HM Revenue and Customs (HMRC) has reversed a decision to show millions of people how their state pension is calculated, potentially keeping them in the dark about whether or not the amount they are getting is correct.
Last year, HMRC announced that it would send pension statements to workers who had been 'contracted out' of the second state pension between 1978 and 1997.
Affected individuals were to be supplied with the details of their contracting out details via post from December 2018.
By this date, the majority of pension schemes would have completed the reconciliation of their information on their employees' employment and pension saving history and provided this to the tax authority. The data is then used to calculate someone's final state pension amount.
In 1978, the government introduced a second-tier top-up pension, in addition to the basic state pension, which was based on how much you earned. Originally called the State Earnings Related Pension Scheme (Serps), it later became the State Second Pension in 2002.
Before reforms in 2016, employees were allowed to 'contract out' of this additional pension. This meant paying lower contributions and giving up the additional pension to put the money towards a workplace or private pension instead.
In 1988, the government extended this to include defined contribution (DC) occupational schemes and personal pensions. These schemes invested contributions from both employers and employees to provide a pot of money for retirement.
The state pension entitlement rules changed dramatically on April 6th 2016 for men born on or after April 6th 1951 and women born on or after 6th April 1953.
A single-tier state pension was introduced with a 'full level' of £159.55 a week (£8,297 a year) and the previous system where you could 'contract out' of paying full NI contributions was scrapped.
Workers who were 'contracted out' of the state second pension would have made reduced NI contributions and, as a result, subject to receive lower state pension.
Details about your contracting out record are a vital part of calculating the amount you'll get under the new flat rate state pension system.
This data has been collected manually since 1978 by pension schemes. thatdiscrepancies have been uncovered between employers' records and those held by HMRC. This introduces the potential that the final state pension amount people in this situation are paid is incorrect.
The letters originally planned to be sent out by HMRC would have served as a prompt for workers to review their records and check for mistakes in the calculations.
According to a spokesperson for HMRC, 'pension scheme administrators are responsible for the quality of their records, including data on contracting out. HMRC is currently offering a free, voluntary service to help pension scheme administrators ensure they have the right information.'
If HMRC receives evidence of an error on someone's National Insurance record, it works to correct it immediately.
The online service intends to help identify: