HC Deb 11 March 1983 vol 38 cc1115-22

Motion made and Question proposed, That this House do now adjourn.—[Mr. Cope.]

2.32 pm
Mr. John Wilkinson (Ruislip-Northwood)

I am grateful for the opportunity to raise a matter concerning my constituent Miss Pauline Walker and her unfortunate superannuation position. She works as a National Health Service superintendent physiotherapist at the Mount Vernon hospital, Northwood, and at Harefield hospital.

Miss Walker's case, and the exactly analogous case of Miss Betty Froud—a senior nursing officer who also works for the Hillingdon district health authority—have been referred to no fewer than four Members of Parliament. They were my predecessor Mr. Petre Crowder; the late Sir Ronald Bell, the former Member for Beaconsfield; my hon. Friend the Member for Beaconsfield (Mr. Smith); and me. My hon. Friend the Member for Beaconsfield sends his apologies for being unable to attend the debate because of a constituency engagement. However, he supports my case.

All four Members of Parliament took up the two cases with Ministers of the Department of Health and Social Security—my hon. Friend on behalf of Miss Froud and Petre Crowder and I on behalf of Miss Walker. During the lifetime of this Parliament I have twice referred Miss Walker's case to the former Under-Secretary of State for Health and Social Security, my hon. Friend the Member for Ealing, Acton (Sir G. Young). I have also discussed the matter with him privately. My hon. Friend the Member for Beaconsfield took up with him the case of Miss Froud. The present Under-Secretary, my hon. Friend the Member for Hampstead (Mr. Finsberg), wrote to my hon. Friend in mid-February. There has been no lack of official interest in these two cases, which have also been referred, in the case of Miss Pauline Walker, to the former Parliamentary Commissioner for Administration Sir Idwal Pugh at the behest of Petre Crowder, and to the Health Service Commissioner, Sir Cecil Clothier, in the case of Miss Froud.

Sir Cecil Clothier, to his credit, took immense pains and replied in sympathetic terms in his personal capacity as recently as 30 November 1982. The Acts of Parliament which govern his work do not allow him to deal with superannuation matters. Nevertheless, he lists no fewer than seven reasons why he believes it worth while for Miss Froud to try to get her Member of Parliament to persuade the Secretary of State to exercise his discretion in her favour.

Sir Cecil Clothier said in his letter: I know, from inquiries I have had made, that there is considerable sympathy within your Authority for your position; and indeed, representations have been made by two Chairmen to Ministers, though unfortunately, without success. On 13 December 1982 the present district administrator of the Hillingdon health authority, Mr. Blythe, wrote to Miss Walker after studying Sir Cecil Clothier's letter. He said; The authority would be prepared to look again at the position in the light of any directions from the Secretary of State … I wish you well in your efforts to have this matter re-examined. Miss Walker has served in the National Health Service since its inception in 1948—almost 35 years. Before that she had a period of war service with the Massage Corps and was employed as a physiotherapist at Mount Vernon hospital, Northwood before the start of the NHS. In 1946 she became superannuable through the Federated Superannuation Scheme for Nurses, an insurance-based scheme.

As I explained in my letter dated 20 March 1980 to my hon. Friend the then Under-Secretary, the hon. Member for Ealing, Acton, When the NHS started Miss Walker had the option of transferring to the NHS Pension Scheme but because she was already contributing to the Federated Superannuation Scheme for Nurses (FSSN) she kept her contributions going to the FSSN as there was no apparent reason to change. However, by the mid-1970s, with the effects of index-linking, it became quite clear that it would be advantageous to her to transfer to the NHS Pension Scheme. Indeed, she was advised to do so by the Treasurer's, Office of Mount Vernon Hospital where she worked. The letter dated 12 June 1975 which I enclosed proved that. This was confirmed in a further letter from her employing authority, the Hillingdon Area Health Authority, written by Mr. V. Middlemiss, Assistant Hospital Services Administrator on 18.6.75. I also enclosed that letter.

The system suggested involved transferring from full-time employment to part-time employment of 35 hours a week for a month and a day and then to return to full-time duty on 2 August 1975. This she did. Miss Walker was assured that her terms of service would continue to apply during her period of part-time service. Miss Walker's FSSN policies became paid up and frozen with the eventual payment of benefit on retirement. She became a contributing member of the NHS scheme.

