MPs accepted a plan to phase in a halving of the pension entitled to a surviving spouse, after rejecting an earlier proposal giving a spouse the right to full pension entitlement. Rules introduced in the Social Security Act 1986 to cut the amount of SERPS inherited by surviving spouses from 100% to 50% were due to come into force next month.
From 1987 to 1996 information leaflets were issued that did not refer to the change meaning some people may have lost out. In addition some Benefits Agency staff also gave wrong information to a number of people.
PAC chairman David Davis said: ‘These proposals are significantly better for pensioners than the original scheme, which would have been unworkable. They represent a victory for parliament as well as for common sense.’
The original plan, which delayed implementation of the pension cut, but provided compensation for those who could show they were misled, was rejected as being too difficult for pensioners to understand and having not been properly advertised to them.
SERPS are a top-up to the basic state pension entitlement and are variable according to level of earnings. It was designed to bring SERPS into line with most occupational pension schemes, where it is usual for half occupational pension rights to be inherited by a surviving spouse.
In 1998, the government began trying to persuade people to leave SERPS in favour of private pension schemes by offering them high levels of compensation, in the form of an annual payment into their private scheme.
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