Report on Lost Pension Arrears

Chapter 6 - Issues & Conclusions

One measure of an Ombudsman's effectiveness is the extent to which he or she can help focus public and parliamentary attention on underlying problems within, and recurring grievances against, the public administration. The Ombudsman's raw material is provided by complainants; but it would be an opportunity lost if an effort were not made to process this raw material in the interests of promoting better practice. It is within this context that the analysis of issues, which follows, is made. It would be foolhardy for an Ombudsman to act as if he or she had a monopoly of insight into public administration. For one thing the Ombudsman, almost by definition, does not see all those instances - undoubtedly the vast majority - in which the public has a good experience at the hands of public bodies. At the same time, the Ombudsman's view of public administration is fairly unique with access not only to the viewpoint of disgruntled customers but access also to the public officials concerned as well as to their complete files.

Arrears Penalty Based on Regulation

There is more than a reasonable possibility that the regulations which, up until 1997, formed the basis of the Department's practice in relation to late pension claims, would have been struck down had they been challenged in the High Court. But because these regulations were never challenged, we shall never know now what attitude the Court would have taken. It is not for an Ombudsman to decide that a particular regulation is invalid; but he is entitled to take a view on the matter and to be guided by that view in dealing with individual complaints. One category of maladministration listed in the Ombudsman Act, 1980 is that of action "taken without proper authority". The key question in considering the validity of a regulation is whether it achieves what the primary legislation intended. Primary legislation, in turn, is subject to compatibility with the provisions of the Constitution. In the present context, the following questions are pertinent. Was it the intention of the primary legislation:

• that a person with a psychiatric condition or with Alzheimer's Disease, and whose pension claim was delayed on that account, should be severely penalised in terms of lost pensions arrears?
• that a person who, acting in good faith, failed to claim a pension on time because of bad advice (whether from a professional adviser or otherwise) should be severely penalised?
• that a widow or widower, seriously upset following the loss of a spouse, and perhaps heavily burdened with family responsibilities, should be severely penalised because of a delay in claiming widow's pension?
• that a person, simply confused as to his or her real age, and who was late in claiming pension on that account, should be severely penalised?
• that a person, whose failure to claim on time arose from nothing other than ignorance of the social welfare system, should be severely penalised?

Case No. 13

"...my mother made voluntary contributions towards a Contributory Widow's Pension after ceasing to be compulsorily insured...By the time she was widowed ... she was already suffering from Alzheimer's Disease and was not in any fit state to claim her entitlements... I subsequently [after her death] submitted a claim to the Department of Social Welfare for (Contributory Widow's Pension). I made this claim ... in the certain knowledge that this is what our mother would have wished me to do. The claim submitted by me was never based on any 'circumstances' other than moral justice. ...I contend that backdating of the claim to November 1992 should be granted IN EQUITY and I ask your office to support me in this ." Letter of February 1995 to the Ombudsman - the writer's mother failed to claim pension when she was widowed; the family claimed arrears of the pension after her death but were paid only for the six months prior to her death, leaving about 16 months of pension unpaid.

On consideration, it does seem unlikely that the Oireachtas intended that severe penalties should be imposed in such cases. It is more likely the Oireachtas intended that measures would be put in place to protect the integrity of the overall Social Insurance Fund and facilitate its effective management. These measures, in turn, would not be out of proportion with what was needed for these purposes. The Ombudsman's Investigation Report of 1997 contained a detailed analysis of the legal framework within which "late claims" decisions were made. It is not necessary here to re-produce that analysis. However, the main points of relevance are as follows:

1. Section 205 of the Social Welfare (Consolidation) Act, 1993 does require that a claim be made in the "prescribed manner" and it is for the Minister to prescribe the manner of claim i.e. on the standard claim form.
2. Where a claim for "benefit" is made outside of the "prescribed time", the Minister may by regulation provide for disqualifying such a claimant "for the receipt of any benefit"; but such a regulation may also provide for the extending of the time within which such claim must be made.
3. The option above appears not to provide for a limited disqualification e.g. disqualification for a limited period such as the period prior to the actual date of claim or part thereof; the provisions at 1. and 2. above relate to "benefit" which is a much wider category than "pension" and includes a number of short-term payments (e.g. Unemployment Benefit) where the Oireachtas may well have intended that a late claimant would be disqualified from receiving any benefit.
4. The Act does not require the Minister, by regulation, to impose any penalty on a late pension claimant; and there is nothing to indicate that a harsh penalty should be imposed.
5. In the light of 3. above, where the option is to disqualify or not to disqualify, it is arguable that the Oireachtas did not intend any penalty to apply to late contributory pension claimants provided the claim, when made, is in "the prescribed manner".

