Hundreds of thousands of pensioners will suffer financial strain for up to a fortnight because their former employers are being forced to delay their pension payments. A raft of company pension schemes have written to their members telling them that payments will be stalled while they update their computer systems to fit in with the new tax requirements. The one-off delay will affect pensioners that currently receive their company pensions in the first five days of the month, and means they will be paid on - or after - the 6th of each month, following the change.
Retail giant John Lewis has sent a letter to its 25,000 pensioners, telling them they will have to wait an extra 12 days to receive their November pension pay cheque. John Lewis says it will soften the blow with an interest-free loan - but only if pensioners ask for it - and on the condition that the full amount is repaid within two years.
A spokesperson for John Lewis Partnership said: "This approach ensures we can comply with new tax reporting requirements in such a way that does not cause pensioners to have 13 months of tax due in a tax year."
The move is expected to cause chaos when direct debits go unpaid. There are also fears that oblivious pensioners jetting off on holiday could be left stranded with no money.
Nearly half of all direct debits leave bank accounts during this period, and they incur charges if they are unpaid. Worse still, Experian has warned that outstanding loan payments will leave stains on pensioners' credit ratings which could prevent them from being accepted for future credit cards or borrowing.
Michelle Mitchell, charity director-general of Age UK, was alarmed by the news and said: "This could be worrying for many pensioners as it could make budgeting difficult. We would like to see all those likely to be affected given as much warning as possible and assistance for those who will face hardship because of this change."
Ros Altmann, freelance pensions consultant, has also raised concerns about the welfare of elderly people who are not aware that their pensions could be delayed. She is urging those affected to ask pension schemes for money to tide them over during the delay period.
The upheaval is an aftershock of HM Revenue & Customs' (HMRC) new real-time reporting regime introduced on 6 April. It means companies have to report data on the day, or the day before, employees are paid.
Companies are supposed to count monthly payments from the 6th of the month because the tax year starts on this day. But companies that have been getting away with starting on the 1st can no longer hide from HMRC, and are having to move payment dates to at least the 6th of the month to comply with the new rules.
HMRC has no idea how many pensions will be paid late, but Investors Chronicle is already aware of a number of affected schemes, which may be just the tip of the iceberg.
An HMRC spokesperson said: "This isn't really a concern for us. Real time information (RTI) is working well for millions of employers and employees across the country. RTI does not change the date when employees or pensioners are paid - this is a matter for employers."
Dates for state pension payments are unaffected.
