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BeeHive  >  BeeLines  >  2008  >  Nov  >  Nightmare on Pension Credit Street

Nightmare on Pension Credit Street

According to research by the Liberal Democrats more than one in three pensioners claiming pension credit are apparently receiving the wrong amount.   Yes, you heard that right, one in three!

Statistics released by the Department for Work and Pensions show that officials are to blame for a large majority of the mistakes leading to the incorrect payments.

The research revealed that:

  • 36.5% of all pension credit payments are incorrect - this represents more than 1 million pensioners’ claims
  • 84% of the mistakes were caused by official error - this is three times more than the number of cases that were incorrect due to errors made by pensioners and 20 times more than those due to fraud
  • Official mistakes have led to £760m being overpaid and £412m being underpaid in pension credit since its introduction in 2003
  • The latest figures show that official error in the pension credit system caused £200m in overpayments and £90m in underpayments last year

Jenny Willott, who is the Liberal Democrat Shadow Work and Pensions Secretary is quoted as saying:

“Pension credit is so complex even officials can’t understand it. It is no wonder that so many people are put off claiming it.

“It is outrageous that money that should be going to hard-up pensioners is not reaching them.

“The Government must scrap complicated benefits for pensioners and introduce a universal, higher state pension which increases in line with wages. This is the only way to deliver a fair deal for all pensioners.”

Readers of the BeeHive will know that I agree with a lot of that.  But I would go further and say that the current system is not only letting down existing pensioners, but is failing future pensioners too.  The system of means-tested credits for older people is probably the biggest obstacle in the way of pension distribution in the UK today and will likely be the stumbling block for the current set of reforms the Government is putting in place for 2012.  A higher state pension with universal access would be one way of assuring future savers that every pound saved in a pension would make them at least one pound better off than non-savers; a pre-requisite for a sensible pension savings market in my view.  If pensions are not first made intrinsically suitable for all then the auto-enrolment of ten million people into saving in a pension is likely to be a disaster.  Giving individual advice on such a scale cannot ever be considered to be a sensible, or even feasible, option.  If you were a reader of the BeeHive three or more years ago you will know that I have always said just that and I have to say I’m delighted to hear more and more people saying much the same thing these days; it leads me to hope that a better way forward might be found.

You may be interested to hear that Jenny Willott has accepted our invitation to become a guest on an upcoming edition of Pensions Radio where we can discuss these issues in more detail.  We’ll let you know as soon as that podcast has been recorded and is ready for release.

Steve Bee

3 November 2008

Source: - Fraud and Error in the Benefit System (from March 2006)
“Over 1/3 of pensioners receive wrong benefits payments” - Liberal Democrat press release, 31 October 2008.

Any research and analysis has been provided by us for our own purposes and the results of it are being made available only incidentally.