§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. J. E. B. Hill.]
§ 10.27 p.m.
§ Mr. David Weitzman (Stoke Newington and Hackney, North)
On 21st March last, in a debate on the Post Office, I first raised the subject matter of this Adjournment debate. A constituent of mine had a number of Premium Bonds, one of which drew a prize of £25. Unfortunately, my constituent died about a month before. His widow, who was not in very good circumstances, and to whom the sum of £25 would have been a boon, was not entitled to receive it The prize was forfeited because her husband had died.
The application for Premium Bonds sets out certain conditions, one of which is couched in language which the layman might be able to construe if he thought it out very carefully. I will read it. It is in paragraph 6, and it says:A Bond will be eligible for inclusion in the first draw held after the expiration of three months beginning on the first day of the mouth following the month in which it is purchased, provided that it has not been repaid before the expiration of those three months, and (subject to the provisions of paragraph 14 below) that the registered holder has not died before the expiration of the first two of those three months. After a Bond has qualified for its first draw, it will be included in each succeeding monthly draw, unless it has been repaid before the first day of the month in which the draw is held or (subject to the provisions of paragraph 14 below) the registered holder has died before the first day of the month preceding the month in which the draw is held.I suppose that that means, first, that to be eligible for inclusion in the draw on, say, 1st May a person must not have died before 1st April and, secondly, that to get the prize that the bond draws on 1st May he must not have died before 1st April. It may be said that a person who purchases a Premium Bond ought to read the conditions. It is not surprising that many do not, but even if they did read them a great many would have difficulty in appreciating exactly what the condition means. At any rate, I know that it came as a surprise to many people to learn that if the holder of a Premium Bond died at 782 a certain time the prize drawn was forfeited.
When I raised the point the Assistant Postmaster-General was very sympathetic. She said:Having said that, I must add that I have a tremendous sympathy for the person in the case that the hon. and learned Gentleman has mentioned, and the fact that he has aired it here tonight, and has given some publicity to it may, perhaps, enable us to get across to the general public what the considerations are, and possibly enable hon. Members that have some influence with the Treasury in seeing whether different regulations could be devised. I must say that when I have to sign a letter saying that the deceased person's next-of-kin—it is usually a widow—cannot benefit from the winning bond, I wish that something could be done. It is a matter for Treasury Ministers."—[OFFICIAL REPORT, 28th March, 1962; Vol. 656, c. 1520.]Thus encouraged I put down a Question. It was not reached, and I was denied the opportunity of probing the matter further by any supplementary question. I had to be content with a Written Answer from the Financial Secretary. My Question to the Chancellor of the Exchequer was:By what authority provisions are set out in the application form for Premium Savings Bonds limiting the right to be included in the draw for prizes in the event of the death of the holder; and whether he will take steps to abolish such limitation.The Financial Secretary replied:By the authority of the Treasury, in exercise of its powers under section 1 of the National Loans Act, 1939. I am considering, with my right hon. Friend the Postmaster-General, whether anything more shall be done to meet the type of case the hon. and learned Gentleman has in mind, having regard to the administrative costs and legal difficulties involved."—[OFFICIAL REPORT, 3rd April, 1962; Vol. 657, c. 23.]I know how slowly officialdom moves and how necessary it is to press for something to be done if the process is to be accelerated. I therefore raise this matter in the hope that something will be done as quickly as possible. I re-mind the House of the words used by the Prime Minister when he was Chancellor of the Exchequer. In dealing with the introduction of Premium Savings Bonds in his Budget speech in 1956, he said:Finally I have something completely new for the saver in Great Britain; that is, a Premium Bond. Let me say at once that this is not a pool or a lottery, where you spend 783 your money. The investor in the bond which I propose is saving his money. He will get it back when he wants it. But as long as he holds it saved, his reward, instead of interest, is the chance of winning a tax-free prize. … This is an encouragement to the practice of saving and thrift by those members of the community who are not attracted by the reward of interest, but do respond to the incentive of fortune."—[OFFICIAL REPORT, 17th April, 1956; Vol. 551, c. 879–80.]It will be noted that nothing was said there about the holder who dies being deprived of that chance.
I appreciate that the Treasury has the power to make such conditions as it thinks fit under Section 1 of the National Loans Act, 1939, but in fact Regulations called the Premium Savings Bonds Regulations, 1956, were made and laid before the House in S.I. 1657, on 31st October, 1956. They deal with many things: the persons entitled to purchase and hold bonds; repayments; and many miscellaneous matters. Regulations 9 and 10 deal with payments in case of a holder's death. Regulation 8 (1) deals with the production of probate or letters of administration and the authority of the Postmaster-Generalto pay the sum repayable, and any other sum payable, in respect of the bondRegulation 9 uses the same phrase, to paythe sum repayable, and any other sum payablein respect of the bond. These wordsany other sum payable in respect of the bondare not defined. They may well include prize money.
