'£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
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: Sales Administrator - Spanish Speaking

£17000 - £21000 per annum: Recruitment Genius: This is a fantastic opportunity...

Recruitment Genius: Sales Administrator - German Speaking

£17000 - £23000 per annum: Recruitment Genius: This is a fantastic opportunity...

Recruitment Genius: Sales Administrator - Japanese Speaking

£17000 - £23000 per annum: Recruitment Genius: If you are fluent in Japanese a...

Recruitment Genius: Graphic Designer - Immediate Start

£16000 - £25000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test