It subsequently became apparent that the advice, given in good faith by the Hillingdon area health authority assistant hospital services administrator according to the regulations pertaining at the time, was most disadvantageous to Miss Walker and to Miss Froud. The reason given by the Under-Secretary in his letter to me of 23 April 1980 was that with the introduction of the State pension scheme in April 1978 special arrangements were made whereby existing policy scheme members within the public services could transfer on actuarially equivalent terms to the relevant main schemes in order to enable them to be contracted out of the State scheme. Policy scheme optants in post in the N.H.S. scheme on 31st March 1977 were given the opportunity to cancel their option for F.S.S.N. in the return for back service credit in the N.H.S. scheme. This facility was later extended to optants who had joined the Health Service scheme on compulsory transfer on 1st April 1974 under the N.H.S. reorganisation arrangements. This meant that all those former FSSN scheme members were able to enjoy the considerable benefits of the inflation-proofing inherent in the NHS scheme for the whole of the period in which they had made FSSN contributions. Not so my constituents Miss Walker and Miss Froud, however, who stand to lose thousands of pounds. Indeed, Miss Walker was due to retire at the beginning of this year but is now not retiring until the spring of next year—partly no doubt because she enjoys her work and is very good at it, but partly also to improve her pension.

Let us examine what Miss Walker's pension position is. The estimates provided by the Hillingdon area health authority would have to be confirmed by the superannuation branch and audit of the DHSS, but if Miss Walker had retired at the end of last year she would have received a lump sum of £2,928 for her NHS scheme contributions since August 1975, plus an annual pension of £3,194, being her NHS pension of £968 plus an annuity on her FSSN scheme of £2,226 at today's rate. Had she been allowed, like all the others, to commute her FSSN scheme contributions in full to index-linked membership of the NHS scheme for the 29 years to August 1975, she would have received a lump sum of £13,197 and an annual pension of £4,347. In other words, through no fault of her own, she stands to lose no less than £10,269 in lump sum and £1,153 in annual pension.

It is no wonder that the late Sir Ronald Bell wrote to Miss Froud, following the negative response of the Labour Under-Secretary of State, the hon. Member for Waltham Forest (Mr. Deakins), to his representations on her behalf, that it was just "a constipated official answer" and that it comes very hard that your forethought"— in transferring to the NHS scheme as advised— should prove to be actually disadvantageous". That is why my predecessor, Petre Crowder, following the legalistic but unhelpful reply of the Ombudsman Sir Idwal Pugh on 11 October 1978 and the bureacratic answer of the Labour Under-Secretary of State on 10 November 1978 very reasonably commented in his letter to Miss Walker: I feel confident that at the Election we shall see the return of a Conservative Government, and with a change of administration and a new Secretary of State it might be possible for some action to be taken". We now have not just a new Secretary of State but a new Ombudsman and Civil Service Commissioner, Sir Cecil Clothier, who takes a more enlightened view of his responsibilities and is not afraid to expose what he believes to be an injustice. I quote in full the seven reasons given in Sir Cecil's letter to Miss Froud of 30 November 1982 which led him to say in conclusion: I wish you every success in trying to persuade the Secretary of State to put you back into the position you would have been in had you not the foresight to seek the advice of your employing authority. After all, what you are seeking is not something extra, as a gift, but what you would properly have been entitled to within the Regulations. I sincerely hope that this most unfortunate situation can be rectified. The seven reasons are the following:

  1. "(1) Your decision in 1974 to transfer (in 1975) from the FSSN to the NHS scheme was made on the wrong advice of the health authority (although it seemed at the time to be the correct advice and was given in good faith);
  2. (2) your technical 'break in service' to make you eligible for the transfer was again wrongly advised and effected by the health authority;
  3. (3) that 'break in service' was contrived by the authority as a book transaction but you continued, in fact, to work whole time hours;
  4. (4) that being so, the actual break in service specified in Regulation 45 of the 1961 Regulations (referred to by the regional personnel officer in his letter of 31 December 1981) was not correctly effected and so (as Mr. Brown has argued) your membership of the FSSN scheme should not have been discontinued;
  5. (5) the authority recognises that your present adverse position is the result of the wrong advice they gave and the 'arrangement' they contrived to transfer you;
  6. (6) accordingly, if the Secretary of State agreed, they may be prepared to correct retrospectively the error they made in 1974 by adjusting the records and payments in respect of the month during which you were paid for only 3½ hours;
  7. (7) your present prospective pension will cause you substantial hardship and, having regard to your 40 years' loyal nursing service"—
equivalent loyal service applies to my constituent, Miss Walker, and her physiotherapy work— may be regarded as injustice. I regard it as an injustice. Often in cases of this sort Ministers are chary of taking a generous view because they are fearful of setting a precedent. Surely the right precedent is to correct a wrong and to redress an injustice.

