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Public sector pension overpayments

Published Wednesday, April 25, 2018

Looks at overpayments to members of public service pensions due to incorrect calculation of Guaranteed Minimum Pensions (GMPs) in 2008 and again in 2018

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In December 2008 the Government announced incorrect payments had been made affecting some 95,000 (or 5 per cent) members of five public service pension schemes. Overpayments amounting to an estimated £126 million had been made over 30 years. A small number of people had been underpaid. The reason was that Guaranteed Minimum Pension (GMP) entitlement had been incorrectly recorded, with the result that the schemes did not apply correct annual increases.

The UK Government decided not to not recover money already paid to individuals but to correct ongoing payments from April 2009. This meant that “some pensioners would have their payments reduced and others will see increases in their payments in 2009 which are less than the annual inflation uprating.” Those who had been underpaid the arrears in full, with interest. (HC Deb, 16 December 2008, c111-2WS)

The Scottish Government decided to protect current levels of pension for Scottish local government, police and fire pensioners but was unable to do so for members of the teachers and NHS schemes (Scotland Government Press Release, ‘Public pension overpayments’, 16 December 2008).

The NAO published the report of its Review of Errors in Guaranteed Minimum Pension Payments on 16 July 2009. It said that no-one had taken responsibility for overseeing the whole process and that it had therefore broken down in a number of ways:

  • Despite the complexity of the administrative processes involved and the known history of problems – some of the parties involved raised concerns about the process as far back as the mid 1990s – few checks and controls were in place, which meant that missing information on the Guaranteed Minimum Pension went undetected, in some cases for over 20 years. No one party has taken responsibility for overseeing the whole process, ensuring it runs smoothly and resolving errors. The process therefore broke down in a number of ways.

A GMP reconciliation exercise is currently underway and is expected to end by December 2018. Further overpayments are being identified as part of this. The decision on whether to recover is one for the relevant government department or local authority:

  • Where a ministerial department is responsible for the appropriate pension scheme, it is for them to determine, in accordance with Managing Public Money (July 2013, Annex 4.11), whether and how overpayments are to be recovered. If departments determine that it is not feasible to recover overpayments, they will need to bring the resultant losses to parliament’s attention. In the case of the local government pension scheme, decisions on whether and how to recover overpayments are matters for the relevant local authority (PQ 133859, 29 March 2018).

Private sector schemes in which people have accrued GMP rights are also identifying incorrect payments due to the GMP reconciliation exercise.

Commons Briefing papers SN04919

Author: Djuna Thurley

Topic: Pensions

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