Problems at the central DSS computer has resulted in hundreds of thousands of the newly retired not receiving the pensions due to them. The chaos, with its overtone of creaking Orwellian inefficiency, has thrown a spotlight on just how powerful this single piece of technology is, and how it influences so many people's lives.
What have been described as "teething problems" with a new pounds 100m computer has resulted in chaos, leaving one in three pensioners who retired since last April being short-changed on their entitlements.
Although in theory the basic state pension could be hit, because almost everyone retiring from full-time employment receives the full state pension nowadays, the system has mainly coped with this sum.
However, its technical wizardry completely floundered when the time came to calculate the additional State Earnings Related Pension top-up (Serps), which many people have been contributing towards throughout their working lives.
Some people have been short-changed by many pounds a week for nearly a year, and it will take more time still to resolve the problem.
Many widows have failed to receive their due widows pensions, and anyone involved in a divorce will also have found their pensions affairs in a muddle. But it is not only the retired who have been hit.
National Insurance rebates into private pensions have all but collapsed, which means that these investments missed out on last year's strong stock market performance.
But most worrying of all is the difficulty in establishing whether you have received the correct pensions and other benefits due, or whether you are among those losing out.
Independent actuary Bryn Davis said: "The calculations involved in working out your pension rights are not very difficult. The big problem is getting hold of the records.
"The DSS computer is the only agency holding records about your earnings and National Insurance contributions going back over the years. We are all utterly dependent on it. And it doesn't work."
In a less-than-magnanimous gesture, Alistair Darling, the Social Security Secretary, announced this week that everyone affected will be compensated by a one-off payment of pounds 10.
The computer problems suffered by so many underline the wisdom of keeping and filing old pay-slips, particularly P60s which record your pay, tax and National Insurance in any given year. Only with this evidence can you challenge the Department of Social Security over how much they pay you in retirement by way of Serps.
However, if you have saved these documents and you can use a calculator, you can work out the sums - although this can be both confusing and complicated. It is probably more practical to contact your local DSS office and ask staff there to explain how they have reached the calculation they are paying you - supplying them with the information you have.
Similarly, anyone who has expected Serps rebates to be paid into their private plan should contact their pension provider and ask them for a statement - except your insurer will be unable to tell you whether the DSS refunds have been made correctly.
The biggest problem with Serps rebates centres on age-related rebates which were made for the first time for the year 1997-1998, and should have been paid into your pension during the 1998/1999 tax year.
The computer couldn't handle the calculation and these payments have not been made. In this case, the Government is promising to pay 0.5 per cent for each month of delay, amounting to 6 per cent over a year. But many people saving towards their pensions will find this inadequate given that, despite the uncertainties of the past year, the FTSE 100 share index rose by 18 per cent last year.
A spokesman for Scottish Mutual said: "The first port of call has to be your pension provider, but he won't be able to tell you for sure whether an adequate rebate has been paid, because we don't know how much you earned.
"Although the problem has only recently come to light it was clear that something wasn't working, because the money we have received from the DSS over the past 12 months has been well down on previous years."
FILE AS YOU EARN
How to stay one step ahead of the state:
l Always keep all records relating to pay and National Insurance contributions - one day you may find that you need them.
l Ask the DSS to explain how your pension benefit has been calculated.
l If you are unhappy, consider paying an independent actuary to check the DSS's sums. He may only levy a small fee, but it will be worth it to get your pension right.
l Ask your pension provider for a statement detailing exactly what has been paid into your plan in the past year.
l Ask your wages office to calculate what the rebate should have been. They can easily do the sum.Reuse content