MPs have demanded that compensation be given to those who fell victim to years of incorrect state pension forecasts.
The government tool has been giving people incorrect pension forecasts for the past decade (Image: Getty)
MPs have called for compensation after incorrect state pension forecast saw hundreds of thousands of people overpay their tax. A faulty government forecasting tool has been found to have overestimated as many as 800,000 people’s retirement payments. This has led to demands of compensation for those that were misled by these forecasts.
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An investigation by the Telegraph revealed that many people were told that they would receive the maximum state pension, without having to pay any more National Insurance contributions. A report published by a group of MPs, criticised the error, saying that people had lost the chance to work longer or save more for their retirement. The report also said that the MPs were “deeply concerned” that the Department for Work and Pensions (DWP) had not communicated about such a glaring mistake.
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The mistakes are leading to people retiring with less than they thought (Image: Getty)
The forecasting tool, which was launched 10 years ago, allowed users to receive an estimate of how much their payout would be, allowing them to plan for retirement.
However, an error was made when the results failed to include a deduction for contracting out of the additional state pension. This had previously allowed people to pay less in National Insurance in return for a higher private pension and a reduced payout from the state.
Some deductions can be as high as £100 a week, meaning that this incorrect forecast puts many at risk of retiring with lower weekly payments than expected.
DWP have been urged by MPs to set out what mistakes were made and who was affected (Image: Getty)
Andrew Tully, from investment platform Nucleus Financial, advocated for the consideration for compensation.
“The state pension is the bedrock of people’s retirement,” he said. “Many will use their forecast to drive decisions around when they stop working, whether they pay voluntary National Insurance contributions to boost their payout and even how much private savings they build up.
“If their forecasts were wrong, people may have made poor decisions or taken action they otherwise would not have.
“In some situations, compensation needs to be considered.”
Baroness Altmann, a former pensions minister told the Telegraph: “I remember when I was designing it, there were clauses in it – small print – that basically said: ‘This is an estimate.’ Unfortunately this is one of many problems, that’s my fear. They have fixed this one and then we find more.
“When someone has made a life-changing decision based on the information they got, what they get from the DWP is that they ‘shouldn’t have relied on it’. There really seems to be this spirit of cover-up of the problems that exist in the state pension and the online calculator.
“Certainly from what I have seen, nobody should rely on what they are told by the calculator, which is something the public needs to know.”
A DWP spokesman said: “We welcome the report from the Work and Pensions Select Committee and we will respond to their recommendations in due course.
“We have fixed this issue for all customers accessing the online tool.”