£450m a year lost in payments to dead pensioners

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The Independent Online

Occupational pension schemes are wasting more than £225m a year in payments to deceased members, with a similar sum thought to be paid out in error to deceased annuitants by Britain's life assurers, according to figures from the Unclaimed Assets Register (UAR).

Occupational pension schemes are wasting more than £225m a year in payments to deceased members, with a similar sum thought to be paid out in error to deceased annuitants by Britain's life assurers, according to figures from the Unclaimed Assets Register (UAR).

The vast amounts being wasted by schemes, which in many cases are cash-strapped, are being paid because of the Government's policy of keeping official death registers confidential.

The UAR says the Government's death register is the only comprehensive databank which records deaths. However, it denies private and commercial access to the information for fear it may be used for fraudulent purposes.

As a result, many scheme trustees and insurance companies are unaware that a member or customer is dead until they are informed by the deceased's spouse or solicitor. In many cases, however, spouses remain unaware that money being paid into their joint account from their partner's pension should have been halved or even stopped when they died.

UAR, which is owned by Experian, the information services provider, is working on building a more comprehensive database for commercial use, so pension scheme trustees and insurance companies know when a member or client dies.

Keith Hollender, the managing director of UAR, said: "The reason it happens is that when someone dies, the money is often being paid into a joint account, and the surviving spouse does not realise that the pension should cease or halve. And it goes on until someone notifies the scheme. When it comes to annuities, the figures are probably even higher.

"We're trying to develop a system which will allow schemes to determine whether their members are alive or dead."

Mr Hollender added that schemes' attempts to send forms to be completed each year, as a measure of whether members were alive or not, was not foolproof and was open to fraud. "Pension schemes are not flush with money ... they should be looking to prevent paying out to people where they should not be getting it," he said.

The UAR said that while the average scheme paid about 0.5 per cent of its assets to deceased members, some of the worst offenders paid as much as 2 per cent. Mr Hollender said in some cases, schemes had paid money to the deceased for several years.

Public sector schemes have begun tackling the problem, using the Audit Commission's national fraud initiative, which checks deaths against the death register. However, the problem is at its worst in the private sector. Banks will often refuse to tell schemes and insurers whether a client is still alive or not.

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