Mil­lions of pen­sion­ers hit by HMRC dead­line

The Daily Telegraph - Your Money - - MONEY - Laura Miller

Up to a mil­lion pen­sion­ers will be stuck with in­cor­rect pay­ments, many long­stand­ing, after the end of this month, ex­perts have warned, be­cause HMRC is lim­it­ing help to set their records straight.

Mil­lions more will be put in limbo from Oct 31, the last day that com­pany pen­sion schemes can eas­ily check with HMRC that they have the in­for­ma­tion needed to pay pen­sion­ers the right in­come.

State and fi­nal salary em­ployer pen­sions will both be af­fected. Wil­lis Tow­ers Wat­son, a fi­nan­cial con­sul­tancy, said hun­dreds of thou­sands of pen­sion­ers would get less than they were due, or too much and com­pa­nies would have to claw it back later.

Dif­fer­ences are small for most peo­ple. But in a re­cent case, Wil­lis Tow­ers Wat­son said some pen­sions were wrong by £5,000 in to­tal and oth­ers, if left un­cor­rected, would be out by £10,000 over a life­time.

Those af­fected reached state pen­sion age be­fore April 6 2016, when the ben­e­fit had two parts: ba­sic, where peo­ple built en­ti­tle­ment based on their na­tional in­sur­ance record; and the state earn­ings-re­lated pen­sion scheme (Serps).

From 1978 it was pos­si­ble to “con­tract-out” of Serps. Em­ploy­ees and their em­ployer would pay less na­tional in­sur­ance to re­flect the cost of what was be­ing given up. The com­pany had to pay a guar­an­teed min­i­mum pen­sion (GMP) in re­turn for its tax break.

But wide­spread prob­lems were found with GMP pay­ment records.

Pen­sion schemes have had since 2014 to fix this, but want more time. HMRC won’t give in, and after Oct 31 it will only process case-by-case checks, which will be much slower.

Phil Titch­ener of Wil­lis Tow­ers Wat­son said: “GMPs are so com­pli­cated some peo­ple could end up with too lit­tle from the state and too lit­tle from their work­place scheme.”

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