Minister caught out on pensions

Malcolm Wicks, the pensions minister, has been forced into an embarrassing volte face after the Department for Work and Pensions admitted he misunderstood pension law.

Malcolm Wicks, the pensions minister, has been forced into an embarrassing volte face after the Department for Work and Pensions admitted he misunderstood pension law.

In a letter to industry minister Jacqui Smith, sent last month, Mr Wicks said: "There are ... currently no arrangements for reinstating members of contracted- out schemes, that are wound up, back into the State Additional Pension arrangements."

The letter referred to the predicament of a constituent of Ms Smith's, who was left high and dry when the company he worked for went bust leaving a huge deficit in its pension fund, which is being wound up. Fortunately, he showed the letter to a pensions expert, who pointed out that the minister was wrong.

Under the 1995 Pensions Act, members of any pension scheme that started to be wound up after April 1997 are allowed to have at least some of their state pension rights restored, under a system called "deemed buy-back".

A DWP spokesman admitted Mr Wicks had misunderstood the regulations and failed to alert Ms Smith and her constituent to deemed buy-back. He is now sending out an amended letter.

Stephen Scholefield, a partner at lawyers Pinsents, said he was astonished at Mr Wicks' error. "Pensions is one of the most pressing political issues of the day. You'd have thought the minister would be able to get his head around it."

Mr Wicks' confusion reflects the problems the DWP and Inland Revenue have got themselves into with deemed buy- back. Since the state second pension was introduced in 2002, the Revenue, which oversees the agency dealing with deemed buy-back, has been unable to produce tables to allow the benefit to be calculated. It is estimated that over 10,000 potential beneficiaries are in limbo because of the problems, and the situation is unlikely to be sorted out until next year.

Mr Wicks has been under fire because it has emerged that under the new Pensions Bill, passing through Parliament, companies will have to contribute more to the proposed Pension Protection Fund than had previously been thought.