Clerical errors hit state pension

Out-of-pocket: Nearly one -in-three could lose £100 a year

Up to three million people could lose out on part of their state pension, a new report reveals.

In most cases the loss amounts to a couple of pounds, but up to one million people might be receiving more than £100 less than they should.

And a small number could be losing out by as much as £250 a year, the National Audit Office said.

The problems have arisen because national insurance records were completed incorrectly by employers.

Most of the people who are thought to have been affected are short-term or low-paid workers, often working in workplaces that have a high staff turnover.

When workers reach retirement they may not get their full State earnings-related pension (Serps).

Serps is an additional state pension, which is based on National Insurance Contributions, and is paid to eligible workers in addition to the basic state pension.

Edward Leigh MP, chairman of the public accounts committee, said: "We know that Serps faces a number of problems. Today's report reveals another.

"The Revenue needs to find a way to improve the information being provided by employers."

Matching details

The Inland Revenue has tried to trace and update the records but if the items can not be matched they are kept permanently on non-matched "suspense files".

The quality of the contributions information received from employers remains a particular and enduring difficulty Sir John Bourn, auditor general

There are more than 100 million items within the suspense files.

Attempts by the department to match the items has "generated no impact at all on benefits" and further clerical checking was too expensive, the report said.

Some of the suspended files date back by as much as 29 years, which means that some of those affected are already drawing their pensions.

Auditor General Sir John Bourn said: "The Inland Revenue continue to face challenges in maintaining individuals' National Insurance contribution records, upon which large amounts of the public's benefit entitlement depend.

"The quality of the contributions information received from employers remains a particular and enduring difficulty that various measures are addressing."

In recent years the number of unmatched records has declined because the Inland Revenue has improved its systems.

It is hoped that by increasing the number of electronic submissions the number of unmatched records will decrease.