Source · Select Committees · Public Accounts Committee
Recommendation 20
20
Managing Public Money (A4.14) states that ‘when public sector organisations have caused injustice or hardship...
Conclusion
Managing Public Money (A4.14) states that ‘when public sector organisations have caused injustice or hardship because of maladministration or service failure, they should consider providing remedies so that, as far as reasonably possible, they restore the wronged party to the position that they would be in had things been done correctly’.50 The payment of a lump sum of arrears may affect the pensioner’s current or future entitlement to other benefits such as Pension Credit, housing benefit, or social care provided by local authorities. The Department told us that it remains the pensioner’s responsibility to advise the relevant authority should their circumstances and eligibility for benefits change. HM Revenue & Customs states that income tax is calculated on arrears of State Pension for the tax year in which the pensioner was entitled to receive it, and not in the year in which a lump sum is paid. Where arrears of State Pension are paid, income tax will only be due on any income that exceeds the personal allowance for the respective tax year.51 However, the Department told us it does not have a clear understanding of all financial consequences of receiving a lump sum on social care provision.52 After our 41 Q 158 42 Q 161 43 Qq 177, 178 44 Qq 108–110; C&AG’s Report, 3.3, 3.5 45 Q 111 46 Department for Work & Pensions, Annual Report and Accounts 2020–21 47 GOV.UK, State Pension underpayments: progress on cases reviewed to 30 September 2021 48 Parliament.UK, State Retirement Pensions, question for Department for Work and Pensions, UIN 56659, tabled on 15 October 2021 49 Qq 68, 69 50 GOV.UK, Managing Public Money, A.4.14 51 C&AG’s Report, para 1.15 52 Q 165–167 16 Underpayments of the State Pension evidence session the Department wrote to us explaining how pensions arrears would affect adult social care provision, benefit entitlement and tax. Specifically, on social care, the Department confirmed that the responsibility to interpret the corresponding regulations sits
Government Response
Not Addressed
HM Government
Not Addressed
6: PAC conclusion: In paying pensioners, a lump sum of their arrears, the Department may not be fully restoring them to the position that they would be in had the Department paid them correctly in the first place. 6a: PAC recommendation: The Department should establish the full extent of the impact on pensioners of receiving a lump sum of arrears of benefit, particularly for larger sums of arrears. It should seek assurance from local authorities that people are not treated prejudicially compared to how they would have been treated had they received the money over their proper period of entitlement. 6.1 The government disagrees with the Committee’s recommendation. 6.2 The department’s letter to the committee dated 15 November 2021 provided a full explanation of the impact State Pension arrears payments may have on other benefits and financial assessments for adult social care. 6.3 The department does not intend to change the current legislative position. It is well- established that State Pension payments are taken into account within the assessment of entitlement to means tested benefits. Accordingly, to prevent duplicate provision from public funds, State Pension arrears will be reduced to take account of Pension Credit that would not have been paid had the State Pension been paid on time. 6.4 For both Pension Credit and Housing Benefit, any remaining State Pension arrears are capital and are treated in line with the normal rules. 6.5 There is long-standing principle of personal responsibility for social care in England, as well as a safety net that supports significant numbers of people today. Under the Care Act 2014, charging is based on a number of principles including that people should not be charged more than it is reasonably practicable for them to pay and that charging approaches be clear, transparent and comprehensive so people know what they will be charged. 6.6 Where a local authority charges a person for their care and support, regulations set limits below which a person’s income and capital must not be reduced by charges. Regulations do not provide any means for State Pension arrears payments to be ignored as part of an adult social care financial assessment. The responsibility for interpreting and applying the regulations and guidance rests with local authorities. 6.7 Social care policy is devolved in Northern Ireland, Scotland and Wales.