MPs attack 'appalling' blunder on pensions

An "appalling administrative blunder" by the Department of Social Security has left thousands of widows and widowers out of pocket and taxpayers facing a bill of up to £13bn, MPs have found.

An "appalling administrative blunder" by the Department of Social Security has left thousands of widows and widowers out of pocket and taxpayers facing a bill of up to £13bn, MPs have found.

In a report published todaythe Commons Public Accounts Committee attacks a catalogue of mismanagement in the DSS over the state earnings-related pension scheme (Serps).

Last night some MPs said the blunder was worse than the private pensions mis-selling scandal unearthed in the 1990s.

Both the DSS and Benefits Agency failed to publicise rule changes that meant widows and widowers would inherit only half their partner's Serps entitlement from this April. Although the change was made in 1986, lack of publicity meant tens of thousands of Serps holders have been unable to find alternative pensions provision.

The Government has now deferred the change to October 2002 and announced a scheme to restore the pensions of those who were misled.

The Public Accounts Committee said the blunder caused "confusion and distress" for many people. David Davis, chairman, said it was incredible that over 14 years there had been no publicity about halving inherited Serps. "This appalling administrative failure has caused distress to many thousands of people and will undoubtedly cost taxpayers many billions of pounds over the next 50 years to put right. The Government should meet its obligation to recompense those who simply were not told about a major change in their pension rights and so were unable to do anything about it to provide for their loved ones after their death."

The committee said there had been a "systemic failure" of administration in the DSS and Benefits Agency. The DSS wants to identify anyone who may have been misled over their pension but has come up with a scheme the MPs say could cost up to £13bn.

Details of the scheme to protect those not told of the changes are still being worked out. The committee expressed concern all those affected may not be contacted. "We are concerned that many of those affected will not hear about the scheme, or may find it difficult to understand," the report said.

The MPs urged ministers to consider deferring for another 14 years the halving of inherited Serps. They also recommended that every one of the 20 million people who could be affected should be written to to make a claim for compensation.

The committee welcomed the Government's decision to set up a dedicated pensions directorate to ensure similar administrative problems do not occur in future.

The report said: "Citizens planning their pension arrangements need to know about changes in their schemes and be sure the information they receive is accurate and complete. The department failed on both counts."

David Rendel, the Liberal Democrat member of the committee, said: "The Government forced the private pension providers to write to all their clients following the private pensions mis-selling scandal. They should now follow suit for their own blunder."