Xafinity Paymaster, the company that was formerly part of the Treasury and known as the Paymaster Agency, before being privatised in 1997, says it made the payments to pensioners on the basis of incorrect information sent to it by government departments.
Liam Byrne, the Cabinet Office minister told the House of Commons that NHS, teachers, armed forces, judicial and civil service pension schemes had overpaid £126m in benefits because of the incorrect indexation of inflation increases. Xafinity was not mentioned in a statement issued on the subject from the Cabinet Office.
Byrne says: “The causes of the overpayments have been investigated by the pension scheme administrators, HMRC and DWP. There is no single cause. I have asked the National Audit Office to carry out a review of the end-to-end process to pin-point accountabilities, and the House will be updated further.
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 state pension is claimed, but thereafter part of the uprating is paid with the state pension, depending on the GMP entitlement.
Around 95,000 former NHS staff and an as yet unconfirmed number of retired military personnel will see their pensions reduced from April as a result of the mistake.
But a small number of Scottish local government, fire service and police pensioners will not see their pensions cut after the Scottish Government said it was wrong to reduce someone’s pension after it had been in payment for years. Around 6,000 Scottish former NHS workers and teachers will see their pensions cut because these schemes are administered by the UK government.