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Public pension overpayments
16/12/2008
The Scottish Government today published its response to a UK Government announcement on overpayment of some public service worker pensions.
Some public sector pensioners have had an element of their pensions paid twice, resulting in overpayments dating back a number of years. This stems primarily from inaccurate or incomplete information provided to scheme administrators, and is a UK-wide problem.
Schemes involved provide occupational pensions for NHS workers, Teachers, Civil Service, Ministry of Defence and Judiciary. Some 6,000 Scottish NHS and Teachers pensioners are affected.
Helpline for NHS and Teachers' pensioners
01896 892463
Civil service, MOD and Judiciary schemes are administered by UK authorities, and permission is needed from the Treasury for Scottish Ministers to amend the Scottish NHS and Teachers schemes.
Scottish Local Government, Police and Fire pensioners may also be affected to a lesser degree but work is ongoing to establish the precise numbers affected. The Scottish Government has taken action to ensure no loss to pensioners of these schemes.
The Scottish Pubic Pensions Agency (SPPA) has written to all Scottish NHS and Teachers scheme pensioners to alert them to this issue. Local Government, Police and Fire scheme administrators will liaise with their pensioners.
The UK Government has decided to correct the overpayment from April 2009, and some pensioners will see a fall in their pensions next year as a result.
The Scottish Government has vigorously lobbied UK Ministers to ensure no pensioner loses out as a result of errors that rest with others. However, on December 12, the Treasury refused consent for Scottish Ministers to amend the Scottish NHS and Teachers schemes in order to consolidate overpayments going forward.
Where decisions ultimately rest with Scottish Government - in relation to the Local Government, Police and Fire schemes - we will act to protect current levels of pension, while applying the correct increases going forward. Any past overpayment will be written off.
Helpline for NHS and Teachers' pensioners
01896 892463
Finance Secretary John Swinney said:
"Where we have the powers, we will act to protect the pensions of people who may be affected in the Police, Fire and Local Government schemes.
"I am extremely disappointed that the UK Government has not taken the same approach, and specifically refused to allow the Scottish Government to protect the position of those individuals affected - through absolutely no fault of their own - in the NHS and Teachers schemes"
Key points
- Some public sector pensioners have had an element of their pensions paid twice, resulting in overpayments dating back a number of years
- This is a UK Government issue. It primarily stems from inaccurate or incomplete information provided to scheme administrators by the UK Government. Schemes involved provide occupational pensions for NHS workers, Teachers, Civil Service, Ministry of Defence and Judiciary
- Some 6,000 Scottish NHS and Teachers pensioners are affected. Civil service, MOD and Judiciary schemes are administered by UK authorities
- Scottish Local Government, Police and Fire pensioners may also be affected to a lesser degree but work is ongoing to establish the precise numbers affected. The Scottish Government has taken action to ensure no loss to pensioners of these schemes.
- All NHS and Teachers scheme pensioners will receive letters to alert them to this issue
- Local Government, Police and Fire scheme administrators will liaise with their pensioners
- UK Government has decided to correct the overpayment from April 2009, and some pensioners will see a fall in their pensions next year as a result
- Scottish Government has vigorously lobbied UK Ministers to ensure no pensioner loses out as a result of errors that rest with UK government. Where decisions ultimately rest with Scottish Government we will correct increases going forward but protect current levels of pension
- Any past overpayment will be written off
Helpline for NHS and Teachers' pensioners
01896 892463
Questions and Answers
Q: What is the Issue?
A: Some pensioners who worked in the public sector have been receiving a larger than expected increase to their pensions each year.
Q: Why?
A: Some pensioners are entitled to a Guaranteed Minimum Pension (GMP) as part of their occupational pensions. They receive an annual increase in line with the Retail Price Index (RPI). In the affected cases, part of the GMP increase has been paid by both the scheme pension administrator and the Department for Work and Pensions (DWP), resulting in an overpayment of pension to some pensioners.
Q: What is a GMP?
A: A GMP is the minimum pension which an occupational pension scheme must provide. It applies to schemes which contracted out of the State Earnings Related Pension Scheme from 1978. All public service schemes, for example NHS, Teacher and Local Government, are contracted out. People who were members of a contracted out pension scheme between 1978 and 1997 may be eligible for a GMP element within their occupational pension. It is a notional benefit which is only paid if the occupational pension is less than the guarantee element and is not a separate benefit to be paid in addition to their occupational pension.
Q: Does every pensioner have a GMP?
A: No. Only those who were employed between 1978 and 1997 and who paid the full employed persons national insurance contribution have an entitlement. Various groups of pensioners will not have a GMP entitlement, for example those who were paying the married women's rate of National Insurance.