In any event, there is the underlying requirement that all rule-making bodies exercise their functions "with basic fairness, reasonableness and good faith". It would be difficult to argue that these regulations, in the light of the type of decision highlighted in this report, comply with these criteria. And, indeed, anyone who might have considered challenging these regulations in court might well have made other arguments e.g. that the regulations, in their consequences, amounted to an "unjust attack" on property rights and were, accordingly, at variance with Article 40.3.2� of the Constitution.

"Where Parliament has delegated functions of that nature, it is to be necessarily inferred as part of the legislative intention that the body which makes the orders will exercise its functions not only with constitutional propriety and due regard to natural justice, but also within the framework of the terms and objects of the relevant Act and with basic fairness, reasonableness and good faith. The absoluteness of the delegation is susceptible of unjust and tyrannous abuse unless its operation is thus confined..." Henchy J. in Burke v Minister for Labour (Supreme Court, 1979)

CURRENT "LATE CLAIMS" PROVISIONS

The current provisions governing the payment of arrears, where a contributory pension claim is made late, are described at Chapter 2 above. Set out below are some comments on these provisions from a legal perspective. The central feature of the current arrangement is an amendment to Section 205 of the Social Welfare (Consolidation) Act, 1993 (effected by Section 32 of the Social Welfare Act, 1997). This retains the requirement that a claim must be made in "the prescribed manner" but it radically alters the provision - described at 2. above - whereby a person may be disqualified "for the receipt of any benefit" in the event of a late claim. The current provision here is that "[w]here a person fails to make a claim for benefit... within the prescribed time, he or she shall be disqualified for payment" for a specified period which varies with the particular payment. In the case of old age and widow's pensions (contributory), the disqualification is in respect of any period more than 12 months before the date on which the claim is made.

Having established, in the case of old age and widow's pensions (contributory), that disqualification for payment applies in relation to any period more than 12 months prior to the actual date of claim, the Act (as amended) goes on to provide that this arrears period may "...subject to such conditions and in such circumstances as may be prescribed [by the Minister], be extended by a deciding officer or an appeals officer, as the case may be." Section 205(2D) of the Social Welfare (Consolidation) Act, 1993 (as inserted by Section 32 of the Social Welfare Act, 1997)

In effect, this enables the Minister to make regulations to extend the arrears payable beyond the 12 months already specifically provided. As outlined at Chapter Two, the Minister has made such regulations and they do provide for (a) the payment of a proportion of other arrears (beyond 12 months) and (b) discretion to pay even more arrears in certain circumstances. There are some difficulties with the present legal provisions, welcome as they may be. For example, there is no discernible guidance within the Act as to how the Minister is meant to exercise the powers, delegated to him in the new Section 205(2D), to extend arrears beyond the guaranteed 12 month period. As matters stand, the Minister might have chosen to extend the arrears period by a further four weeks or he might even have chosen to pay full arrears in all cases. The Act appears not to establish any principles or policies which the Minister would put into effect and the Minister would appear to have an unfettered discretion. However in the context of Irish administrative law, no exercise of discretion (except perhaps by the President) is completely unfettered because, ultimately, it must satisfy Constitutional standards of reasonableness and fairness.

