Page last updated at 16:28 GMT, Tuesday, 16 December 2008

Q&A: Overpaid pensions

The government has been paying too much into the pensions of thousands of public sector workers. How did this happen and what are the implications?

What is the problem?

It has emerged that, over the last 30 years, an ongoing error has meant that an estimated 95,000 former public sector workers - about 5% of the total - have been paid too much pension.

Who is affected?

Those overpaid include former armed services personnel, NHS staff, teachers and judicial and civil service pensioners.

How much money is involved?

The government says that the total amount overpaid over the past 30 years is 126m.

How much was overpaid to each person?

The government has not said how much people were overpaid - but the total overpayment is equivalent to about 1,300 per person - which would work out at about 3.70 a month over 30 years. The Scottish National Party say the overpayments in Scotland are about 250 per 10,000 of pension received each year.

Will pensioners have to pay back the money?

Chancellor Alistair Darling has promised that this will not happen but added that it "will be necessary to adjust what's paid for the future". The Cabinet Office said it would be "unlikely to be cost effective to attempt recovery of these monies from individuals".

But they won't continue to be overpaid will they?

Not in England they won't. The Cabinet Office says "some pensioners will have their payments reduced and others will see increases in their payments in 2009 which are less than the annual inflation uprating". However the SNP says it will continue to overpay all those pensioners whose payments it has power over in Scotland.

Why is it different in Scotland?

The ruling SNP says it is wrong to cut pensions because of a "bureaucratic bungle". It says it will protect the pensions of retired council, police and fire service workers in Scotland, which it has powers over. It says it has asked the UK government to allow it to do the same for affected teachers and NHS workers, but the Treasury refused. Retired armed forces, judiciary and civil service staff in Scotland will also have the overpayment removed.

What do opposition parties say?

Tory leader David Cameron said the affair showed the government needed to "get a better grip" on its workings. For the Lib Dems, Mr Cable said it demonstrated "decades of incompetence" and said the government should not "claw back any money". The SNP says it is right that those who served society should not see pension payments cut due to "bureaucratic failures".

How did the overpayments come to light?

A BBC journalist discovered the problems and the concerns were taken up by Mr Cable, who asked for a ministerial statement last week.

Why were overpayments made?

The Cabinet Office says it was the result of "incorrect indexation of the Guaranteed Minimum Pension" dating back to 1978 when public service occupational pension schemes contracted out of the State Earnings Related Pensions Scheme (SERPS). Read the explanation in more detail on the Cabinet Office statement.

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