Government 'will consider' £450m loss to pensioners

Complex systems at HMRC left many retirees in the wrong tax code leading to major overcharging
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Pensioners are being badly treated by the tax authorities, says a report published last week by the Public Accounts Committee. It claims pensioners have been overcharged by as much as £450m in tax, as a result of HMRC's complex administrative systems, with many ending up on the wrong tax code.

Edward Leigh, chairman of the committee and a Tory MP, said: "The truth is that millions of older people are paying too much tax." It's unacceptable but, do you know what? I simply have no confidence in HMRC putting its own house in order and doing right by older people.

HMRC's response to the accusation was classic civil service bluster. "The Government will consider the committee's conclusions and recommendations in detail and respond formally in due course." As Yes, Prime Minister's Sir Humphrey Appleby would probably have translated: "We'll do absolutely nothing until the whole issue has gone away and everyone has forgotten about it."

I hope I'm proved wrong and the tax authorities act decently but, one thing's for sure, I and all the pensioners affected won't forget about it.

£450m administrative error

The Financial Ombudsman Service (FOS) published its six-monthly complaints data last week. The figures are much as you'd expect, with the biggest banks getting the most complaints. In fact, three out of five of the 82,136 complaints between July and December 2009 concerned Lloyds, Barclays, RBS, Abbey or HSBC. Aviva once again topped the insurer tables.

The complaints culture we now live in – with many folk wanting to blame others rather than themselves for their financial misfortune – is one of the key reasons the number of grievances has risen, from just under 70,000 in the first six months of last year.

Financial firms are also contributing to the rising tide of complaints by not handling them properly. The Ombudsman said a high proportion of cases involved overturning the decisions made by financial businesses after they had supposedly conducted their own investigations. This is clearly not good enough.

We need an independent ombudsman system so people who have got no joy with their bank or insurer have somewhere else to turn. There was a pleasing fall in the percentage of complaints upheld in favour of consumers, from 59 per cent, in the first half of 2009, to 53 per cent. But if the finance businesses were playing fair, only a small proportion of their decisions would be overturned, not a majority.

So it's with some sadness that I note that the organisation with the fewest decisions upheld against it was the Chelsea Building Society. The Ombudsman upheld just one in 10 complaints, a tribute to its efforts in treating its customers fairly. Sadly, by the time the FOS next reports, the Chelsea will be no more, as it is being swallowed up by the Yorkshire in March.

The moral of the story

A firm of lawyers has threatened to take the Skipton to court over the raising of its standard variable rate from tomorrow. Leon Kaye Solicitors says the move may be illegal because the building society ripped up a mortgage guarantee to borrowers that the rate would never be more than 3 per cent higher than base rate. The rise, from 3.5 per cent to 4.95 per cent, will leave a typical borrower on a £150,000 loan paying an extra £1,500 a year.

Leon Kaye says the society's claim that it is responding to "exceptional market conditions" doesn't wash, as the downturn hasn't been bad enough. Yet it's fairly certain the Skipton would not have made the move unless it was pretty sure of its validity. But morally, the Skipton is on very dodgy ground.

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