"Delegated legislation is a necessary evil. The classic reasons for its use, i.e. lack of parliamentary time, its technicality, flexibility and detail, are as valid today as they ever were. The danger in recent developments is that exceptional types of delegated legislation threaten to become the norm." Administrative Law Facing the Future, ed. Leyland & Woods, London 1997

The Ombudsman gave two examples; the first related to the "late claims" regulations, the subject of this present report, while the second involved regulations governing the payment of subventions to patients in private nursing homes. These regulations (SI No. 227 of 1993) were made by the Minister for Health under the Health (Nursing Homes) Act, 1990. What was remarkable about them was that, in determining what subvention (if any) was payable to the patient, regard was had to the capacity of any adult children to contribute to the nursing home costs. At least this was the manner in which the health boards chose to interpret the regulations. In effect, the regulations were being operated as if adult children had an obligation to contribute to the parent's nursing home costs. The Ombudsman made the point that children do not have a statutory obligation to support their parents; that there is nothing in the Health (Nursing Homes) Act which could be construed as creating such an obligation; and that the regulations, at least in so far as they were having the consequences just described, appeared to be without Oireachtas authority. Whether or not adult children should have an obligation to support their elderly parents is an open question; but a decision on it is surely one for the Oireachtas and not for an individual Minister. These regulations were recently amended and, with effect from 1 January 1999, the provisions in question have been deleted. However, for more than five years the regulations operated as described despite their probable invalidity. The issue of nursing home subventions will be the subject of a separate report from the Ombudsman later this year. In his Annual Report for 1994 the Ombudsman drew attention to a perceived defect in the 1993 regulations which implemented the EU Directive on freedom of access to information on the environment. The regulations excluded from their scope information which is already covered by some other statutory provision e.g. planning records. The Ombudsman pointed out that the Directive contained no such provision and that it was a matter for concern that the regulations should be more restrictive than the Directive itself. The Department of the Environment subsequently amended the regulations and dealt with that particular difficulty.

More important than the individual social welfare, nursing home or information on the environment regulation is the fact that the Oireachtas appears to have no effective mechanism for scrutinising secondary legislation to ensure that what is being done under its authority, actually conforms with its intentions. One approach would be to make it easier for individual Oireachtas members to be allocated time, whether in Committee or otherwise, in which to raise issues or concerns in relation to individual regulations. An alternative approach would be to establish an Oireachtas Committee with a brief to monitor secondary legislation and to report to the two Houses (providing of course that a mechanism would exist to allow the reports of such a Committee to be considered by the Dáil and Seanad). In its Second Progress Report, of April 1997, the All-Party Oireachtas Committee on the Constitution suggested that the Seanad could provide the forum in which a check could be kept on statutory instruments. Whatever the precise mechanism, it seems clear that there is a real need for the Oireachtas to supervise the exercise of those powers which it delegates to rule making bodies

"...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'." Ombudsman's Investigation Report of 1997

been aware of the arrangements. One such instance is Case No. 3 at Chapter 2 in this report, but there were very many more. At best, it would be fair to say that it was a matter of chance as to whether the Department would choose to use the extra-statutory discretion. The pensioner would need to have persisted in seeking arrears and would need to have been lucky enough to present a reason for the late claim which co-incided with the grounds covered in the arrangement (e.g. delay was due to ill health or to mis-advice by the Department). Because pensioners did not know that these might constitute grounds for payment of arrears, there was no good reason why they should mention them to the Department. In its Fifth Report (October 1985), the Commission on Taxation dealt with the discretion available to the Revenue Commissioners in the form of extra-statutory tax concessions. The Commission expressed views then which are very similar to those set out above, commenting:

"The way certain legislation is interpreted in a given situation may amount in practice to an extra-statutory concession. It should follow that the Revenue Commissioners apply the same interpretation in all similar situations, in which case there can be no objection to its being published. ...This is the only defence against administration which may become arbitrary and against suspicion which may be unfounded."

The Freedom of Information Act, 1997 should do much to displace any lingering tendencies to secrecy within Irish public bodies. Section 16 of that Act specifically requires public bodies to publish, for the benefit of the public, full details of the rules, procedures, guidelines and precedents which govern the conduct of their business. Within this requirement, the possibility of a public body keeping secret any of its rules or discretions should, in future, be remote. In summary, the point about openness in relation to discretion is that (a) it enables those who might stand to benefit to be aware of its existence and (b), perhaps more importantly, openness is a very effective brake on any tendency to the arbitrary or idiosyncratic application of discretion. As Kenneth C. Davis has put it (see opposite): "Openness is the natural enemy of arbitrariness and a natural ally in the fight against injustice".

Social Insurance - Is it Different?

In reviewing what complainants have said over the years about lost contributory pension arrears, it is striking that so many of them see social insurance as somehow different from the general run of income maintenance payments. Many of them are very clear that social insurance payments are made from a fund created by their own contributions, and those of their employers, and they feel they have both a moral and a legal right to these payments, irrespective of any technical nfringements (such as being late with a claim). Complainants do not advert to the fact that the Exchequer generally contributes to the social insurance fund on a top-up basis, that is, meeting

"The seven instruments that are most useful in the structuring of discretionary power are open plans, open policy statements, open rules, open reasons, open precedents and fair informal procedure. The reason for repeating the word 'open' is a powerful one: Openness is the natural enemy of arbitrariness and a natural ally in the fight against injustice." Discretionary Justice - A Preliminary Enquiry, Kenneth C. Davis, 1971

whatever shortfall may arise between outgoings and contributions received from employers and employees. However, the trend with the Exchequer contribution over the past 35 years has been one of gradual decline, with a matching increase in the proportion contributed by employers. In 1994 the Exchequer contribution had dropped to 2.4% of the total fund and in the past two years no Exchequer contribution has been necessary. The employee contribution, as a proportion of the overall fund, has held reasonably steady over the past 35 years at roughly 25 per cent. The Department makes the point that comparison of social insurance with other forms of insurance may be misleading. The Department's views on this are set out in detail in the 1997 Report. The Department's principal points are:

• social insurance payments are not risk rated;
• benefits are not directly linked to the level of contribution made;
• payments are financed on a pay-as-you-go basis rather than on an invested fund basis.

The future funding of social insurance is certainly likely to be problematic given the enormous growth in contributory pension costs anticipated over the next few decades. For example, the number of persons over 65 years is projected to grow from 11% of the population in 1996 to 27% of the population in 2056. The Old Age Dependency Ratio is estimated to decline from 5.1 in 2006 to 1.9 in 2056. Clearly a review of the system, including the contributions of all the parties, will be needed to meet the expected demands on the fund. While the scale of future demands on the fund is substantial, it does put in context the relatively insignificant demand represented by the unpaid arrears being claimed in the "late claims" cases. The Department's role in relation to social insurance is one of manager of the fund on behalf of the fund contributors and beneficiaries. On the one hand, it will be anxious to ensure that outgoings are contained in a way which minimises any need to increase contributions. In particular, the Department is conscious of the desirability of limiting any Exchequer exposure. On the other hand, the Department acts in a trustee capacity in relation to the beneficiaries. The inference in what complainants have been saying to the Ombudsman is that the Department is striking the wrong balance between these potentially conflicting roles. There is a danger that, where the Department is responsible both for social nsurance payments and for the parallel means-tested income maintenance system, it may be unduly influenced by its responsibilities in relation to the latter. Clearly, the Department has the administrative machinery to deliver both social insurance and means-tested payments and there are economies of scale arising. But is there a case for suggesting that, in the context of the changes which are inevitable in the social insurance system, the Department should consider whether the Fund might be managed in future with the benefit of advice from some kind of advisory body which represents the interests of all the parties to the Fund viz. insured workers, employers and the Exchequer?

"Compulsory social insurance... created a kind of contractual relationship between the insured and the State....the benefits were due, as specified, because the contributions had been paid, and the government was a party to the contract, being responsible for its terms and for their faithful fulfilment." T.M. Marshall (quoted in the Report of the Commission on Social Welfare, 1986)

The Ombudsman's conclusion here is that, whereas secondary legislation remains a necessity, there is a real need for a mechanism which enables parliament to satisfy itself that secondary legislation does not amount to a usurpation of any of those powers which belong to parliament alone. Interestingly, this very point was raised by the Supreme Court in a recent judgement - see opposite. Like any discussion in the area of administrative law, this report has relied heavily on technical terminology e.g. proportionality, discretion, equity, force majeure, fair procedure, adverse effect. By linking the discussion to the points of view of the people affected, as set out in the page margins, the Ombudsman hopes that the real significance of this rather dry terminology will have been made abundantly clear.

"The increasing recourse to delegated legislation throughout this century in this and the neighbouring jurisdictions has given rise to an understandable concern that parliamentary democracy is being stealthily subverted and crucial decision-making powers vested in un-elected officials." Keane J in Sorin Laurentiu and the Minister for Justice, Equality and Law Reform (Supreme Court, 1999)