Pension errors hit incomes of thousands
TENS of thousands of retired workers face cuts to their pensions after HMRC identified errors in their records stretching back decades.
An extensive trawl of records comparing HMRC’S official files with those held by pension schemes has identified errors dating back as far as 40 years.
The errors in calculations by the pension schemes mean retired workers with both public and private sector pensions face reductions to their payments, which in some cases will halve their retirement income.
Some pensioners have been paid too little and will receive back payments in addition to future increases, though they will not receive any interest on the payments or compensation.
Baroness Altmann, a Tory peer and former pensions minister, said: “It is almost beyond belief that thousands of pensioners can suddenly be told they will have their income cut because of mistakes by those supposed to be in charge of paying them the right amount.
“It seems utterly wrong to make pensioners suffer for the mistakes of others.”
The records check began in 2014 and is due to conclude at the end of the year. It has identified underpayments that range from £50 a year to £10,000 over the course of someone’s lifetime.
The errors affect those who “contracted out” of a state pension top-up between 1978 and 1997. Under the scheme, employees received a “guaranteed minimum pension” to ensure they were not penalised financially. But significant discrepancies were identified because of poor recordkeeping and missing paperwork when pension schemes’ data were compared with the official records.
The Civil Service Pension Scheme, which has one million members, last year identified £22 million of overpayments relating to errors affecting around 10,000 people. A recent review
of 500,000 pensioners with private sector schemes identified between 10,000 and 15,000 in overpayments, according to The Financial Times.
In some cases people have been asked to repay historic overpayments, although the Government is clear that they should not be expected to do so.
Sir Steve Webb, a former Liberal Democrat pensions minister, said: “It would be totally unacceptable for pension schemes to try to claw back hundreds or thousands of pounds from scheme members. The whole system is eye-wateringly complex, and there is no way that members would have a clue if the figures were right or not.”
A government spokesman said: “Where overpayments of state pension do occur due to incorrect Guaranteed Minimum Pension figures [the opt-out scheme], individuals will not be expected to repay any overpayments.”