DWP admits state pension forecast errors, with some savings overestimated by up to £35 a week ‘People rely on these forecasts to make their plans and they have to be confident that they are accurate’

The Government needs to take “urgent action” to restore confidence in the state pension forecast system after hundreds of thousands of people were given incorrect estimates, the former pensions minister has said.

Sir Steve Webb’s warning comes after the current pensions minister admitted in a letter there was a “significant problem” with forecast errors.

The issue means that some people, who are preparing for retirement and check their online statement, might find their state pension forecast does not correspond with the written statement they previously received.

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In most cases the online amount has been overestimated and is incorrect. One person’s forecast was overestimated by £35 a week, said Sir Steve.

The Department for Work and Pensions (DWP) has said it is working to resolve the errors.

360,000 people affected

It is believed that 360,000 people with a complex work history may have been affected by the issue over the last three years, according to Sir Steve’s analysis, which was carried out in partnership with financial website This Is Money.

Pensions minister Guy Opperman admitted the problem in a letter to Sir Steve, who enquired about the issue.

Mr Opperman said no more than 3 per cent of people will be impacted by the issue and that the errors will be corrected before they retire.

“However, I nonetheless recognise there is a significant problem here,” he said.

He said the DWP “has worked with HM Revenue and Customs (HMRC) to strengthen the quality and accuracy of state pension information to ensure that the online tool Check Your State Pension operates an optimal customer service”.

‘People rely on forecasts’

Sir Steve, who is now director of policy at mutual insurer Royal London, said while the percentage of people affected was relatively low, it still added up to around 360,000.

“Far too many have been sent information by the Government which is simply incorrect,” he told i.

“People rely on these forecasts to make their plans and they have to be confident that they are accurate. Now that the Government knows the scale of the problem, urgent action is needed to restore confidence in the whole system,” he added.

‘Residual level of error’

The digital service for checking pension forecasts went live in 2016 with the DWP encouraging people to use the system. Before that, forecasts had been given via written copies.

Mr Opperman said “there will always be a residual level of error in the system”.

“As a former pensions minister I am sure you will recognise that HMRC records can never be perfect,” he wrote in his letter to Sir Steve.

“But we are making progress with this; HMRC have increased the accuracy of National Insurance records and reduced the number of cases requiring corrective action in advance of state pension age from 10 per cemt of claims in 2013-14 to 3 per cent in 2018-19.

“Work continues to increase the level of data accuracy. Importantly, no-one will receive an incorrect amount of state pension.”

The DWP said: “We are aware that a small proportion of online State Pension forecasts may have been affected by errors.

“We apologise to those affected for the inconvenience. Our officials are working urgently with HMRC to make sure this problem is resolved as quickly as possible.”