by Dr. Ros Altmann

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1. I welcome the Government's consultation on establishing fairer payment arrangements for those victims who are seriously ill and have a much shorter than normal life expectancy as a result of their illnesses. It is long overdue!
2. I remain very distressed that the Government has still not made proper arrangements for this comparatively small group of people, some of whom have already been ill for years and suffered significantly because their pension scheme would have paid them a full pension if it had been protected in the way Government said it was, but the inadequate protection meant that their schemes have not and never will pay them adequately.
3. It is a regrettable fact that earlier this year, the Government ignored my representations on behalf of such seriously ill people (who obviously are in most cases too ill to speak up for themselves) and introduced a category of ill health payments which was inadequate in that it only pays people within 5 years of pension age, will only pay a reduced pension apparently because of the need to pay that pension for longer than normal (which is clearly not the case for those who are already seriously ill) and will not be backdated to when they actually became ill. That means those individuals who have already been seriously ill for years will not receive any redress for their past distress and no recognition of the fact that they should have had their full pensions long ago. This is manifestly unjust.
4. The Government's proposals in this Consultation are too harsh. They seem designed to exclude as many ill people as possible by insisting on a definition of significantly reduced life expectancy that requires doctors to certify that the person is expected to die within just 5 years.
5. Clearly, if doctors are expected to assign probabilities to expectation of death within 5 years, the FAS will be bound to exclude seriously ill people who may have, say, an 80% probability of living longer than 5 years but who end up in the category of 20% who will die before that time without getting the needed help from FAS. At the end of this Consultation Response, I provide a case study of just such a person, who was given an 80% probability of living more than 5 years, but only a 20% probability of living 10 years and who, therefore, may have been excluded by the currently proposed test, yet he died in 4 years. This is a classic example of why the 'expected to die within 5 years' test is unjust.
6. In its application, this test is also likely to prove extremely distressing to the individuals concerned and is unnecessarily cruel. Even if the victim was expected to die within 10 years, that would still represent a significantly reduced life expectancy.
7. I do not accept that it is impossible for doctors to reliably assess whether someone is expected to live for 10 years. Significantly the medical advice the Government suggests supports this view has never been disclosed to allow consultees to comment meaningfully upon it. The Government's position that doctors can only reliably assess whether someone is likely to die within 5 years is not reasonable. I suspect it is the view of a General Practitioner, but not of a specialist or consultant who is experienced in the fields of serious illness that such people would be suffering from. A 'die within 5 years' test is the harshest possible interpretation of significantly reduced life expectancy and I have given a case study - and can give more - to prove that this test in practice would be grossly unfair. It risks excluding people who are likely to die in less than 5 years because of the way probabilities work. If someone has an 80% probability of surviving for 5 years, the medical consultant might not be able to say they were 'expected to die within 5 years', but obviously 1 in 5 of such people will not live that long, yet they would probably be excluded from the test proposed in this Consultation. Equally, someone who has an 80% probability of surviving 5 years, but only a 30% probability of surviving for 10 years might would be included in a test which stated 'expected to die within 5-10 years', or 'not expected to live longer than 10 years', or 'has a significantly shortened life expectancy'. In the case study included here, that person actually died before the end of the 5 years and this is not an aberration: I am aware of others in similar circumstances.
8. We are basically talking about whether or not payments should be actuarially reduced. The relevant points here are firstly that the person would have received a pension from their scheme that was not reduced if they were seriously ill and the scheme had been ongoing. Secondly, the reductions are meant to reflect the need to pay the pensions for longer, but if they are seriously ill and have a shortened life expectancy, this does not apply.
9. Normal life expectancy for a man aged 60 is a further 23 years or so. For a man aged 55 (the minimum age proposed in the consultation - which is again the harshest possible terms and will exclude people who are seriously ill but not yet 55) the normal life expectancy would be around 28 years. The Government is proposing only paying unreduced payments to those expected to die within 5 years, which is so much shorter than the 'normal' 23 or 28 years that it is too harsh. Even using 10 years is clearly significantly below the normal life expectancy, but at least it would be much better than just 5 years.
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11. I hope the Government wants to avoid creating fresh injustice in an attempt to remedy that originally exposed by the Ombudsman. I urge the Government to reconsider the 5 year test and implement a more reasonable one.

Introduction

On 17 December 2007 Peter Hain made an announcement about implementing further reforms to the Financial Assistance Scheme in the wake of the Young Review and ongoing concerns about the adequacy of the Government's response to the Parliamentary Ombudsman report. He told Parliament:

"The Government recognised in July that more needed to be done to help those who lost their pensions.

The final details of these proposals will be confirmed in the New Year, when we will outline the legislation necessary to give effect to this package. We will do this as quickly as possible and call on all parties involved to work with the Government to ensure this commitment results in increased payments in the fastest possible time..."

Some 16 months on from the stated 'recognition' that more needed to be done and 11 months from Mr Hain's statement, these words ring hollow for many of those who should have been benefiting from the support promised for some time and who need that help most acutely. This class of people are the tiny proportion of the 125,000 potential FAS beneficiaries who are or will become seriously or even terminally ill before they would otherwise be entitled to claim under the scheme. The Consultation purports to offer a reasonable amount of support to them, triggered by a workable assessment of their illnesses' prognoses. The proposals it contains will not achieve that in a humane and meaningful way. For this very small group, if implemented as proposed in the Consultation, much of their hardship could be continued and they could be caused still further anxiety and injustice on top of how much they have suffered to date. I had hoped that this Consultation would be able to bring comfort and justice to these very ill people, but the Government's harsh and seemingly penny-pinching proposals are in danger of not doing so. With small amendments, it might be possible to achieve a just and workable outcome for the serious ill-health category, but this will require a willingness to move away from the strict insistence on only helping those whose doctors can certify that they are expected to be dead within five years. Such a requirement will cause obvious distress to the victims involved and, especially given the very small numbers of people affected and the fact that they are already going to have been seriously ill, seems unreasonably harsh.

Background to this response

I am responding to the Consultation on introducing a new serious ill health category to the Financial Assistance Scheme. I have been pressing for this since last December, when the Government announced that it would improve the benefits payable by the FAS to bring them more into line with the Pension Protection Fund. At meetings with Ministers last December and on several occasions during 2008, I have pleaded with the FAS to recognise the need for people who are seriously ill to be able to access FAS payments urgently. I stressed at the time that there is a small group of people who were already very ill, having suffered strokes, heart attacks, cancer or other serious illnesses over the last few years. These people would have had their pensions from their schemes at the time they became so very ill, if their schemes had been protected in the way Government assured everyone that they were. The members of failed schemes believed the Government had fully protected their pensions with the measures of the 1995 Pensions Act and were wrongly led to believe - by the Government - that there would be enough money in their schemes to pay their pensions 'whatever happened to the employer'. Because they thought their schemes were safe and adequately funded, these people did not take out any life insurance or ill health insurance, since they did not have any reason to believe they needed this as it was all supposed to be part of their pension scheme benefits.

Sadly, the people concerned were left in a position that they became very ill, usually without any warning, and found they had no insurance to cover them, no pension scheme to pay their pensions and a Financial Assistance Scheme that would not assist them either! Even after the FAS was announced in 2004, it failed to make any provision for people who were seriously ill, unless they could certify that they had less than 6 months to live.

The ongoing consequences

I have had emails, letters, phone calls and meetings with members who have been desperately ill and in despair because they had saved all their lives in their pension scheme, thought they would be covered and then found they had nothing, despite believing the Government's assurances of safety.

Since 2004, I have been fighting to get the FAS improved to a level where it can at least come close to treating the victims fairly. Having had to appeal to the Parliamentary Ombudsman, Public Administration Select Committee, High Court and finally the Court of Appeal, the victims have seen each verdict come out in their favour, yet still found themselves excluded from any help and in need of urgent money. I have given the FAS, Ministers and officials, details of individual members who have been suffering in this way. Their case studies make terrible reading and are a damning indictment of the heartlessness and cruelty of their treatment so far. It is so hard to believe that we are now nearly a year on from last December's announcement and the Government is still just consulting about helping these people and is still making proposals that may not actually include them all.

Attempts to focus attention on this issue

Earlier this year, I attended a number of 'consultation' meetings with the FAS officials and Ministers at which I explained that people who are already seriously ill, and have been for some time, are the most urgent cases that must be helped. I also stressed that their payments need to be backdated to when they became ill, since this is when their scheme pension would have been paid, and as the FAS is backdating every pension to the schemes normal pension age, it would be grossly unfair not to do the same for those who are so ill and most desperately need the money now. I also stressed that the payments they receive should not be reduced if they have to get them early, since their scheme pension would not have been reduced and the date when they became ill would have been the date their scheme would have paid their pension. I compared this situation to entitlement to an impaired life annuity, which pays higher rates in recognition of a person's reduced life expectancy. I pleaded with the officials and Ministers to deal with this urgently and properly, but sadly they chose not to.

