National Insurance Recording Computer (Hansard, 4 November 1998)

§ Mr. Darling

[holding answer 3 November 1998]: The Contributions Agency (CA) has recently introduced a new National Insurance Recording computer system (NIRS2). The old NIRS1 system had to be replaced because it was aging and could not support future business and legislative changes, in particular those associated with the Pensions Act 1995.

The new system is designed to collect contributions, hold 65 million individual contribution records, calculate contributory benefits, provide data to many other Government Agencies, and pay age-related contribution rebates to Private Pension Providers. It is one of the biggest systems in Europe, with over fourteen million lines of computer software.

In April 1995 Andersen Consulting was awarded a contract, under the Private Finance Initiative (PFI), to replace NIRS1. The replacement system is the first major IT contract to be delivered under PFI. Under the terms of 604W the PFI contract Andersen Consulting has borne all of its own costs in getting the system accepted and has not been paid for operating the new system until it was accepted. Payments for providing the new system did not commence until 13 July.

The original plan was to replace NIRS1 completely in February 1997. However, in March 1998 Anderson Consulting made a supplementary proposal to phase implementation, in order to reduce the technical and business risks. Therefore, the contract was varied, including financial compensation arrangements, to reflect this phased implementation between February 1997 and April 1999. This variation was documented in the National Audit Office report of May 1997. The contract letting and the phasing variation are fully covered in the 46th report of the Public Accounts Committee published on 17 September 1998.

Because of the scale, complexity and sensitivity of the NIRS2 system it has been thoroughly tested prior to acceptance by CA. During the first year of operation the system is being introduced through a series of pilots leading to national implementation.

Contingency plans were developed by both CA and Benefits Agency (BA) in order to accommodate the phased implementation and the attendant difficulties. These plans have been systematically updated to ensure minimum impact on contributors and benefit claimants.

In June 1998 data were transferred from the NIRS1 system to NIRS2. Andersen Consulting estimate that over four billion data items were successfully transferred before NIRS2 went live. Since then there have been some implementation problems; however, as I said in my letter of 11 September to Members of the House, no data have been lost and no records have been destroyed.

On 13 July 1998 the majority of the new system was switched on. After three weeks pilot several major business processes were implemented nationally. For example NIRS2 has read over 40 million items from end of year returns supplied by employers, posted over 14 million national insurance contributions for 1997–98, paid out over £630 million in age related rebates to holders of personal pensions and billed and/or collected £230 million in National Insurance contributions from the self employed. The CA is still piloting some key business processes.

On 14 September 1998 further parts of the system were switched on. Since then there has been a focus on piloting the links into the benefits systems. It is expected that the links to Jobseekers Allowance and Incapacity Benefit will start nationally in November. Andersen Consulting has submitted a plan that, subject to a satisfactory outcome from the current pilot exercise, enables the links to pensions and long term benefits to be available from December for implementation in early 1999. To reach this milestone problems identified during the pilot running of these functions critical to benefits must be cleared. These include the calculation of benefit entitlement for some cases; these are currently under investigation by Andersen Consulting.

As a result of the extended transition and pilot period there have been problems for some people making claims to Jobseekers Allowance, Incapacity Benefit, Retirement Pension and Widows Benefit.

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Ninety five per cent. of new and repeat claims for JSA are being cleared using information from other DSS systems, from the claimant or by the award of an interim payment. An interim payment is made where the actual contribution position cannot be confirmed and an amount equal to the benefit rate is paid. The remaining 5 per cent. are currently being processed.

Ninety five per cent. of new claims for Incapacity Benefit are being cleared using information from other DSS systems, and the claimant. The 5 per cent. claims remaining are being processed or have been referred to Income Support. All interim payments and cases referred to Income Support will be reviewed when the NIRS2 system is fully implemented.

Most new Retirement Pension claims, an estimated 97 per cent. are being cleared using NIRS1 information. Because 1997–98 contributions are not being taken into account most claimants will be receiving initial awards. An initial award is a pension assessment based on the contribution information available at the time, in most cases the initial award of basic pension is likely to be correct or an underpayment of £1.25 a week. All initial awards will be reviewed as soon as the NIRS2 system is fully implemented and their 1997–98 contributions are posted. It is usual practice to make initial awards of benefit while waiting for additional contribution information. However, more cases than usual are being affected and claimants will have to wait longer before their retirement pension is finalised. In the remaining 3 per cent. of claims, where the Benefits Agency has no record of a claimant's contribution history, emergency payments equal to the basic pension rates can be made. All emergency payments will be reviewed when the contribution information is available.

Where there are unresolved issues relating to contracting out of State Earnings Related Pension Scheme (SERPS) some pensioners will be underpaid between a penny and a maximum of £100 a week. The Benefits Agency is undertaking clerical calculations in cases of hardship.

For Widows Benefit it is estimated about 10 per cent. of new claims are being cleared using information available to the Benefits Agency and the remaining 90 per cent. of new claims are being cleared by initial awards or emergency payments. All initial awards and emergency payments will be reviewed when NIRS2 information is available.

Where benefit payments are delayed as a result of the problems with NIRS2 payment of compensation will be automatically considered within the normal rules of the Department Special Payments Scheme. Where there has been an adverse effect as a result of the NIRS implementation on CA customers, compensation payments are being considered in line with normal procedures.

Considerable effort has been jointly made by DSS Agencies, private sector, pensions industry and Andersen Consulting to maintain service levels. All the work involved is being taken forward through a co-ordinated plan agreed between the DSS Agencies involved and Andersen Consulting. The key priority is to ensure that full normal operations can resume as soon as possible. It is expected that this will take until the end of this financial year. It will take longer to catch up on all backlogs. 606W Within the plan, priority is being given to those aspects of the NIRS2 system, which most directly affect benefit claims. I shall keep the House informed of progress.