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Investigation Report on the non-payment of arrears of contributory pensions.

Analysis - General Restriction on Payment of Pension Arrears in Late Claim Cases

Analysis - General Restriction on Payment of Pension Arrears in Late Claim Cases

71. It is important to be clear that the decisions complained of arise as a direct consequence of the provisions at Articles 102, 104 and 105 of the Social Welfare (Consolidated Payments Provisions) Regulations, 1994 (SI No. 417 of 1994). It is true that the Oireachtas has delegated to the Minister for Social Welfare the authority to make rules in relation to the prescribed time for claiming a pension; in relation to disqualification "for the receipt of any [pension]" where the claim is not made within the prescribed time; and for the extension of the prescribed time subject to such conditions as the Minister may prescribe. As pointed out in Paragraph 27, it is in this latter context that the Minister - and successive Ministers since 1952 - have provided for the six month limit on arrears payments in the case of a contributory pension claimed outside the normal prescribed time. It is important to recognise, also, that the disqualification of late applicants, in accordance with the provisions of Articles 102, 104 and 105, for any arrears in excess of six months, even where good cause exists for the delay in applying, is not based on any specific provision in the governing Act.

72. Indeed, an examination of the provision now at Section 205 (2) of the Social Welfare (Consolidation) Act, 1993 - see text at Para. 22 - suggests that a disqualification "for the receipt of any benefit", in the event of failure to claim within the prescribed time, is not necessarily required by the Act. In other words, it seems that the Minister is not required - but may if he so chooses - make regulations under Section 205 (2). The Minister might, it would seem, have opted to prescribe the manner of making a claim, as required under Section 205 (1) but then have decided not to make any regulation in relation to the prescribed time for a claim or for partial disqualification in the event of a claim made outside the prescribed time.

This is largely what has happened in the case of child benefit. The Minister has not , by way of a regulation under Section 205(2), set a prescribed time for a claim. In the case of a claim for child benefit made after the earliest potential date of qualification, full arrears of benefit may be paid provided it can be shown that there was "good cause" for the delay in making a claim. It is noteworthy that such an arrangement has been decided upon in the case of child benefit, which is totally funded from the Exchequer and which is a universal, non-means tested payment, whereas equivalent arrangements have not been made for social insurance pensions.

73. I have already referred (Paragraph 6 and see also Appendix 2) to the situation whereby there is no longer any effective parliamentary scrutiny of statutory instruments. This is an unsatisfactory situation. Some of the issues relating to this question were considered by the Constitution Review Group, particularly in the context of a suggestion that the Oireachtas should "have power to authorise by law the delegation of power to either the Government or a Minister (but no other body) to legislate, using the mechanism of a statutory instrument, in relation to the substance of the parent legislation..." [Report of the Constitution Review Group (1996) P.40]. The Constitution Review Group urged that change in this area should be approached with great caution and that adequate safeguards would be essential in order to ensure that the "legislative supremacy of the Oireachtas" would not be undermined. I fully accept the validity of what the Review Group has to say in relation to any change in the present arrangements. But irrespective of any change in the powers of the Oireachtas to delegate the making of legislation, it is essential that the present powers to make statutory instruments should equally be subject to adequate safeguards which will ensure the "legislative supremacy of the Oireachtas". It strikes me that the Regulation in question in these investigations appears not to have had the benefit of oversight by a

Committee of the Oireachtas in a manner which would place its acceptability to the Oireachtas beyond dispute. I am raising this not only as a point of interest in relation to regulations generally but also because, as pointed out in Paragraph 27, the penalties imposed in this particular Regulation are not expressly provided for in the governing statute.

74. I recognise that the Department has a legitimate interest in relation to the control of claims and in relation to maintaining the financial viability of the Fund. This may well require the application of some time limits and the imposition of some penalty in the case of claimants who claim outside the prescribed time without good cause. There is no reason, however, why the Department could not factor into its annual budget a contingency provision for late claims. In any event, this may well prove to be a declining contingency, over time, as the public becomes better informed on welfare rights and as the Department further develops its capacity to notify insured people directly of their potential entitlements. It is also legitimate for the Department to seek to operate in a manner which is admininistratively convenient. But at the heart of these complaints is the question of the balance to be struck between the requirements of the Department, on the one hand, and the rights of social insurance claimants on the other hand. In addition, there is the overiding requirement to avoid any practice which might serve to undermine public acceptance of social insurance and of the implicit contract which is involved.

