The process for notifying pension schemes of Guaranteed Minimum Pension entitlements is complex and fragmented, and therefore prone to error. There was a collective failure to recognise the interdependencies between the parties and the potential for the process to break down. The successful administration of the Guaranteed Minimum Pension process required effective joint working, but the parties failed to achieve it.
The Guaranteed Minimum Pension process involves the pension schemes and their payment contractors, but also relies on HM Revenue and Customs and the Pension, Disability and Carers Service, who in turn rely on employers. No one party owns the process as a whole and no one took responsibility for checking it was working properly or for ensuring that problems were satisfactorily resolved when, for example, pension schemes could not match Guaranteed Minimum Pension notifications to their systems. There was no assurance therefore that the information passing between HM Revenue and Customs and the pension schemes, and between the Pension, Disability and Carers Service and HM Revenue and Customs, was complete. Despite the complexity and the known history of problems, the process lacked checks and controls, which meant that the missing Guaranteed Minimum Pension information and the resultant payment errors went undetected, in some cases for many years.
The payment errors resulted from the Guaranteed Minimum Pension process breaking down in a number of ways, leading to the pension schemes not having Guaranteed Minimum Pension information recorded when they should have done. Responsibility for the errors is shared between:
• the pension schemes and their payment contractors, for neglecting to put in place checks that they had obtained the information necessary to calculate payments correctly. Specifically, they did not make sure that the Guaranteed Minimum Pension information they held was complete and did not have adequate arrangements for tracking rejected notifications;
• HM Revenue and Customs, for failing to have adequate arrangements for tracking Guaranteed Minimum Pension notifications which were rejected and returned by the pension schemes, and for having no checks built into the National Insurance Recording System to reduce the risk of notifications being sent to the wrong pension scheme; and
• the Pension, Disability and Carers Service, for not always finalising state pension claims either at all or properly, meaning there was no trigger for HM Revenue and Customs to issue a Guaranteed Minimum Pension notification, and for supplying incorrect scheme contracted out numbers to HM Revenue and Customs, meaning that notifications were sent to the wrong pension scheme.