MPs are urging Labour to introduce a compensation scheme for the 800,000 state pensioners who were overtaxed by HMRC
State pensioners could be in line for compensation after being overtaxed on their payments by HM Revenue and Customs (HMRC) in a historic scandal.
MPs are demanding the Government provide financial redress to as many as 800,000 pensioners following a Telegraph investigation that revealed serious flaws in the official state pension forecasting system.
The Work and Pensions Committee published a report on Saturday urging compensation after discovering the Government's online calculator had been providing inflated retirement income estimates for nearly a decade.
According to the cross-party committee's findings, some users were incorrectly informed they would receive the full state pension without needing to make additional National Insurance payments.
Ministers only took action after The Telegraph's reporting brought the issue to light, despite the problem persisting for nine years.
The forecasting service was introduced in February 2016, shortly before the new state pension came into effect that April, intended to help individuals estimate their future pension and determine whether to boost their National Insurance contributions.
However, the system failed to properly factor in "contracting out" arrangements, a historical scheme allowing workers to pay reduced National Insurance in return for enhanced private pensions, with a corresponding reduction in their state pension entitlement.
For some individuals, this oversight meant their forecasts were overstated by as much as £100 per week, potentially leading them to believe they were adequately prepared for retirement when they were not.
It is understood that the Department for Work and Pensions (DWP ) became aware of the fault as early as 2017, yet it took another four years before any corrections were implemented.
By that point, approximately 360,000 people had already received inaccurate pension forecasts.
Further investigation revealed the true extent of the problem could be significantly greater, potentially affecting up to 800,000 individuals, as the underlying error continued to impact anyone expecting to reach state pension age after April 2029.
The committee expressed concern about how the department communicated with the public and demanded full disclosure of what went wrong and how many people were ultimately affected.
Baroness Altmann, a former pensions minister who was involved in creating the original tool, warned that additional problems may still emerge.
She advised the public against placing excessive trust in the calculator's outputs, citing what she described as a departmental tendency to minimise its mistakes rather than acknowledge them openly.
Andrew Tully, technical services director at Nucleus Financial, highlighted that forecasts play a central role in retirement planning, influencing decisions about when to stop working and how much to save privately, meaning erroneous figures could lead people into damaging financial choices.
The DWP stated it welcomes the committee's report and will respond to its recommendations, confirming the issue has been resolved for all online users.