Instead, a category of 'ill health early retirement' was introduced, which merely allowed people to receive pensions that were actuarially reduced and not backdated to when they became ill. This was directly against what I had urged and was a dreadful disappointment, but Ministers and officials had made up their minds.

I then met with Ministers and officials again, and they promised to consider introducing a separate category to try to help those cases that I had already put to them, and people in similar straits, which would recognise the fact that they had already been ill for some time and that they had a significantly reduced life expectancy and therefore should receive the full pensions, as they would only receive the pension for a shorter time than normal. This was obviously adding yet another delay to fair treatment for the group of people I had already explained were most urgently in need of help all along! I was assured that this category would look after the people I was most concerned about and whose cases I had explained to the FAS and DWP. I was also assured that the consultation document would be prepared during the Summer and issued in September. Sadly, this did not happen and, after further delays, this document has now been issued, but there is still no sign of money coming through.

Flaws in the proposals

First and foremost, the wording of the category of 'seriously impaired life' has been set seemingly to exclude the maximum number of people possible. Instead of being sensitively set to try to help the seriously ill victims in a humane and decent manner, recognising their shorter lifespan and serious ill health, the consultation proposes the harshest possible test. From the victim's perspective, having to prove that they are expected to die within 5 years is often likely to cause deep distress - I have seen this first hand with doctors who have not wished to tell a patient just how ill he is in order that he can enjoy what little time he has left and patient's families who ask doctors not to tell the patient exactly how ill they are too. This consultation proposal would force doctors and patients to confront this issue directly. If the wording embraced a marginally larger group - at least allowing up to 10 years life expectancy, then the immediacy of death is less likely to cause the same inhibition for doctors or the victim. As currently proposed, anyone who receives ill health payments in this category would have to know that they were expected to die within just 5 years. That is a very painful message and is going to be especially hard for those who have already been ill for some time.

I believe it will be helpful to include a case study of one of those who I was trying to help last December and whose details were passed to the FAS at that time. Sadly, this person passed away a few days ago, aged just 59, so he never actually managed to receive fair treatment from the FAS while still alive. If the Government had acted swiftly to include payments for seriously ill victims, this man would have at least had his full pension and backdating to when he became ill. Sadly, this never happened.

I would like to stress that his wife should receive the backpayments even though her husband has passed away. She will obviously only get the half payments for the future, but she should not be deprived of the payments her husband would have received just because he died so quickly.

You will note from the words her husband wrote last year (please see below) that his doctor had no doubt that his heart attack was caused by the stress of losing his job and pension.

You will also see that his doctor was able to give him an 80% chance of surviving to age 60, but only a 25 - 30% chance of surviving to age 65. This clearly shows that doctors are able to give much longer than 5 year forecasts of death or survival and also suggests that there was a risk this person would not have been accepted under the very strict 5 year test that the Consultation wants to apply. This is utterly outrageous. It is absolutely clear that this kind of person is exactly the type who should be catered for in the serious ill health category, but the nature of his illness may have made it difficult for the doctor to affirm he is expected to die within 5 years, while he would certainly have been able to say he would be likely to die within 10 years. This is a perfect example of why the Government's proposals are inadequate and need to be relaxed.

This is a man who was working while dreadfully ill. He did not want to be on benefits and had no money after losing his pension. He tried to get ill health payments from his scheme, but the trustees could not pay him. He was on oxygen 16 hours a day but still struggled to work on minimum wage. Even though the Parliamentary Ombudsman recommended full restoration of all pension and other scheme benefits nearly 2 years ago, the Government still has not sorted things out to help him. Indeed, this man became ill after the FAS was announced in 2004, yet he never received any help. If the new category cannot cater for people like this, then it will not achieve what it needs to achieve.

I respectfully ask the Government to reconsider its position and ensure that the test applies up to at least 10 years, not just 5 years, or is worded more loosely. For example, that the doctor can certify the person has a significantly reduced life expectancy, without having to give exact number of years. We are only talking about people over age 55, there is still nothing for younger people who may be seriously ill. This 5 year test is one restriction too far.

