Without co-ordinated action by all parties to improve the Guaranteed Minimum Pension process, there will be duplication of effort and potentially inconsistent new standards and approaches adopted. Our detailed recommendations at (b) to (l) should therefore be addressed in the context of the urgent resolution of recommendation (a), which concerns responsibility for the process as a whole and leadership of actions necessary to improve.
a) The Guaranteed Minimum Pension process involves several inter-dependent parties who failed to work together effectively. At present, none of the parties has a lead responsibility for the process as a whole. HM Treasury, HM Revenue and Customs, the Pension, Disability and Carers Service and the five pension schemes should agree the one body which will be responsible for the Guaranteed Minimum Pension process as a whole, and for oversight and co-ordination of plans to address weaknesses in the process. The decision on where this responsibility falls is not an easy one but, in our view, it should be either the Pension, Disability and Carers Service or the Cabinet Office. The Pension, Disability and Carers Service is the body most directly connected to the pensioners who are affected by administrative failings concerning Guaranteed Minimum Pension, and to the overall quality of government services to pensioners. The Cabinet Office is the body which, amongst the departments responsible for paying public service pensions, is the one which has been most closely involved in co- ordinating actions to deal with the payment errors, and which also has the role of strengthening the civil service as a whole.
We acknowledge the extensive work that has been carried out so far to identify and deal with the payment errors. Our review also identified two further risks which should be addressed by the parties as part of this work.
b) There is a risk that pension schemes may be underpaying members who left contracted out employment early but who have deferred claiming state pension. It is not clear how the pension schemes know whether these 'early leavers' have claimed state pension and, if not, that the scheme should therefore suspend the usual Guaranteed Minimum Pension rules and uprate the occupational pension in full. Working with HM Revenue and Customs and the Pension, Disability and Carers Service, the pension schemes should confirm whether members in this category are in receipt of state pension, and take action to both correct any underpayments that have arisen and to address the risk of underpayments in the future.
c) There is a risk that payment errors will continue to occur after the correction exercise during 2008 09, but before actions to prevent errors recurring have been agreed and implemented. Working with HM Revenue and Customs, the pension schemes should check whether there are any further overpayments or underpayments which were not captured by the correction exercise during 2008-09, and take any necessary corrective action.
Going forward, we make the following recommendations to help strengthen the Guaranteed Minimum Pension process.