Q: Who is affected?
A: A proportion of pensioners (about 4-5%) who were members of a public service pension scheme between 1978 and 1997 and who have a GMP entitlement are affected. Some 6,000 people in Scottish NHS, and teachers pensions schemes are affected out of a total of 129,000 pensioners. Pensioners of UK schemes covering the civil service, MOD and judiciary may also be affected. Scottish Local Government, Police and Fire Schemes are still finalising their investigation into the matter.
Q: Does this affect private sector schemes, as well?
A: We are not aware of any private sector schemes that are affected. However, Scottish Ministers have concentrated on the schemes they are responsible for, the Local Government, the NHS, Teachers, Police and Firefighters schemes in Scotland. Occupational pensions is a matter that is reserved to the UK Government. The Department for Work and Pensions (DWP) may be able to answer this question.
Q: How did the overpayments occur?
A: Public service pensions are increased each year in line with the Retail Prices Index (RPI). The occupational scheme pays the increase on the whole pension, including the GMP element, until pensioners begin to receive their state pension. Thereafter the GMP element is shared between the scheme and the State. A proportion of public service pensioners did not have a GMP shown on their pension record which has meant that they have received the increase twice: once with their occupational scheme and again with their State pension. The result of this is that they have been overpaid.
Q: Why was the GMP not recorded on the pension record?
A: The agreed procedure whereby Her Majesty's Revenue and Customs (HMRC) provides information to occupational pension scheme administrators has failed in a small proportion of cases. All public service schemes are working with HMRC and DWP to identify any patterns to the missing information. Administrative processes are being amended to prevent a recurrence of the issue.
Q: If someone has not received a letter, is the pension correct?
A: Every NHS and Teachers scheme pensioner in Scottish schemes should have received a letter to advise, either that the pension was correct, or potentially wrong. If no letter has been received they can write to the Director of Operations at SPPA for information. The UK Government intends to write only to those pensioners who have received an overpayment from schemes that it administers. Scottish Local Government, Police and Fire Schemes are still finalising their investigation into the matter.
Q: When will letters about the inflation adjustment from April be sent?
A: The annual inflation amounts are not normally announced until later in March. SPPA will write to everyone as soon as they have more information on this from HM Treasury
Q: How will pensioners of Local Government, Police and Fire pension schemes know if they are affected?
A: The individual pension scheme administrators for the Local Government, Police and Fire schemes will be examining their systems to see if the problem affects them. They will contact affected pensioners once they have completed that work, which may take some time. However, even if pensioners in these schemes are affected, they will continue to receive the overpayment they are currently getting along with their correct pension.
Q: Why are local government/police/fire scheme pensioners not having to lose pensions?
A: The Scottish Government will put in place regulations which will allow current levels of payment to continue. From April 2009, the correct increases to GMP will be in place. Because of devolved powers, the Scottish Government does not have to seek the consent of the Treasury , and therefore a different solution is possible.
Q: Why can't this be done for NHS and Teachers scheme pensioners?
A: Changes to the regulations for these schemes require the consent of HM Treasury, and such consent was withheld, despite the request of the SG. The SG therefore have no option but to implement the decision of the UK Government, and correct wrong pensions caused by the GMP issue from April 2009.
Q: Why has the Scottish Government adopted a different approach to the rest of the UK?
A: Scottish Ministers took the view that no-one should have to repay money because of mistakes by Government Departments/Agencies and therefore decided that it was appropriate to write-off any overpayments. The SG also felt that it was wrong to reduce someone's pension, which would have been in payment for many years, and especially since there was no-way that the individual would have realised they were receiving the wrong amount. Despite these views being presented to the UK Government, no HM Treasury consent was given and this is why the final decisions in Scotland are different to the rest of the UK.
Q: Who can those affected talk to if they need further information or advice?
A: The helpline number for NHS and Teachers' pensioners is 01896 892463. Pensioners in other schemes should contact their pension scheme administrators .
Q: What help is available in the event of any hardship this may cause?
A: Once the figures are known in April 2009 individuals may be eligible for other financial assistance. They may be eligible for Pension Credits from the Pension Service, who can be contacted on 0800 99 1234. They are open from 8am to 8pm Monday to Friday. People can also contact their local Council Offices and inform them of the change in their income, in case they are eligible for assistance with Housing Benefit or with their Council Tax.
Q: Can those affected take the matter further?
A: The SPPA has an internal dispute resolution procedure (IDRP) for pensioners who are unhappy with a decision affecting their pension. They can also write to the Director of Operations at SPPA and ask for the IDRP guide which explains what their rights are if they remain dissatisfied with the decision. Other schemes have similar arrangements.