There have been a number of amending regulations, but nowhere in these regulations is there a single word suggesting that if a holder dies at a certain time the prize shall be forfeited. I do not say that there is no power to make that limitation, but I say that if regulations are made with regard to many matters—I remind the House that the Treasury has power to make conditions without those regulations—one would have thought that an important limitation of this kind would have been included so that Parliament could have discussed it when the opportunity arose for debating these regulations.
It might be thought that there are very few cases, but as a result of the publicity which followed when I raised 784 this matter in the first instance a number of people have written to me. I will refer to only two cases. In each of those cases the bond of the deceased person drew a prize of £500. One of these people raised the matter with the authorities and received a reply from the public relations officer of the Post Office.
He wrote:The main reason why the rights as regards prize draws do not survive the registered holder of a bond is to avoid the difficulties which may arise in dealing with his estate. The Postmaster-General has discretion to distribute small sums invested in National Savings where there is no will or grant, and this is often very convenient for the beneficiaries. In many such cases there are several beneficiaries; one can readily imagine the difficulties which would arise if, after some Premium Savings Bonds had been distributed among them, one beneficiary were to win a prize. It would be invidious and complicated to make special provisions according to the size of the bond holding, the number of beneficiaries and as to whether there was or was not a will. The bond scheme was devised to be as simple and economical as possible, and we could not take on the complications and expense which would be implicit in such arrangements.Presumably this is what is meant by the reference in the reply of the Financial Secretary to the Treasury to "legal and administrative difficulties." I venture to suggest that there is no real difficulty. Either there is a will or letters of administration can be taken out. There is nothing to prevent the Post Office from withholding payment until it is satisfied. It can make payment to the executor or the administrator. I ask what the Post Office does about savings bank accounts or Savings Certificates.
It is of interest to know that the letter goes on:You wished to know also what happens to prize money in such circumstances. The answer is that the prize list is adjusted so that the full amount of the prize fund is paid out to eligible bondholders. In the case of a £500 prize, the first £250 prize winner is paid a further £250; the first £100 winner gets another £150; the first £50 winner gets another £50; the first £25 winner gets another £25; and the first reserve is awarded £25. This is done because the prizes are awarded in the order in which the bond units are drawn, those drawn first taking the higher prizes. The reserve units are drawn as part of the ordinary draw, and they come up for prizes (if any) in the order in which they are drawn. We do not, however, publish the reserve numbers so as to avoid raising false hopes.I do not know whether that information has been communicated to the 785 public. It is all very well, but a person is asked to invest in Premium Bonds, getting instead of interest what the Prime Minister called "the incentive of the future." If it was a bond earning interest, presumably on the death of the holder, the bond, or its value, and the interest, would be part of the estate of the deceased, to be dealt with by his executive administrator. Why should it be different with a Premium Bond? It is obviously unfair that if John Smith dies on 31st March his widow cannot receive a prize of £1,000 that his bond draws on 1st May, but that if he dies on 2nd April she can receive it. Is it suggested that the legal complications or the administrative difficulties are greater in the one case than in the other?
The cruel thing is that when the bond draws a prize notification is made by the Post Office to the widow. When she returns the prize claim form stating that her husband is dead the widow learns that she is not entitled to any prize. The matter is made still more unfair by the fact that Premium Bonds are not transferable. Among the letters I received was one from a lady in Bromley who, presumably, is a constituent of the Prime Minister. I wish to refer to part of the reply that she received from the Director of Savings to whom she wrote to ask whether she was able to transfer her bonds to her son if anything happened to her. The Director wrote:I am sorry to say that there are no facilities for you to nominate your son Eric to receive your bonds, if anything happens to you. Premium Savings Bonds are not transferable and are repaid to the next-of-kin when the holder dies.I suggest that the present arrangement is manifestly unjust. It could be remedied in a very simple fashion. In his reply to me the Financial Secretary referred to the powers under Section 1 of the National Loans Act, 1929. There is power under that Act to remove this limitation. If a person is the holder of a Premium Bond eligible for the draw, and it wins a prize, let that prize be paid to him or his estate if he dies. If the bond draws interest that would be the position. There is no reason why this should not be dealt with in the same way. I emphasise that it is absurd to suggest that administrative costs or legal difficulties could prevent this from being done.
§ 10.43 p.m.
