The DWP has been urged by MPs to offer compensation to state pensioners after a major error was uncovered by an investigation. Earlier this year, The Telegraph found pensioners were overtaxed on their payments by HM Revenue and Customs (HMRC) following serious flaws in the official state pension forecasting system. A report was published on Saturday by The Work and Pensions Committee, revealing that the government’s online calculator had been providing inflated retirement income estimates for almost a decade.
The cross-party committee found that some users of the forecasting service, which was first launched in February 2016, were incorrectly told that they would receive the full state pension with no need to make additional National Insurance payments. Meanwhile, it was revealed that ministers only took action after The Telegraph’s report, even though the issue had been ongoing for nine years.
It was found that the system failed to consider “contracting out” arrangements, which allowed workers to pay reduced National Insurance in return for enhanced private pensions.
This resulted in some people’s forecasts being overstated by as much as £100 per week, which would have led some to believe they were appropriately prepared for retirement when that was not the case.
The DWP became aware of the fault as early as 2017, but it took another four years for corrections to be made.
Around 360,000 people had already received inaccurate pension forecasts by that point, The Telegraph reported. Its investigation revealed that as many as 800,000 people could have actually been affected.
Baroness Altmann, a former pensions minister, warned people against putting too much faith in the reliability of the calculator. Andrew Tully, technical services director at Nucleus Financial, said that people could have made damaging financial choices as a result of inaccurate forecasts.
The DWP confirmed that the online issue has been resolved, and it welcomes the committee’s report and will respond to its recommendations.