Restitution
front page

What's new?

Archive front page

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2007

2006

2008

2009

From The Times:

£82m tax error hits pension savers
Times, November 8, 2002
By Antonia Senior

THE Inland Revenue has wrongly paid out an £82 million windfall to thousands of pension savers after a computer error - and the taxman wants the money back.

In an unexpected, and now regretted, act of largesse, the Revenue doubled payments made to 175,000 people who opted out of Serps, the State Earnings Related Pension Scheme.

The extra cash has filled personal pension pots offered by major insurance companies. Savers who opt out of Serps gain national insurance rebates paid directly to their pensions to make up for the state pension they are giving up.

The Inland Revenue said it was very sorry for the computer glitch, but insisted it wanted to be repaid in full.

None of the affected policyholders knows that an average of £469 extra has been credited to their pension over the past four years but they will now be forced to dip into their savings to pay it back. As most pension plans are invested heavily in the stock market, the value of the erroneous payments will have been eroded.

The affected pension savers will personally be responsible for topping up the repayments.

The stock market has declined by 40 per cent since its peak in December 1999. If the £468 was invested in the FTSE 100 over that period it would now be worth about £281. The pension saver in this case would be liable for £187.

The mistake arose because the Revenue's computer system, NIRS2, failed to register that many employers were sending in duplicate information about staff national insurance records. The Revenue said that it had put in place new checks to ensure that the mistake cannot recur. It is also planning to offer "financial redress" to pension savers who lost out because of the fault.

But it remains unclear if the affected pension savers will be told individually by the Revenue that they are entitled to claim redress.

Steve Hedley

=============================================
FACULTY OF LAW, UNIVERSITY OF CAMBRIDGE

ansaphone : +44 1223 334931
www.stevehedley.com
fax : +44 1223 334967

Christ's College Cambridge CB2 3BU
=============================================