The Department for Work and Pensions doesn’t know how many incorrect state pension forecasts individuals have received.
FTAdviserreported in January 2018 that some of the state pension forecast could be showing incorrect amounts, especially for people with contracted out benefits.
In a written answer to Parliament on Monday (May 28), Guy Opperman, minister for pensions and financial inclusion, noted that state pension forecasts are based on the national insurance record at the time they are produced.
"If the national insurance record changes subsequently this will affect the forecast," he explained.
However, the DWP doesn’t hold data in relation to changes to state pension forecasts after discrepancies are raised by customers, because these are then referred to HM Revenue & Customs for investigation, he added.
In 2016, Baroness Ros Altmann introduced the Contracted Out Protected Earnings element in the state pension forecast, designed to explain to the public that they might not be getting a full flat rate pension, due to the fact that there was some other pension arrangement in place.
However, with the introduction of pension freedoms in 2015, savers are now allowed to cash out their final salary savings. In these cases, the state pension forecast provided DWP will still show the COPE, even though that pension pot no longer exists as a benefit.
Contracting out means defined benefit schemes could opt out of the state earnings-related pension scheme, so that individual members would not be tripling up on pension benefits by building up a basic state pension, Serps, and an earnings-related occupational pension.
Between 1978 and 1997, provided the scheme offered a pension of a guaranteed minimum level, the employer and employee would be allowed to pay a reduced rate of national insurance contributions and the worker would no longer build up rights under Serps.
Steve Webb, former pensions minister and director of policy at Royal London, noted that it’s "very worrying that growing numbers of people are coming forward with clearly incorrect state pension forecasts".
He said: "The calculations can be complex, especially during the transition to the new system, and there is a risk that people may make choices about their retirement based on incorrect information.
"Rather than take these as individual isolated cases, the government needs to look at the root cause of these problems to make sure that more people do not get sent incorrect forecasts.
"I now believe that thousands of people may have received incorrect forecasts and this matter needs urgent investigation."
maria.espadinha@ft.com
What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know.