§ Mr. G. R. Mitchison (Kettering)
If nothing were said on the Premium Bonds there is little doubt that the right to take part in the lottery and get a prize if a person won would pass to the widow or other heir, just as the right to take part in a beauty contest—if I may remind the hon. Gentleman of this—has held to be a contractual right in the case of Hicks v. Chaplin.
What puzzles me is that when these bonds were introduced and the House had the opportunity to pronounce on the matter, this change in the ordinary law, if it was then contemplated, was never put before the House. So far as I can gather from what my hon. and learned Friend has said, the House has never had the opportunity to approve of this. I do not deny the power of the Treasury, but I say that this is a diminution of ordinary rights. In a case of this sort and in a matter of considerable importance to the public, it is regrettable that the House has never had the opportunity of expressing its opinion on the matter.
§ 10.44 p.m.
§ The Economic Secretary to the Treasury (Mr. Anthony Barber)
I am sure that both the hon. and learned Gentlemen who have spoken will appreciate that I must direct my observations to the position as it is now. Not having had notice of what may or may not have been said in 1956 and on subsequent occasions, I have not looked into that. Both hon. and learned Gentlemen will agree that while it may be that a Premium Bond holder does not generally look at the terms of the prospectus, in fact the position is made quite clear in the last two or three lines of paragraph 6 of the prospectus.
I am sure also that the hon. and learned Member for Stoke Newington and Hackney, North (Mr. Weitzman) will be the first to agree with me that it is, in the general interest of Premium Bond holders, essential that the scheme should be kept as simple and as cheap to administer as possible. It was decided at the outset that Premium Bonds should, like other National Saving securities, be registered so that the small saver could still establish his right to his money even if by some mischance he should lose the actual document.
787 In order to avoid the cost of having an organisation to deal with changes in the registered holder, it was provided that, like savings certificates, Premium Bonds should not be transferable from one holder to another. It was also decided that it would not he practical to make an exception to this general rule in the case of the death of a holder, as is the case with National Savings Certificates. This is because, apart from the additional administrative cost of registering transfer, difficulties peculiar to Premium Bonds could arise in cases where the Postmaster-General had the duty of allocating the bonds between several beneficiaries.
There is a provision that the Postmaster-General can pay out of holdings of up to £100 without the production of probate or of letters of administration. This is the provision to which the hon. and learned Member for Stoke Newington referred. There is no doubt that this provision is in practice of great value to the relatives of many small holders who otherwise would have to go through legal processes to obtain the holding on death. But if the Postmaster-General were to be involved in the allocation of a bond holding between different beneficiaries, there would inevitably be cases of complaint about the method of allocation if a bond of one beneficiary subsequently won a prize and the bond of the other did not. So, as I have already said, no provision for transferability on death was made in the prospectus.
§ Mr. Mitchison
I remind the hon. Gentleman that one may nominate a successor for one's National Savings Certificates in the event of one's death.
§ Mr. Barber
I was explaining that. If the hon. and learned Gentleman reads what I said, he will see that I made it clear that in this regard Premium Bonds were treated differently from National Savings Certificates. The condition about the eligibility of bonds for the draw after the death of the holder, with which the hon. and learned Gentleman is concerned tonight, is a corollary of the rule than bonds are not transferable even on death. If there were not some such provision for the withdrawal of bonds from the draw after the death of the holder, 788 it is obvious that the rule about non-transferability could easily be evaded. A beneficiary would merely fail to report the death of the holder to the premium bond office and wait for the bonds to win a prize. This would amount to de facto transferability. It would clearly be wrong to permit this, because apart from equity between those holders who complied with the regulations and those who did not, it would enable some people to evade the maximum limit on total holdings.
When the scheme was first introduced, the rule about eligibility on the death of the holder took the most simple and logical form of saying simply that a bond is not eligible for a prize immediately the holder dies. This gave rise to some unfortunate cases, similar to those mentioned by the hon. and learned Gentleman this evening, in which the bereaved relatives learned that one of the Premium Bonds had won a prize, expected it to come to the estate and then found that the prize could not be paid because of this rule. This inevitably and naturally caused considerable disappointment.
A number of my hon. Friends have written to me about cases of this kind. The most recent case was one brought to my attention by my hon. Friend the Member for Bradford, West (Mr. Tiley). These are cases of disappointment at a most unfortunate time, but they are not really cases of unfairness or injustice, because after all the holder bought the bond subject to the conditions in the prospectus, including this particular condition.
The hon. and learned Gentleman made it clear that there is no gain whatever to the Exchequer as a result of this rule because, as he pointed out, if a bond which has been drawn is found to be ineligible the prize which would have gone to that bond goes to the bond at the head of the reserve list which is drawn each month by "Ernie" precisely for contingencies such as this.
