TaxPersonal Tax£100m bill to catch-up on NI crisis

£100m bill to catch-up on NI crisis

The government is spending £100m on a huge catch-up exercise notifying state pensioners and prospective pensioners of deficiencies in their national insurance contributions.

Link: Tories propose return of the dividend tax credit

The crisis stems from a computer systems failure that dates back nearly 10 years.

Comptroller and auditor general Sir John Bourn revealed the extent of the catch-up operation in a report in which he qualified the National Insurance Fund’s accounts for 2003/04, because the Department of Work and Pensions could not produce the evidence required to verify incapacity benefit payments.

According to Sir John, the Inland Revenue only started writing to working age contributors, who should have received notices warning of deficiencies in their payment records, between October 2003 and November 2004.

During the year some 10 million notices were sent out and the annual production of deficiency notices – suspended by the former Contributions Agency in 1995/96 when the computer failure was at its height – restarted late last year.

The DWP has the more difficult task of writing to 670,000 people who have reached pension age and for whom there is an immediate impact on pension entitlement. It began the exercise last September and expects completion to take 12 months.

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