2.47 pm
The Under-Secretary of State for Health and Social Security (Mr. Geoffrey Finsberg)

My hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) has raised the subject of the statutory regulations governing the National Health Service superannuation scheme as they affect his constituent, Miss Pauline Walker. In his recent approach on this matter to my right hon. Friend the Secretary of State for Social Services, he has again demonstrated the close and genuine concern with his constituent's interests that he showed in pursuing it with my predecessor. I am glad to have this opportunity of joining him in paying tribute to Miss Walker and her record of over 35 years' service with the Mount Vernon hospital, and I can understand her concern about her superannuation position.

As these matters of superannuation are complex, particularly in relation to those who, like Miss Walker, chose to remain members of insurance policy-based pension schemes on joining the National Health Service, it might be helpful to an understanding of the position in which Miss Walker now finds herself if I set out some of the background.

The Federated Superannuation Scheme for Nurses and other hospital officers—the FSSN—was established in the 1920s. It was a pioneer scheme in providing "decent" pension arrangements in a field where these had been markedly lacking and was still held in high respect at the time that the National Health Service was set up. Unlike the modern public service schemes, the FSSN did not offer benefits based on length of service and final pay. Instead, the employee and employer contributions were used to purchase for each individual insurance policies maturing on his or her death or retirement.

On the individual's retirement, the proceeds of these policies could either be paid to him as a lump sum or used to purchase an annuity. At the time the National Health Service was established in 1948, there were strong pressures on Ministers to allow people who were already members of pension schemes such as the FSSN to remain in them if they wished as an alternative to joining the new NHS superannuation scheme, and they were given free choice.

When Miss Walker joined the NHS on the "appointed day"—5 July 1948—she opted to remain subject to the FSSN. The choice was entirely hers, and she was doubtless influenced by certain specific attractions of her existing scheme. For example, the employee contribution rate in the FSSN was only 5 per cent., compared with 6 per cent. in the NHS scheme, and the benefits on premature withdrawal were more favourable than in the NHS scheme. For some individuals, the attractions of membership of the FSSN persisted even into the 1970s, but by at least the mid-1960s the effects of inflation had taken their toll on the FSSN and other similar policy schemes elsewhere in the public service, and the benefits available through the NHS superannuation scheme began to appear increasingly advantageous.

Clearly Miss Walker could see this and rightly on numerous occasions she sought a means of transferring from the FSSN into the NHS scheme. In 1975 a device to enable her to do so was recognised. This involved her changing to part-time hours of work for a month and a day. This change had the effect of creating a break in her service which, under the regulations, caused her option to remain in the FSSN to lapse, and allowed her to join the NHS scheme on her return to full-time duty on 2 August 1975. There is documentation in the Department's files to show that the terms of the change were clearly and specifically set out. Since that date, Miss Walker has been a contributing member of the NHS scheme, and, as my hon. Friend said, her FSSN insurance policies in force in 1975 have remained "frozen".

About two years after Miss Walker transferred to the NHS superannuation scheme, those people who still remained in the FSSN and other insurance policy-based schemes, as she had been until 1975, were, exceptionally, given an opportunity of joining the NHS scheme. The basis of the offer made to them was that, in return for surrendering their policies to the managers of the main NHS scheme, they would receive service credit in the main scheme on terms recommended by the Government Actuary's department.

The standard basis for conversion set by the Government Actuary was nine years' NHS scheme credit for every 10 years' employment during which FSSN policies had been fully maintained. This offer came about because, during the planning of the new state scheme, it was recognised that its provisions, and other related regulations, would present new problems for those who were still in policy schemes. They would not be able to be contracted out of the state scheme and they would also lose full tax relief on their superannuation contributions. So, in 1977, they were given the chance of coming into the NHS scheme, and the same facility was offered to those who had been compulsorily transferred from local government to the NHS following the restructuring of the NHS in 1974.

Those were the reasons for the 1977 offer, and I must stress that it was not part of its purpose to enable people who had previously made decisions in what they conceived to be their own best interests to change those decisions in order to improve further their superannuation expectations.

Having ceased to be a member of the FSSN in 1975, Miss Walker found that she was unable to take advantage of the 1977 offer, and therein, understandably, lies the crux of her concern. I can certainly understand her desire to maximise her eventual benefits. It is not in any way unusual in the pensions field for circumstances to arise which cause people to wish, with the benefit of hindsight, that they had made different decisions, and to want retrospectively to change decisions they have already taken. Sadly, it is simply not possible to run a superannuation scheme on that basis. The binding nature of earlier decisions, freely taken by individual members of the scheme in what they conceived to be their own best interests at the time, has to be recognised.

