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Tens of thousands face pension cut in 2009 after blunder
Nicholas Cecil, Chief Political Correspondent16 Dec 2008
TENS of thousands of retired public sector workers will see their income drop by hundreds of pounds from next year because of a pensions blunder, ministers admitted today.
The revelation sparked immediate calls for Prime Minister Gordon Brown to intervene in the fiasco to soften the blow on pensioners' budgets.
Nearly 100,000 retired teachers, nurses, doctors, judges, military personnel and civil servants were either over or underpaid their pension.
The overpayments are in some cases believed to have run to thousands of pounds. They affect occupational pensions not the State pension. One report suggests the average overpayment over the 30-year period is about £1,300 per person. In total, they are said to amount to about £126 million.
In the past, ministers have sparked outrage by clawing back overpaid tax credits. Downing Street has vowed the pensioners will not be forced to repay the money. The Prime Minister's official spokesman said: "We recognise that through no fault of their own, some public sector pensioners have been overpaid and we believe it would be unfair to ask them to repay this money."
But the Government said from next April, payments would be adjusted -probably leading to a sharp drop for some pensioners. "It would also be unfair to taxpayers to compound the administrative error by allowing this situation to continue," the spokesman said.
Scheme administrators have written to individuals affected by the blunder, by firm Xafinity Paymaster, which accounts for five per cent of members of these pension schemes. The changes will mean average individuals could see their pension fall by £220 a year.
Liam Byrne, the Minister for the Cabinet Office, said no single cause had been found for the errors. "I have asked the National Audit Office to carry out a review of the end-to-end process to pin-point accountabilities," he said.
The situation emerged last night after Liberal Democrat Treasury spokesman Vince Cable received a tip-off and challenged Chancellor Alistair Darling in the Commons. He said Xafinity was believed to have overpaid pensions to former public-sector staff "for decades". Mr Cable said he raised the matter with Cabinet Secretary Sir Gus O'Donnell "several days ago". Sir Gus asked for time to contact pensioners.
Mr Cable asked Mr Darling: "How many people are we talking about; how much money is involved; and what steps are going to be taken to retrieve the overpayments - which I understand in some cases go back decades and are potentially enormous?
"I hope none of us face the possibility of large numbers of ex-servicemen suddenly having bailiffs turning up and asking them to repay overpayments."
Mr Cable added: "If a big reduction is involved, ministers must look at staggering the new rates to ease the transition, while ensuring that people end up paying no more and no less than they are owed."
Conservative leader David Cameron said: "You have to ask why this was allowed to go on for such a long time. This Government has been in power for a lot of years. They have to get a better grip."
The Cabinet Office is due to make a written statement later today.
Reader views (19)
A point the effect of which does not seem to appear in discussions. This relates to the impact on Service widows pensions (Forces Family Pensions) which are based on the basic pension. If the pensions are cut as a result of this blunder, the implication is that that the widows FFP will be reduced also. Where there are expectations of a certain FFP based on current pension levels, and plans have already been made, (perhaps to pay for residential &/or nursing care),then there is every possibility that these plans will be adversely affected. This could place many widows in situations of considerable hardship.
This needs to be taken into consideration when or whether existing pension payments should be reduced.
Ian Garrow
- Ian Garrow, Downham Market, England, 30/12/2008 10:10
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Labor seems to have built another house of cards with this one. The huge state bureaucracy does not work.
- Jacqueline, Hampstead, London, 16/12/2008 20:13
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The first question is can the government legally reduce the amount paid given it was stated as correct at the time of retirement or even compulsory or voluntary redundency.
If this goes back to 1978 when Labour was in power and replaced by Thatcher in 1979 how come the tories who had 18 years in power failed to pick this up?
Anyway most of those affected have gone to that great commitee room in the sky.
- Melvyn Windebank, Canvey Island, Essex, 16/12/2008 19:46
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This so-called 'Blunder' has nothing to do with the current Labour Government. This goes abck as far as 1978 so it is alledged (Adrian of France} - in this case you cannot blame New Labour. Blame previous administrations, or when these pension schemes were originally set up.
Yes, sum £126 Millions is a lot, but that goes back 30 years. Of course this make headlines for the Tabloid Press to trumpet about. What about the Billions and Billions of pounds that have been wasted by this and previous governments and not much is said about it - it all passes on by!
I am one of those Service Pensioners with a small pension - £200-00 or so pounds off my pension of around Three thousand a year is quite a lot, and I pay taxes on this plus an occupational pension I receive. So far from it - retired public sector workers are not rolling in cash as some people think. Maybe if you are being paid Two Hundred Thosand Pounds a year like some Senior Civil Servants or our illustrious MPs and Ministers are!!
