'£35bn blunder' puts pensions in disarray

Labour's pensions policy was thrown into disarray last night after a statistical blunder forced the Government to admit it had no clear idea how much millions of people were investing for their retirement.

The hugely embarrassing mistake means contributions may have been exaggerated by up to £35bn a year. Andrew Smith, the new Secretary of State for Work and Pensions, announced a complete overhaul of the way pension funds would be monitored.

David Willetts, the shadow Work and Pensions Secretary, said the admission reinforced fears that millions were heading towards a retirement in poverty. Professor Steve Webb, spokesman for the Liberal Democrats, said the fiasco left "a black hole at the heart of pensions policy".

The latest crisis is a further blow to the British pensions industry at a time of fury at the closure of final salary pension schemes and increasing concern that millions of Britons are not saving enough for their retirement.

Figures published in May showed pensions contributions running at £86bn last year, reflecting a 54 per cent real-terms increase in private pension contributions since 1997. They were hailed by the Pensions minister, Ian McCartney, as evidence "that our policies to encourage higher levels of private saving are having a positive effect".

But news emerged yesterday that figures compiled by the Office for National Statistics included transfers of money between pensions funds as well as new savings.

Mr Smith warned: "I think it wise to treat figures with caution until the outcome of the review" – but he insisted the figures had been published in good faith.

Mr Willetts said ministers had ignored clear double-counting. "They were making an elementary statistical howler by including money moving around the system as though it was new money."

The Conservatives' estimate, based on tax returns, suggests £51bn was put into pension schemes last year, £35bn less than government estimates.

Professor Webb said: "It was criminal not to apply common sense to statistics. People's standard of living in retirement is being determined today, but we have had five wasted years."

Ministers will face fresh pressure in the Commons today when the Tories hold a full-day debate on the issue.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
2015 General Election
May2015

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Domestic Appliance Service Engineer

£21000 - £24000 per annum: Recruitment Genius: This centre seeks an experience...

Recruitment Genius: Technical Support Analyst / Helpdesk Support Analyst

£16000 - £20000 per annum: Recruitment Genius: Our client is the UK's leading ...

Recruitment Genius: Conveyancing Fee Earner / Technical Support

£20000 - £30000 per annum: Recruitment Genius: An experienced Fee Earner/Techn...

Recruitment Genius: Data Administrator

£20000 - £24000 per annum: Recruitment Genius: This company is part of this mu...

Day In a Page

Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee
World War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel

Max Brooks honours Harlem Hellfighters

The author talks about race, legacy and his Will Smith film option to Tim Walker
Why the league system no longer measures up

League system no longer measures up

Jon Coles, former head of standards at the Department of Education, used to be in charge of school performance rankings. He explains how he would reform the system
Valentine's Day cards: 5 best online card shops

Don't leave it to the petrol station: The best online card shops for Valentine's Day

Can't find a card you like on the high street? Try one of these sites for individual, personalised options, whatever your taste
Diego Costa: Devil in blue who upsets defences is a reminder of what Liverpool have lost

Devil in blue Costa is a reminder of what Liverpool have lost

The Reds are desperately missing Luis Suarez, says Ian Herbert
Ashley Giles: 'I'll watch England – but not as a fan'

Ashley Giles: 'I'll watch England – but not as a fan'

Former one-day coach says he will ‘observe’ their World Cup games – but ‘won’t be jumping up and down’
Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

Greece elections

In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

Holocaust Memorial Day

Nazi victims remembered as spectre of prejudice reappears over Europe
Fortitude and the Arctic attraction: Our fascination with the last great wilderness

Magnetic north

The Arctic has always exerted a pull, from Greek myth to new thriller Fortitude. Gerard Gilbert considers what's behind our fascination with the last great wilderness