HMRC has issued a reassurance to state pensioners after an error dating back to 2016 affected hundreds of thousands of people. The tax authority confirmed that pensioners can still make voluntary contributions towards their state pension after some received incorrect forecasts.
Error in State Pension Forecasts
The Labour Party government's tax arm warned that many pensioners may have received forecasts suggesting they were set to receive more than they would actually get. The error occurred because forecasts did not show deductions for individuals who were contracted out before 2016.
Labour Party minister Torsten Bell was questioned about the issue by the Work and Pensions Committee. MPs inquired about how some state pension forecasts may be inflated due to an HMRC error, as the forecast did not account for contracting out before 2016.
Minister's Explanation
Mr Bell explained that the issue relates to customers who were contracted out and therefore received the equivalent of their earnings-related part of their state pension through their private pension system. He stated: "The system that was providing state pension forecasts - admittedly, with caveats, to be fair to the last Government, it would have been clear that it was not like an entitlement - provided forecasts that did not take into account that contracting out had taken place in all cases."
When asked about the number of affected people, Mr Bell said: "I cannot tell you exactly how many people have been affected, because that will depend on how many people used the forecast model. We are obviously looking at that, but no one can give you a number for, 'We know this many people in this year'."
Timeline of the Error
The minister confirmed that the issue primarily affects people who contracted out between 2016 and 2021. He noted that the previous Government stopped providing forecasts and encouraged people to call instead when they became aware of the problem. Since then, permanent fixes have been implemented to ensure forecasts now take contracting-out status into account.
HMRC Reassurance
HMRC stated: "We can reassure that affected customers have not missed out, as they can still make voluntary contributions towards their State Pension for years they were contracted out." It is estimated that as many as 800,000 people could be affected by this error.
