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Thousands face pension cut following Xafinity blunder

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  • Thousands face pension cut following Xafinity blunder

UK - The UK government has admitted tens of thousands of ex-servicemen, former NHS employees and teachers, and other former public service industry workers now face an pensions cut, following a blunder on indexation connected to Xafinity Paymaster.

The UK Cabinet Office said in a statement today an estimated £126m (€141m) has been overpaid to approximately 95,000, or 5%, of public service pensioners, as Xafinity - a former public body paying out public sector pensions - overpaid pensioners in a miscalculation going back as far as 30 years.

The flawed indexation of the so called guaranteed minimum pension (GMP) involves the NHS, Teachers, Armed Forces, Judicial and Civil Services pension schemes, the Cabinet Office said.

Alistair Darling, the UK's chancellor of the exchequer, warned the money would not have to be repaid, though added it would be necessary to adjust what is paid for the future.

Letters are now being sent to pensioners explaining how they will be affected, and the correct pension payments will be reset for April next year.

Accounting officers of the five schemes have advised it is unlikely to be "cost-effective to attempt recovery of these monies from individuals".

IPE understands the government will have to review each individual case in the following months.

The Cabinet Office wrote in its statement: "The problem dates back to 1978 when public service occupational pension schemes contracted out of the State Earnings Related Pensions Scheme (SERPS).

"As a condition of contracting-out members had a guarantee of a minimum amount of occupational pension. This GMP applied to those who were members of a contracted out scheme between 1978 and 1997 and who would otherwise have been entitled to SERPS."

Public service pensions are uprated in April each year in line with the Retail Price Index. The occupational pension scheme pays for all the uprating before the state pension is claimed, but thereafter part of the uprating is paid with the state pension, depending on the GMP entitlement.

However, to apply the correct pension increases, the administrators need accurate GMP information derived from the individual's National Insurance contribution record.

"Our investigations have revealed that in 95% of cases this information is correctly recorded. But, in some cases it is not. In those cases schemes have paid the annual increase on the full pension each year instead of on an amount adjusted to reflect the GMP entitlement," read the statement.

A spokeswoman of Xafinity Paymaster declined to comment on how the fault was able to occur or for how long it has held the administration contract.

If you have any comments you would like to add to this or any other story, contact Carolyn Bandel on +44 (0)20 7261 4622 or email carolyn.bandel@ipe.com

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