This piece first appeared in The Daily Telegraph on 2 December 2000
The text here may not be identical to the published text

The computers at the Department of Social Security were condemned as "rubbish" last week by the Government Minister in charge of them. Pensions Minister Jeff Rooker used the term after he was forced into new admissions about the problems caused by the three-year-old National Insurance computer known as NIRS2.

The computer has been dogged by problems since it was turned on in February 1998. Ministers have frequently assured MPs and the public that the problems were being sorted out. Now it appears that the computer is still getting its sums wrong. Each year it fails to calculate correctly the pensions of more than 27,500 newly retired people. Mr Rooker told Parliament.

"Each month about 50,000 plus people become pensioners. Currently the system is not dealing with payments to about 2300 of those people, which is not satisfactory. Also there is still a backlog of information from NIRS2 to the Benefits Agency. We are however, working very quickly to rectify the situation. I do not think it is a secret that the Department of Social Security is not proud of our IT systems which are rubbish. Over the years under-investment in IT and the purchase of the cheapest systems have brought us into a sorry state."

Although Mr Rooker gave this apology, the responsibility for the NIRS2 system passed to the Inland Revenue when it was given charge of the National Insurance system in April 1999. A spokesman told Your Money that it would be wrong to conclude that 2300 new pensioners each month got the wrong pension.

"The NIRS2 system identifies those cases where the calculation cannot be fully dealt with. It then applies a basic entitlement to pension and then flags the case up for the Benefits Agency. A section of the National Insurance Contributions Office then completes the calculation…Pensioners should then be paid the right amount at the time it becomes payable."

The calculation of the basic pension and of the State Earnings Related Pension Scheme is so complex it is unlikely if the recipient would know if the pension paid was wrong or not. Tony Gammage, a retired accountant from Epping, might be expected to. He is concerned about the catalogue of mistakes made in his case.

"I was not set the form before my 65^th birthday. I had to wait six months to get anything and then I was only paid the basic pension. There was then a long delay to get the additional pension (SERPS) and the amount I get I believe is still wrong. The graduated pension is simply not on the sheet at all. I think my pension is still £5.74 a week too little. I am not concerned with the amount; it’s the principle. I have a letter of 20 March 1995 saying what I should get when I retired, I have fulfilled the conditions, so that is what I think I should have. A lot of people would just accept what they were told by the bureaucrats."

Mr Rooker has now admitted that the computer problems have led to 128,000 pensioners being underpaid by a total of £43.5 million, an average of £340 each. Adding in invalidity and jobseeker's allowance claims took the total to 140,000 underpaid by £58 million. The Government says they have all now been paid. But Mr Rooker admitted that in addition by the middle of September there were still 97,000 retirement pension cases waiting to be checked. That number had fallen from 128,000 at the end of March. If the Department continues to clear them at that rate – about 5600 a month – it will take until February 2002 to finish the job. That could leave big problems with the new stakeholder pensions. National Insurance rebates paid into them rely on the same computer system and begin next April.

Mr Rooker also revealed that the average amount of compensation paid by the Department of Social Security was just £11.77 per pensioner, barely £2 million in total. Not much comfort to people like Alastair Cowan from Bath, who reached 65 in August last year. He had obtained regular forecasts and was looking forward to a pension of around £140 a week. But he got barely half that. When he complained

"In October I got a letter saying that the adjudication officer had looked again at my pension and it was £72.91, no SERPS at all. The Bath office said not to worry, the computer was up the spout and it would all be sorted out eventually. Nothing happened. Then in June I was told I could have the pension paid according to the forecast as long as I signed an indemnity in case they paid me too much. So eventually I did that and got a backpayment. But it has still not been properly sorted out. If a private insurance company had done this they would have been onto them like a ton of bricks."

That view is echoed by Amanda Davidson, the director of independent financial advisers Holden Meehan.

"If the pensions industry was not allocating money in this way there would be severe reprimands, huge fine, and penalties. It isn’t right. The Government should more accountable. People should be able to trust the Government more than a pension company, not less."

David Willetts, the Conservative MP for Havant, Shadow Secretary of State for Social Security, says it bodes ill for the future.

"Trying to implement further radical changes in pensions looks very foolhardy - there are questions about whether people who opt out from SERPS into stakeholder pensions are going to have an accurate calculation of their rebates, and there are questions about whether for example the pension credit can be made to work. This has implications for the future because we're not sure they can deliver their new complicated scheme if they can't even get the basic contribution computer calculations correct."

2 December 2000

e-mail Paul Lewis on paul@paullewis.co.uk