Private sector expertise could help clear up pension mistakes – former minister

Outside experts should be brought in to support the Government in correcting the long-term underpayments of thousands of pensioners, a former pensions minister has suggested.

The Department for Work and Pensions (DWP) has been strongly criticised over the handling of long-term state pension underpayments.

It has underpaid an estimated 134,000 pensioners, mostly women, more than £1 billion of their state pension entitlement, with some errors dating as far back as 1985.

In January 2021, DWP started an exercise to correct the errors.

Baroness Ros Altmann said private sector experts from pensions administration companies and actuarial firms should be brought in to help clear up the blunders if necessary.

She said: “The underlying problem is the shocking complexity of the state pension system itself and the need to have records dating back over many decades.”

She continued: “Only a small group of DWP specialists fully understand the system and the complexities are such that members of the public have almost no hope of working out their correct pension themselves.

“They are, therefore, totally dependent on the DWP to calculate the amount correctly and, if it is incorrect, they will normally not realise.

“Despite the complexities, it seems there was insufficient staff training, inadequate data accuracy checks, poor integration between new and old IT systems and quality assurance failures across the calculation functions and customer helplines.”

Baroness Altmann added: “If necessary, additional external specialist staff from the private sector should be brought in, perhaps from actuarial firms and pension administration companies, such as those who are used to dealing with the complexity of contracting out calculations for defined benefit schemes, to add the required expertise.”

Last week, the Public Accounts Committee (PAC) described the underpayments as a “shameful shambles”.

Fixing the mistakes is expected to cost £24.3 million in staff costs alone by the end of 2023, the PAC added.

The committee of MPs said the underlying IT system relied on to manage millions of pensioner records dates back to 1988.

Quality checks failed to identify the systematic underpayments and small errors added up over years to significant sums of money.

There is no formal plan for contacting the next of kin where a pensioner who was underpaid is dead and there is no assurance that the errors that led to the underpayments will not be repeated, the committee said.

The PAC said last week that the department should consider whether there are cost-effective ways to upgrade its IT systems “as a matter of urgency”.

A DWP spokesperson said: “Resolving the historical state pension underpayments that have been made by successive governments is a priority for the department and we are committed to doing so as quickly as possible.

“We have set up a dedicated team and devoted significant resources to processing outstanding cases, and have introduced new quality control processes and improved training to help ensure this does not happen again. Those affected will be contacted by us to ensure they receive all that they are owed.

“We are carefully considering the content of the Public Accounts Committee’s report and will respond formally in due course.”