Public service pensions – GMP-related overpayments

In December 2008 the Government announced incorrect payments had been made affecting some 95,000 (or 5 per cent) members of five public service pension schemes. Overpayments amounting to an estimated £126 million had been made over 30 years. A small number of people had been underpaid. The reason was that Guaranteed Minimum Pension (GMP) entitlement had been incorrectly recorded, with the result that the schemes did not apply correct annual increases.

The UK Government decided not to not recover money already paid to individuals but to correct ongoing payments from April 2009. This meant that “some pensioners would have their payments reduced and others will see increases in their payments in 2009 which are less than the annual inflation uprating.” Those who had been underpaid the arrears in full, with interest. (HC Deb, 16 December 2008, c111-2WS)

The Scottish Government decided to protect current levels of pension for Scottish local government, police and fire pensioners but was unable to do so for members of the teachers and NHS schemes (Scotland Government Press Release, ‘Public pension overpayments’, 16 December 2008).

The NAO published the report of its Review of Errors in Guaranteed Minimum Pension Payments on 16 July 2009. It said that no-one had taken responsibility for overseeing the whole process and that it had therefore broken down in a number of ways:

Despite the complexity of the administrative processes involved and the known history of problems – some of the parties involved raised concerns about the process as far back as the mid 1990s – few checks and controls were in place, which meant that missing information on the Guaranteed Minimum Pension went undetected, in some cases for over 20 years. No one party has taken responsibility for overseeing the whole process, ensuring it runs smoothly and resolving errors. The process therefore broke down in a number of ways.

Further overpayments were identified during another GMP reconciliation exercise, conducted following the end of contracting-out in 2016. The Government said that the decision on whether to recover was one for the relevant government department or local authority, taking into account HM Treasury guidance on Managing Public Money (July 2013, Annex 4.11) (PQ 133859, 29 March 2018).

As in 2008, the Scottish Government has decided to allow the overpaid element of the pension to be converted to a pension entitlement from the scheme. It will make a decision on whether all overpayments will be non-recoverable when the full extent is known (SPPA, Guaranteed Minimum Pension FAQs).

Private sector schemes in which people have accrued GMP rights were also identifying incorrect payments due to the GMP reconciliation exercise.