Getting what you are due?

Pension and bombshell. Words to make anyone pull the duvet back over their heads. Most of us have an ostrich reaction when it comes to pensions – they’re too complicated or we know we’re going to end up retiring with very little income, so why even think about it?

But for the people already living on their state pensions, the recent bombshell news that they could now be cut will have come as real shock.

In case you hadn’t heard, a government scheme which aimed to clean up old company pension records to make sure HMRC was paying out the correct state pension, has revealed that companies may have overpaid out of their employee pension schemes. This could now mean a cut to people’s state pensions.

It all stems from when employees were allowed to “contract out” of a secondtier top-up pension the government introduced in 1978, called SERPs.

You could choose not to pay this and put the money saved into a company or private pension instead.

If you chose a company pension, employers had to promise to at least match the state pension the employee would have received had they stayed in SERPs this was called the Guaranteed Minimum Pension.

Now, HMRC holds data on everyone who has a GMP and when the state pension is calculated the GMP is deducted from a person’s entitlement.

But errors can creep in which is why the government launched the realignment scheme. So when companies match up their data with HMRC’s, it could be that people have received too much in state pension.

Just how many people will be affected is not yet known as the scheme won’t be completed until December. And because of the complex nature of the system, it’s impossible to proactively check whether you’re being overpaid.

The government has said it won’t make people repay any state pension overpayments, but it will mean a cut in future payments. And chances are some people will be hit quite substantially.

Obviously there was little anyone could have done to stop this happening – but it serves again as a reminder that we should all take our heads out of the sand and get pension savvy.

Send me your consumer queries to askalex@which. co.uk