Mr. Wilkinson

My hon. Friend's interpretation of the facts coincides with mine, but does he concede that both categories—those who, like Miss Froud and Miss Walker, took advice to improve their position, and those who did not, but subsequently were put in a better position because of the Government-induced changes in 1977—have worked for the NHS for the same time and that it is, therefore, unfair and unjust that one group should be so much worse off in retirement?

Mr. Finsberg

I hope that my hon. Friend will forgive me if I do not comment on the case of Miss Froud. I have looked at the papers and I am not certain that the cases are identical.

Everybody who has pored over the papers—I cannot speak for all my predecessors, though I am sure that my immediate predecessor, my hon. Friend the Member for Ealing, Acton (Sir G. Young), was as conscientious as anyone — has great sympathy for Miss Walker. However, I cannot accept my hon. Friend's argument, because, with the benefit of the available advice, a free choice was made.

Mr. Wilkinson

It would have been better if my constituent and Miss Froud had ignored the official advice given by their employers, because they would be £10,000 better off in retirement. Surely that cannot be just.

Mr. Finsberg

I cannot answer on the figures, but I think that there is much less difference than my hon. Friend has been led to believe. When advice is given and people weigh it up, the decision is theirs. My hon. Friend recognises that advice was given in the best possible faith.

Any consideration of Miss Walker's case ought to satisfy the test of fairness, not only to her, but to other members of the scheme, some of whom would like to have the opportunity of changing earlier decisions, but recognise the binding nature of them and fairness to the Exchequer, which has to meet the cost of any extra benefits thereby awarded. The opportunity to convert FSSN service into NHS main scheme service which was given in 1977 was limited to those who were still members of the policy scheme at that time, and had fully maintained their policies up to then.

Miss Walker satisfies neither of those conditions. As I have already explained, the purpose of the offer in 1977 was to allow such people to be contracted out of the state scheme from April 1978 and not to improve their superannuation expectations.

The relevant regulations are tightly drawn and I have no discretion, despite what Sir Cecil has said, [n his personal capacity though not in his official capacity. I regret that there is no way in which Miss Walker can be allowed retrospectively to change the decision that she made in 1975 to leave the FSSN and join the NHS main scheme.

It has also been suggested that the device used to allow Miss Walker to free herself from her option to remain in the FSSN and, in consequence, to join the NHS scheme may not have been legal. I am advised that that is not the case, and that the evidence shows that she was, indeed, employed in a part-time capacity from 1 July to 2 August 1975. There was thus a break in her superannuable status of more than a month, and, accordingly, her option to remain a member of the FSSN lapsed.

There is no suggestion that any advice given to Miss Walker by her employing authority in this context was wrong, in the sense of being improper, misleading or incompetent; on the contrary, it was honest, genuine, and thought to be in her own best interests. It offered her a way of getting precisely what she wanted at the time, and there was no way in which Miss Walker's employing authority could have expected in 1975 that the later offer in 1977 would be made.

Having said all that, I think that when my hon. Friend and his constituent see the final figures for the total benefits due to Miss Walker they will realise that they are nothing like as unfavourable as they may have thought. I will write to my hon. Friend to set them out in detail. I have a series of complicated computations, all of which indicate to me as a layman that the gap between what Miss Walker thinks she will get and what she might have got had she been able to take advantage of the transfer is much narrower than has been made out.

It is true that Miss Walker will receive less by way of both pension and lump sum under the NHS scheme than she would have done had she been given the opportunity to convert her FSSN service to NHS scheme service. But she will receive a not insubstantial supplement by way of pensions increase on her FSSN service which will increase both her pension and her lump sum. And, of course, under present arrangements, she will receive a substantial lump sum—I understand just over £13,000—from FSSN policies which, if she had taken the nine years for 10 offer in 1977, she would have had to surrender to the Department.

The calculations are complex—I shall write to my hon. Friend about them—but I think he will find when he has had a chance to study them—I shall be delighted to offer one of my experts in superannuation to go through them with him if, after he has read them, he is still unhappy—that they show—they do to me as a layman and someone who has gone deeply into the case—that under the current arrangements Miss Walker does not seem, overall, to have been significantly disadvantaged by being deprived of the opportunity to transfer her FSSN service to the NHS scheme.

My hon. Friend has put firmly on the record his worries about his constituent's case. I hope I have shown him that the case has not been considered in a faceless, heartless, bureaucratic manner and that, once he receives my letter, he will feel that Miss Walker's position is somewhat rosier than has perhaps appeared on the surface.

Question put and agreed to.

Adjourned accordingly at two minutes past Three o' clock.