This is what the gentleman wrote, in his own words - in October 2007:

Health problems:

Heart attack in early January 2005. Further heart problems in May and July 2005 resulted in me having to give up work. I recovered enough to take on light work, on a minimum wage, in March 2006, but was diagnosed with Hypoxia, caused by Bullous Emphysema, in January 2007, and will now be on supplementary medical oxygen 16 hours per day, for the rest of the time I have left. My condition, together with my age, makes it virtually impossible for me to find suitable work.

Bullous Emphysema is a progressive illness, for which there is no cure. In the sense that my life expectancy has been reduced, it is essentially a terminal illness.

The rate at which the illness will progress cannot be determined; therefore my consultant is unable to be specific on time span. He has indicated that there is a better than 80% chance that I will live beyond 60, but only a 25 to 30% chance that I will see the age of 65.

It's only a matter of time before I will require supplementary oxygen 24 hours per day. The dosage rate can be increased, but there will come a time when no amount of oxygen will make any difference.

My GP has no doubt that my heart attack in January 2005 was a direct result of the stress and worry experienced during the months following the loss of my job and my pension.

I have written to the Dexion Pension Fund Trustees explaining my situation, and asking if there was any way I could claim my benefits early, due to ill health. After several months delay, and 2 reminders, I eventually received a reply which was not very sympathetic or understanding. They gave all sorts of reasons why the could not (or would not) help. They suggested I seek redress from the Government's FAS scheme, but pointed out that I would not be entitled to anything until I reached the age of 65. Given that I am unlikely to survive until 65, this was not really very heartening news.

This is another letter that the gentleman wrote in Summer 2007:

I am 58 years old and paid into the Dexion pension scheme for 20 years. My retirement age was 60.

Like everyone else who had remained loyal to the Company, I was made redundant when Dexion went bust in May 2003, and then discovered that the scheme would not be able to pay us any pension - effectively we were all "stripped" of our Final Pension rights.

During the 4 years since, I have had several health issues which have had a major effect on my earning capacity. Periods of severe depression, caused by the worry about how my wife and I would manage with the loss of my Pension rights, were eventually brought under control with medication.

Unfortunately I suffered a heart attack in early January 2005. Then I HAD to return to work early April (against medical advice) because debts were mounting up, but ended up back in hospital in May with another suspected heart attack, which thankfully turned out to be a severe Angina attack. After being admitted to hospital again in July with chest pains and breathing difficulties (I had fluid on the lungs), I had no choice but to give up my job.

Unable to work during most of 2005, my wife and I had no choice but to borrow heavily against the equity in our house to pay bills and clear the debts which had accumulated.

However, borrowed money has to paid back with interest, and we were really struggling to make ends meet. After being given the all clear to go back to light, stress-free work, I found a little job in March 2006, selling garden sheds, etc in a local Garden Centre (34 hours a week @ £6.00 per hour).

At the same time we had to put our house on the market, so that we could look for something smaller and cheaper.

Towards the end of January 2007, during a routine medical check, it was established that my blood oxygen levels were dangerously low (normal level is high 90's - mine were low 70's). I was immediately put on supplementary oxygen 16 hours per day, and underwent various tests, including a CT Scan, which eventually established that I had significant Bullous Emphysema. The condition is irreversible, and will gradually get worse (prognosis is that I will be lucky to reach the age of 65). I will need supplementary oxygen for the rest of my life.

Current situation is that I still managing to do the job I started in 2006, but how much longer I will be able to is uncertain. The stress is just unbearable, but without my pension I have no choice.

We eventually sold our house (subject to contract) last month, and have found somewhere more financially manageable, but if there is a rapid deterioration in my health, and no Pension to fall back on, it will only be a matter of time before we have to think about down-sizing even further, or lose everything we have worked so hard for.

I feel terribly disappointed and sad that I may be unable to leave my wife as well provided for as she deserves. It's only with her help and support, and that of my family, that I've got through the last 4 years.

I just hope that the Government will acknowledge how wrongly it has treated us soon. My pension scheme would have paid me by now, but so far I have had nothing at all and am struggling to work, despite having saved for my future. I am so frightened of what is to come but try not to think about it too much.

Does what is proposed fulfil the Government's aims ?

