Blunders means thousands of state pensions have been underpaid

A728GG social security retirement pension book and money

Around 30,000 people have been ripped off by the Department of Work and Pensions, which has been paying them less state pension than they were entitled to. We all need to check our National Insurance records, to ensure we don't become victims of a mistake that has left thousands of people short changed.

The mistakes surround how many years of National Insurance contributions people have. The taxman holds the information, but it is collected from employers. The strength of the data depends on how robust the employer's systems are - and how robust they have been for decades. In many cases employers collected data manually, relying on perfect data entry by human beings - who weren't designed to be foolproof in this regard.

Where the employer has submitted incorrect figures, false gaps have opened up in people's National Insurance records. Where they make it look as if someone has insufficient contributions for a full state pension, they will have been receiving a far smaller amount then they should.

What can you do?

The government told the Daily Mail people should check that their records are correct, using the 'Check your State Pension' online service. It will show any gaps in your National Insurance record, so you can check that against your work history to see if there are any errors. It's also worth asking for a forecast of your state pension from the HMRC, to see whether it matches your expectations.

If you spot any mistakes, you should contact your tax office. You can send proof that you were working and making national insurance contributions during the time it claims there's a gap in your records, so they can correct the error before you reach state pension age.

These aren't the only problems with the state pension systems. Only last month it emerged that tens of thousands of stay-at-home mums in the 80s and 90s may receive too little state pension, because calculating the correct National Insurance records means bringing together the IT system holding information on child benefit with the one holding National Insurance records - raising the risk of IT problems.

It demonstrates the inherent risk of tinkering with state pensions. The enormous legacy IT systems within government are being required to do things that were never dreamed of when the systems were built. They have to interact with employers' IT systems, and gather information from entirely separate programmes from other government departments. None of these systems were designed to communicate with one another, because nobody imagined that they would every have to.

The fact that issues are emerging should not, therefore, come as a huge surprise.

All we can do is check our own records, and take steps to correct any mistakes, to ensure none of this means we face accidental state pension cuts.

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Figures from Saga show that the over 50s now account for the majority of money spent by Brits on travel and tourism. They have the time to spare, the money, and they are healthy enough to take on the world.

A poll from Abta found that in the wake of pension freedoms, 35% of people were considering cashing in at least part of their pension to travel. A separate study by Senior Railcard found that pensioners take an average of three holidays a year, plus two weekends away, and 17 day trips.

Research from Senior Railcard found that retirees eat out an average of three times a month. However, one in ten do so more than twice a week, and one in three people said that one of the first things they did when they retired was to go out for lunch with their friends.

Of course, just because retirees want to enjoy themselves, it doesn't mean they are happy to throw money away. The vast majority are keen to eat at lunchtimes, when a fixed lunch menu tends to be cheaper, and canny retirees are skilled at tracking down pensioner special offers too.

Figures from the Office for National Statistics show that on average nearly a fifth of the money spent by people aged 65-74 is on leisure. This includes everything from the cinema and theatre to golfing and gardening. They spent more on this than on food, energy bills and transport.

A report by Canada Life found that retirees are spending £4,279 a year on having fun - that’s more than £1,000 more than they spend on boring essentials, and is a 74% increase over the past ten years. It went on to predict that this trend was set to continue, and that pension freedoms would encourage people to spoil themselves a bit more in retirement

Pensioner property wealth is now over £850 billion, and all these family homes don’t look after themselves. The Senior Railcard survey put home renovations in the top 20 activities people got stuck into on retirement, and figures from ABTA found that almost a third of people who were considering raiding their pension pots under the new pension freedoms planned to spend the cash on their home. This seems like an eminently sensible investment - looking after what is undoubtedly their most valuable asset.

Unsurprisingly, while some pensioners are very well off indeed, others are struggling with debt. Figures from Key Retirement found that the average retiree has £34,000 of debt.

Most of this is mortgage borrowing - in many cases driven up by the number of people who unwittingly signed up to an interest-only mortgage. However, credit cards, overdrafts, and loans are also common. It’s why so many pensioners have used pension freedoms to access enough cash to pay their debts.

The day to day basics are swallowing up their fair share of pensioner cash too. On average, people aged 65-74 spend a third of their weekly income on essentials like food and bills - which is hardly living the high life.
The bank of gran and grandad has become an increasingly vital source of cash for families. According to Key Retirement, of those who release equity from their property, 21% of them use the cash to treat their children and grandchildren. This includes an average of £33,350 to help children get onto the property ladder, £6,000 to buy them a new car, £11,000 on family weddings, and £24,780 giving grandchildren a helping hand.

While retirees are quite rightly spending what they need to enjoy retirement, they are hardly all throwing caution to the wind, buying flash cars and spending the kids' inheritance.

Most expect to have something left over to pass onto their family after their death. Some 69% expect to leave property in their wills, and 75% expect to leave cash - according to Unbiased.co.uk - because while baby boomers know how to have fun - they also know how to save for the future.

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