When my right hon. Friend the previous Chancellor of the Exchequer, Lord Amory, reviewed the Premium Bond scheme in 1960, he examined this particular condition very carefully, because he was well aware of the sort of unfortunate case that has been referred to. He felt able to allow the 789 concession making the bond eligible for the first draw after the death of the holder. This dealt with the worst cases of disappointment, where the notification of the prize arrived a very short time after the death.
This was as far as Lord Amory felt that he could go at that time because of the administrative problems, and I have something to say on that—
§ Mr. Weitzman
Why are there greater legal and administrative difficulties if the man dies two weeks before, when the widow can draw the prize, than if he dies a month more?
§ Mr. Barber
I must get on, because I have something of importance to say to the hon. and learned Gentleman which, I hope, he will consider is of greater importance than my answering that point.
Lord Amory said that he hoped that it might be possible, in the light of further experience, to go further. Because of this possibility the revised prospectus introduced in August, 1960, included a provision for the Treasury to vary the terms of this condition without having to go through the full procedure of a new prospectus and a new issue.
We have now had some eighteen months' experience of the working of the 1960 provision, and the Treasury has considered with the Post Office whether any further concession can be made. Both hon. Members who have spoken will, I am sure, be glad to know that we have decided to extend the period of eligibility for a prize after the death of the holder from the present period of one month to twelve months, so that the hon. and learned Member will see that officials, even in the Treasury, can move pretty swiftly. This change should eliminate the overwhelming majority of the present cases of prizes being notified and then having to be withdrawn because it is found that the bond is not eligible because of the death of the holder.
I might mention that from samples which the Post Office have made of recent cases, it appears that this extension should remove nearly 90 per cent. of them. The year should allow ample time for almost all estates to be wound up, and in this respect the hon. and 790 learned Gentleman will recall that it corresponds to the executor's year in common law. The change will, therefore, meet the other complaint that the bonds at present do not earn interest, or have a chance in the draw during the period when the capital cannot be realised. This change will involve the Post Office in additional administrative work and cause certain difficulties, but from the experience it has had of working the one-month rule it does not think that they will be insuperable.
Hon. Members may ask why we are not making changes to eliminate all these cases and not merely the 90 per cent. The very few cases that will remain are cases where, for instance, the beneficiaries are unaware of the rules about eligibility after death of the holder or, possibly more frequently, are unaware of the existence of a holding until the prize notification arrives. It would be possible to cover these cases only by permitting transferability of the bonds on the death of the holder, and this we do not feel able to accept, for the reasons I have already given. I might mention, in passing, that the administrative cost of the Premium Bond scheme is more than three times as great as that of National Savings certificates.
I will not say more on this question of transferability since it would be out of order in an Adjournment debate: it would require a new prospectus and so a new issue, and if the new terms were to apply to existing holders there would have to be legislation similar to that in the 1960 Finance Act.
§ Mr. Fletcher
Can the hon. Gentleman confirm that the concession will apply to all existing Premium Bond holders?
§ Mr. Barber
It will, and I am grateful to the hon. Gentleman for having given me the opportunity of making that clear.
The change in the period of eligibility after the death of the holder will be given effect by means of an announcement giving the prescribed three months' notice to be inserted in the London, Edinburgh and Belfast Gazettes before the end of this month. This will mean that the first draw in which the new rule will apply will be that on 1st September next. In order to avoid inequity between the beneficiaries of those holders who have died in the last nine 791 months or so, many of whom will have obtained repayment on the understanding that bonds are not eligible for the draw for more than one month after the death of the holder, the new conditions will apply to the bonds of holders who die an or after 1st July, 1962.
I am grateful to the hon. and learned Member for Stoke Newington and Hackney, North for having raised this subject tonight, so enabling me to explain the reasons for what has seemed to many to be an unfortunate condition. I am sure that he will agree that the changes which I have proposed go a considerable way to meet the sort of difficulty to which he has referred. We certainly do not want to perpetuate conditions which might prejudice the success of the Premium Bond scheme. That it has been successful nobody would deny, for in the 5½ years since it 792 was introduced, some £450 million worth of Premium Bonds have been bought and some £350 million worth of them are still held.
The way in which people have held on to their bonds after they have bought them has been most encouraging. There are now about 14½ million holders with an average holding of about £25. The administration of the scheme, with more than 46 million bond documents, sets considerable organisational and administrative problems for the Post Office, and I hope, in the light of the change which I have proposed tonight, that the hon. and learned Gentleman will join with me in paying tribute to all of those who work at the Premium Bond Office at Lytham St. Anne's.
§ Question put and agreed to.
§ Adjourned accordingly at three minutes to Eleven o'clock.