State Pension - Calculation Errors.
A Financial Times report in June revealed that many thousands of people have been receiving the wrong amount of state pension. The errors have resulted in both under and over-payments so that some pensioners will see a fall in the amount they receive when the corrected figures are implemented (they will not have to repay any overpayments received) while others will receive lump sums representing the under-payments (although no interest will be paid).
This is the current status of a review which started in 2014 and will be completed at the end of this year. It has found discrepancies involving poor record keeping, errors and missing paperwork according to the FT.
These findings will cause some doubts over the validity of pension forecasts which many rely on when planning their personal retirement funding. To obtain guidance from the Pension Service, whether you are in retirement or seeking an up to date forecast, follow this link https://www.gov.uk/contact-pension-service.
Anyone already in receipt of the State Pension will be contacted by the DWP if they are affected by these findings.
The errors uncovered relate to the Guaranteed Minimum Pension (GMP) which was a form of protection for anyone who was ‘contracted-out’ of the State Earnings Related Pension Scheme (SERPS). Employers, in effect, guaranteed that ‘contracted-out’ employees would receive substantially the same benefits as if they had been in SERPS. This was an especially complex area of pensions legislation and it is not surprising that errors occurred.
If you have not yet retired but have made plans based on a pension forecast, which has always been seen as the prudent way to plan for retirement, and were contracted out of SERPS it would be prudent to seek a revised forecast. These should be available from the Pension Service by October of this year.
If you need any financial advice, please contact the Chattertons’ Wealth Management team at your nearest office.