Take your grousing out on them and NOT on the lower paid public sector workers. People make me mad when they say we are all living the 'Life of Reilly' - (Round spherical objects). I certainly am not, get your facts right!!
- Uncle Vanya, Chelmsford England, 16/12/2008 18:02
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A lot of Nu Labor blunders will have to be put right... This surely cannot continue!
- Georgie, Islington, London
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Don't kid yourself Georgie!
This shower will bribe Joe Thicko Public with a few cheap shiny baubles and "Voila", they will be back in power with a bigger majority than Tony Bliar!
- Geronimo, LONDON MIDDLESEX, 16/12/2008 17:47
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Why should the pensioners have to pay for the mistakes of overpaid civil servants? Take it out of the pensions of the people who made the mistake, and sack the useless idiots who cocked up.
- L.Taubler, London / UK, 16/12/2008 17:41
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They have had the money and should have noticed or at least query the amounts they were being paid. Us lesser mortals in the private sector who are not protected by this moronic governement and their leaders wouildc have the underpayments in tax clawed back by the IR on pain of a hefty fine. Equally we have had a raid on our pensions by Mr Brown when he was chancellor leaving us a lot worse of and still having to pay for government workers guaranteed pensions. This is tax payers money that is owed an should be repaid without delay!
- Adrian, Paris, France, 16/12/2008 17:03
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My wife and I are both retired teachers in receipt of small pensions. It is impossible for one to work out what one should be getting for a pension as every person is different. My wife especially is worried as she did full time work, part time, supply work and occasional work during her career. There is no way to work out what she should be getting without all the details of her periods of employment, payment at the time and annual pension increases over the years. Neither of us has been informed that we are being paid wrongly but like so many others we are now very concerned that we might be hit hard next year.
Surely we should have been informed as a matter of urgency and surely those responsible for the mistakes should have to carry the financial responsibility. I understand from the media that there are underpayments as well as overpayments. Can we assume that those who have been underpaid for years will have backdated payments? No mention has been made of that. With all of our saving having been hit this year this is just what we do not need. We have worked hard all of our lives and now get hit financially from all directions
- Colin Williams, Wells, Somerset, 16/12/2008 16:27
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A lot of Nu Labor blunders will have to be put right... This surely cannot continue!
- Georgie, Islington, London, 16/12/2008 12:35
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i think it's terrible that this has gone piblic before those involved were informed,also the company who made the mistake shoul repay the debt not their victims
- C Matchett, leicester,uk, 16/12/2008 12:13
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Typically a final salary pension in the public sector is 1/60th of final salary per year of service. I just cannot believe that none of the individuals concerned never noticed thet were paid too much. Or maybe it is confirmation that all public sector employees are incompotent! Someone I know wants to retire from the private sector. His 'pot' has dropped by 1/3rd this year and the reduction in interest rates (merely to try and keep property overvalued) has knocked down annunity rates. So Mr Darling lets see a bit of concern for those on money purchase schemes for once!
- Michael, London, 16/12/2008 12:11
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I can't afford to put money away for my own pension, yet my tax payers money is going towards the Public service pensions! Ridiculous. The money should be used for nurses, doctors, police - instead of lining the pockets of the Public sector.
- Jk, London, 16/12/2008 11:45
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Go on, that's right, hit the retired services personnel and long-suffering NHS retirees. I don't suppose they'd admit to having overpaid MPs or civil service pensions too would they.
- Yvonne, Doncaster, UK, 16/12/2008 11:37
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hey darling, how about stopping the guarantee for all public sector pensions? why should i have to pay for public sector pensions and their pay which is higher than the private sector and their pension be guaranteed when mine isnt?
You have a cheek Alastair. I don't support you, nor do i care what the unions say, they are living in the past and not facing the fact that this cannot continue..
- Irene Davey, London, 16/12/2008 11:16
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Just about sums up the whole of the incompetent public sector. They can't even look after a company to do a simple job
- Trevn, Abu Dhabi, 16/12/2008 10:04
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The over payments should be chased for those running back to seven years! this is digraceful that again tax payers money is being used as if it was a leaky tap dripping.
- Raminder Bhalla, Northolt, 16/12/2008 09:57
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>>in total, they are said to amount to about £100 million.
A mere drop in the ocean considering the financial mess this Govt has presided over. £100m is petty cash.
- Adam, Harrow, UK, 16/12/2008 09:38
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Perhaps they should use the correction proceeds to refund Equitable Life victims about which the government has so far declined to do anything because they do not want to help out anyone who has tried to help themselves.
- Anglo, Sussex UK, 16/12/2008 09:29
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is this another blunder from when Labour was last in power?
- Fly, london, 16/12/2008 09:14
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