. 56. In relation to the equity clause, none of the officials interviewed could recall a specific case where an extra-statutory payment was made on that basis. Subsequently, the Department produced details of a number of instances where non-contributory pension arrears had been paid extra-statutorily and on the basis of equity. Unfortunately, the most recent instance dated from 1958, the amounts involved were all inconsiderable, and no general approach could be inferred from the examples. Indeed, it seemed reasonable to conclude that reliance on equity, as a basis for paying pension arrears extra-statutorily, had effectively been abandoned. But in its response to the draft of this report, the Department argued that the instances cited
did point "to a construction on the 'equity' issue". Furthermore, the Department said that it could not accept the view that reliance on equity in such cases has been abandoned. The Department noted that in 1996, in relation to retirement and contributory old age pensions, twelve such payments had been made at a total cost of £52,550. Five of these payments arose because of "Departmental error" (costing £6,200), six arose because of "medical reasons" (costing £43,450) and one arose because of "hardship" (costing £2,900).
57. At interview, the Department officials found it difficult to define what constituted equity and how it might be applied in the present context. Where a failure to claim in time arises from some failing on the part of the Department, then this would be likely to result in a payment of arrears based on equity. But the Department appears not to have any criteria for deciding when it might be equitable to treat a claim, made late, as having been made in time - other than the instance where the failure to claim arises from the Department's own mistake.
58. At interview, one definition of equity was put to the Department, viz. that equity is about ensuring fairness and justice in the individual case even if this conflicts with the rigid application of the law. In response, the Department pointed out that the law (in the vast majority of cases) is laid down in statute or in a regulation in a precise and detailed manner by way of conditions which, by their very specific nature, allow of little or no discretion in their interpretation or application. On the basis of the definition suggested, it argued, almost all pension arrears lost because of late claims would be paid extra-statutorily on the basis of equity. The Department stressed that equity should not be used "to drive a coach and four" through the Regulation. Any resolution of the issues raised in these cases will, according to the Department, have to be achieved on the basis of law rather than on the basis of an extra-statutory arrangement.