Pension payment blunders by the HMRC dating back four decades mean tens of thousands of pensioners face income cuts while others could get an unexpected boost.
The errors have hit retired workers with both public and private sector pensions and could result in some seeing their retirement income drop by 50 per cent.
Where pensioners have not been paid the correct amount, they will see their pensions boosted with back payments as well as future increases.
But neither interest on the payments nor compensation for the errors are in the pipeline.
Pensions and retirement expert Baroness Ros Altmann, a Tory peer, and former pensions minister, told the Telegraph that it was ‘almost beyond belief that thousands of pensioners can suddenly be told they will have their income cut because of mistakes by those supposed to be in charge of paying them the right amount.’
‘It seems utterly wrong to make pensions suffer for the mistakes of others.
‘Confidence in pensions is so important and if people can’t even trust the figures they are told by the experts are right, then it damages the whole system.’
The payment blunders have become apparent during a pension data clean-up, which began four years ago and will run till December.
The government’s data-checking exercise is the largest involving retirement benefits in UK history.
It involves thousands of public and private sector pension schemes reviewing records held for millions of workers who ‘contracted out’ of a government plan that allowed them to build up an additional state pension.
To date, the data-checking exercise has established that pensioners have missed out on payments ranging from £50 a year to £10,0000 during the course of a person’s lifetime.
When data held by pension schemes was compared with official records, the blunders became apparent because of poor record-keeping and missing paperwork.
Last year, £22 million of overpayments attributed to errors hit about 10,000 people in the Civil Service Pension Scheme, which has about one million members – about 600,000 of whom are pensioners. The Cabinet Office called for an investigation after some retired civil servants were told their pensions had been overpaid, and were asked to repay the money.
The Financial Times recently quoted pension administrator Willis Towers Watson saying over and underpayments it had seen ranged from £50 a year to £10,000 over someone’s lifetime, and up to three per cent out of 500,000 pensions in one review turned out to be wrong.
A Government spokesperson said: ‘The reconciliation exercise has been underway for some time. Most queries submitted as part of the exercise do not have an impact on the amount of an individual’s state pension.
‘However where queries do result in changes, we are notified by HMRC, and where the pension is in payment, review the award and notify the individual of the change.
‘HMRC and pension scheme administrators determine whether the GMP figures are correct. However, where overpayments of State Pension do occur due to incorrect GMP figures, individuals will not be expected to repay any overpayments.’