75. Social insurance is not just another statutory income maintenance service. It is a tripartite arrangement - bipartite in the case of the self-employed - involving at least an implicit notion of contract and a strong sense of social solidarity. The Minister for Social Welfare, in his Foreword to the recent discussion document Social Insurance in Ireland, referred to these aspects of social insurance:

"This expression of social solidarity between groups and generations is part of an ongoing social contract between government, employers, employeees and the self-employed. [Social insurance's] primary purpose is to provide social protection".

In the context of these investigations, it is reasonable to ask whether the decisions in question - based as they are on the Department's own regulation - serve to support and foster the principles upon which (as the Department asserts) social insurance in Ireland is based. 76. All three complainants say that they were poorly informed about their social insurance rights. The experience of my Office over 12 years has been that the vast majority of such late claimants say they were poorly informed about their social insurance rights. For example, a retired civil servant is among those who have complained about the loss of pension arrears because of a late claim (for survivor's pension, in his case). In his letter of complaint this man specifically argues that the Department failed to advertise adequately the introduction of survivor's pension for men - and for civil service widowers in particular - and claims that his failure to apply in time arose "through ignorance, due to the State's inadequate information process". People will almost universally wish to claim their entitlement from the earliest date possible. Despite genuine advances in the Department's information services over the past decade, and despite the efforts of the Citizens' Information Centres and the National Social Service Board over twenty years, it remains the case that many people are ill-informed in relation to social insurance matters. Perhaps the simple explanation for this is that the social insurance system is extraordinarily complicated and it may be unreasonable to expect people to inform themselves adequately. The Department has been taking the line that it is doing its best to inform people but that, ultimately, ignorance of the law is

not an acceptable excuse for having failed to claim in time. I feel that, in the context of social insurance, this is not a reasonable position to adopt. This is particularly so given that the parent statute does not require the Department to apply such strict penalties on late claimants.

77. In any case, it would seem that the penalty imposed in the case of late claims is not something which has been particularly well publicised. The Department's main information booklet is its Guide to Social Welfare Services which is published every few years. The most recent editions of the Guide do not point out explicitly that a failure to claim in time may result in substantial loss of arrears. The current edition (1994) and the preceding edition (1991), for example, tell people they should apply for the pension three months in advance of reaching pension age. But they do not go on to point out the consequences of a failure to claim in time.

78. The Courts have developed a range of tests to be applied when the question of the validity of a particular regulation is raised. One of these tests arises from the presumption that, in delegating the right to make a regulation, the Oireachtas would expect the rule-making body to exercise its functions "with basic fairness, reasonableness and good faith" (Source: Burke v Minister for Labour [1979] IR 354). A delegated discretion is not as absolute as the text of the statutory delegation might otherwise suggest. This is a test which is particularly appropriate in the present context.

79. Against a background of a complex social insurance system and a less than perfect information service, one must seriously question the "basic fairness and reasonableness" of the present regulations. In particular, it is clear that these regulations, as they are applied in individual cases, take no account whatever of the individual circumstances which resulted in the failure to claim on time. For example, I am currently examining a complaint

where a woman failed to claim contributory widow's pension when she was widowed in 1992. The woman died two years later without having made her pension claim. Only after her death did the members of her family learn that she had an unclaimed entitlement to contributory widow's pension for the previous two years. The woman was already suffering from Alzheimer's Disease when she was widowed in 1992 and, according to her family, was not able to manage her affairs. The family applied retrospectively for the pension and explained that, during the period since being widowed, their mother had not been able to manage her affairs (because of her illness) and the family were then unaware of the entitlement. The Department awarded the pension but paid out only for the six months prior to the widow's death. The Department decided that this was not the type of case which merited an extra-statutory payment, whether on the grounds of equity or otherwise. In particular, the Department felt that as the person had died before the claim was made, the question of avoiding hardship did not arise. I have not yet concluded my examination of this particular complaint but I have noted the position of the Department as set out above.

