HM Revenue & Customs has claimed “no pensioners will lose out” due to faulty data supplied by their employers pension schemes.
From this April the state pension will move to a flat-rate system, with some people receiving the full-flat rate, while others get a different amount based on their national insurance contribution record.
However, discrepancies have been uncovered between employers records and those held by HMRC, leading to suggestions that people may be given erroneous state pension payments.
A spokesperson for HMRC responded that it is working closely with pension funds to make sure their records are completely up to date, while all pension providers should use the official checking service to make sure their members’ records are accurate.
“HMRC is offering a free reconciliation service to enable the schemes to match their records against HMRCs, based on employers’ PAYE returns. This service has been available for nearly two years and HMRC urges employers to register for it before the deadline of 5 April.
“For individuals shortly reaching their state pension age there is a fast track service to ensure they get the correct pension.”
The flat-rate state pension will pay a minimum of around £155 a week and people need at least 10 qualifying years of national insurance contributions to qualify, with 35 years worth required to receive the full amount.
Many who will not get the full flat-rate pension will have contracted out of the system, meaning they opted out of extra benefits such as the state second state pension, in exchange for being allowed to pay a reduced rate of national insurance.
Data on this contracting out record is crucial to determining their final entitlement under the flat-rate system.
Such information has been collected manually since 1978, so errors are therefore more likely to occur between what schemes and the government holds.
Another potential issue is that since 2012, HMRC stopped requiring pension providers to collect data on contracting-out, meaning six million people who transferred into a personal pension have no such records.
HMRC pointed out that it is the scheme administrators responsibility to track the rights of their members and their legal responsibility to notify the tax office when a member transfers away from the scheme.
Despite this, as a backup, HMRC also tracks the rights of the employee using the information it receives from employers on the amounts of national insurance paid, together with data from the employer.
peter.walker@ft.com
