News story

18th March 2002

Government Creates Pension Confusion for 1 Million People

Steve Webb MP, Liberal Democrat Shadow Secretary for Work and Pensions, today revealed that the Government is about to create confusion for a million people by sending out a complicated booklet telling them about a pension change that does not even affect them. The root of the problem is the Government’s hopeless computer systems. They cannot write just to the people who will be affected because they simply do not know who they are. Steve Webb said:

“Up to one million people are going to be receiving a complicated leaflet informing them of something that does not even affect them, despite the Government’s own admission that it may cause them considerable distress and confusion.

“It is unbelievable that the Government pours so much money into its IT systems collecting data on people’s pensions, and yet when it actually needs to contact these people, it simply has no idea who they are or where they live.

“After 5 years in power, the Government can no longer blame the crumbling computer systems it inherited. It is time the Government got a grip instead of wasting people’s time and money in this way.”

ENDS

Notes to Editors

· Over 5 million people within 10 years of state pension age are about to receive a 12 page booklet detailing complicated changes to their entitlements under the state earnings-related pension scheme (SERPS). But at least a million of these people have opted out of SERPS into a company pension and therefore do not have any SERPS entitlement. They are likely to be bewildered and confused by receiving this leaflet from the Government.

· The Government has in the past admitted that mass mailshots of this sort may not work. DWP Permanent Secretary Rachel Lomax told the Public Administration Committee that: “Writing to everybody may turn out to be expensive and inefficient and possibly distressing in some cases.” The Government has also admitted that in approximately 1 in 3 cases it may not even have an accurate name and address for the people it is trying to contact. She also said that the real problem with writing to everyone is that “in about a third of the cases the address is almost certainly wrong.”

· According to the Department of Work and Pensions their computer systems will cost £2.44 billion to maintain and upgrade during the period 2001-04.

· The booklet itself is also far from clear, despite having a “plain English” stamp. One paragraph, which would confuse even pension experts, reads: “Contracted-out deductions which apply to SERPS earned between April 1978 and April 1997 do not apply to SERPS earned after April 1997. This is because from April 1997, there is no longer a link between contracted-out schemes.”

· In 1986, the Government legislated to halve widows’ and widowers’ entitlements to their spouse’s State Earnings Related Pensions Scheme (SERPS). The change in law was not due to take effect until April 2000, to give people plenty of time to adjust their pension arrangements accordingly.

· However, the DSS failed to inform people of the change, and Government leaflets were only updated in 1996 – after 10 years of misinformation. The Government therefore deferred the cuts to October 2002, to be phased in for those who have not yet retired, on a sliding scale.

· Over 20 weeks from 11 March, the Department of Work and Pensions is sending a letter and a 12 page booklet to 5.5m people within 10 years of state pension age who may be affected by the changes outlined above.

· Up to 1 million of these people do not have any SERPS entitlement and so will not be affected by the changes. This figure is calculated by looking at the number of newly retired people (men aged 65 & women aged 60) this year – about 500,000 – without SERPS entitlement, which is approx. 100,000 (i.e. 20%). 20% of the 5 million people that the DWP are writing to is 1 million people.