80. As regards the payment of the remaining arrears (18 months pension) in the case cited in the preceding paragraph, the Department's position is that, irrespective of the circumstances which led to the failure to claim on time, the Regulation does not allow for the payment of these arrears for more than the six months already paid. This cannot be regarded as either fair or reasonable. The proposed change in the legislation - which will increase the maximum arrears period from six months to twelve months - will not, unfortunately, provide the flexibility to look on a case by case basis at the reasons why a claim was made late. I shall deal with the proposed legislative amendment later (see Para. 88)

81. A related test, one which is already an established feature of EU law and increasingly becoming a feature of Irish constitutional and administrative law, is that of proportionality. The principle here is that where a sanction is imposed by a public body, in its dealings with an individual, then that sanction must be a proportionate sanction. More specifically, the punishment imposed must not be greater than what is necessary to protect the interests of the public body. Proportionality is one of the Principles of Good Administration which I described in some detail in my 1995 Annual Report. I also indicated there that I would take these principles into account in examining complaints which come before me. The principle of proportionality recognises that public bodies must be allowed use a system of sanctions in its dealings with the public in order to operate efficiently and effectively. But there must be some proportionate relationship between the detriment caused to the body by the individual's failure and the loss to that individual as a result of the sanction. The relative strengths of the parties is also a consideration. The fact that John Smith applied for the pension in 1992, when he should have applied in 1983, did present problems for the Department. But these problems cannot have been insurmountable. His insurance record was already available; his age was easily verifiable and perhaps the only real problem would have been the demand for substantial arrears which the claim represented. It is worth noting that the Fund had the benefit of Mr. Smith's pension during the nine years in question. The sanction in Mr. Smith's case was the loss of about �33,000 in arrears. While acknowledging the legitimate requirements of the Department in such cases, one can hardly conclude that the sanction here is a proportionate one.

82. The principles of proportionality, and indeed of equality before the law, also encompass the concept that, where rigid adherence to the letter of the law results in manifestly inequitable treatment, then steps should be taken

to mitigate the consequent effects. Indeed it is common practice in Ombudsman Offices in other countries to regard instances of such rigidity as maladministration. The Department of Social Welfare has always argued that the law requires it to act as it does in these cases. In a sense, the Department presented the case that it was just as much the prisoner of the law as the claimant. In the individual case, the Department has always had the option of recourse to an extra-statutory payment in order to mitigate the effects of rigid adherence to the letter of the law where that produces manifestly inequitable treatment. But the extra-statutory arrangement has not been much used nor has its existence been publicised. Indeed, to the best of my knowledge, the existence of the extra-statutory arrangement may not even have been referred to in the Oireachtas. On a broader level, it has always been open to the Department to change the law, by amending the regulations, in order to minimise the incidence of inequitable treatment. Yet the Department has not taken the opportunity, despite the matter having been raised regularly by the Ombudsman and others, to amend the rules. Accordingly, one can only conclude that the Department's actions here offend against the concept outlined above.

83. Finally, I feel some comment on the use of the extra-statutory payment arrangement is warranted. At interview, the Department's officials were strongly of the view that the extra-statutory arrangement should not be used on a widespread basis. The existing extra-statutory arrangement does allow the payment of arrears on the basis of equity. On this basis, arrears could well be paid in a very substantial number of the late claims cases. The officials felt that it would be driving a "coach and four" through the Regulation were equity to be relied upon to any extent. While I appreciate its point of view, clearly the solution here is to amend the Regulation in a manner which allows for the circumstances of each individual late claim case to be assessed on its own merits and to provide specifically for

proportionate penalties where it is considered that there was no "good cause" for the delay in making the claim. But pending an appropriate amendment to the Regulation, there may be no alternative but to rely on the extra-statutory arrangement in order to achieve equitable outcomes.

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