Though an apology has yet to be forthcoming, it is now appears to be tacitly accepted by the DWP that its officials were responsible for maladministration and that this resulted in much of the injustice described in the Ombudsman's report: DWP decided not petition the House of Lords after losing the Court of Appeal case which the victims were forced to bring in order to highlight the injustices of the Government's refusal to compensate them.

Individuals seeking further compensation are told that the FAS represents the DWP's complete package of redress, Yet if that is so, is the FAS fit for the Government's purposes? The current answer is 'no'.

I say this because the FAS does not conform to the standards which the Parliamentary Ombudsman herself has set for dealing with the consequences of maladministration and these standards have recently been accepted by every Government department, including the DWP.

IN the last few years the Ombudsman has reviewed the way a number of government bodies has dealt with the consequences of their own admitted maladministration. This issue was first discussed in Put Together in Haste (HC313), an Ombudsman report regarding compensation for fishermen who were inappropriately advised they had no redundancy claims against their employers. At para 163 she said:

"163. My final recommendation relates to ex gratia compensation schemes more generally. During my investigation - and others that I have conducted into similar schemes - it struck me that no central guidance exists for public bodies that specifically relates to the development and operation of ex gratia compensation schemes. Such guidance can, in my view, only be helpful to them - and may well assist in preventing a re-ocurrence of the problems I have identified in this report. I therefore recommend that such guidance be developed across government."

The Parliamentary Ombudsman then consulted with the government upon and published her own general guidance on redress, Principles of Remedy. This stresses that public bodies should be "customer focussed", and sensitive to hardship such as ill health in particular. It adds

"Public bodies should promptly identify and acknowledge maladministration and poor service, and apologise for them."

Principles was drafted to complement HM Treasury's guidelines on remedy as set out in "Managing Public Money" (which as you'll know is the new Government Accounting). It says this:

"Dealing with complaints
A.4.14.5 Systems for dealing with complaints should operate promptly and consistently. Those making complaints should be told how quickly their complaints can be processed. Where groups of complaints raise common issues, the remedies offered should be fair, consistent and proportionate."

In response it might be said that none of this has to do with statutory schemes like FAS. But that is not right when redress for maladministration is provided through a statutory scheme. The FAS is currently the only mechanism for remedying the effects of the maladministration that has been clearly established by the Parliamentary Ombudsman and implicitly accepted by the DWP. The FAS is precisely doing the same thing only through slightly different machinery. There is no reason why the same principles - promptness, sensitivity to particular hardship - should not apply. I have also asked the Government if it would introduce some special scheme to remedy problems for those who are seriously ill by means of ex-gratia payments outside the FAS, perhaps by setting aside an emergency fund for this purpose. Again my numerous requests for such an approach have been refused every time and I have been promised speedy action to resolve the outstanding issues, especially those regarding serious ill-health, but sadly the matter is not resolved even now.

Conclusions:

The small group of people which this Consultation's proposals is designed to help need to receive their payments as soon as possible. Some of them have, sadly, already died while the Government has failed to look after them. The Consultation proposals are too strict. Using a 5 year test is inhumane, is likely to cause further distress to the victims and is unnecessarily harsh. It is not correct that doctors will be unable to assess 10 year life expectancies. Obviously it is more difficult to forecast over 10 years than over 5 years, but we are dealing with a group of people who the Government has an obligation to help, following verdicts from the Parliamentary Ombudsman, High Court and Court of Appeal. The proposals need to be amended to reflect the fact that normal life expectancy for a 60 year old is around 23 years and for a 55 year old is around 28 years, so restricting the unreduced payments to only those with less than 5 year life expectancy is far too restrictive. It seems designed to exclude as many people as possible but that means it will not cover many of those who desperately need their pensions and would have already had them if their scheme had been protected in the way Government assured them. Using only a 5 year test will not remedy the injustices and will not comply with the Ombudsman's recommendations, nor with the Government's obligations or its policy statements.

Given that the numbers of people are small, and we are still only talking about a few years' worth of payments at full FAS rate rather than a reduced rate, the amounts cannot be significant. This seems a very mean-spirited approach to helping those in most urgent need and may indeed leave many of them out altogether. I hope the Government wants to avoid creating fresh injustice in an attempt to remedy that originally exposed by the Ombudsman. I urge the Government to reconsider the 5 year test and implement a more reasonable one.