LONDON - THE government said on Tuesday 95,000 retired public sector staff had had their pensions incorrectly paid for up to 30 years at a cost of 126 million pounds (S$286.9 million) to the taxpayer.

An error in the system which calculated entitlements for workers meant that pension scheme administrators had been using inaccurate information, Cabinet Office minister Liam Byrne said.

However, after the error was brought to light by Liberal Democrat finance spokesman Vince Cable, Mr Byrne said the government would not be seeking to get back cash that had been overpaid to pensioners.

'The advice of the accounting officers of the five schemes is that it is unlikely to be cost-effective to attempt recovery of these monies from individuals,' Mr Byrne said in a statement.

He said 5 per cent of all public service pensioners, including teachers, NHS staff, former members of the armed services and civil servants, had been affected.

The pension payments will now be corrected from next April.

'This means that some pensioners will have their payments reduced and others will see increases in their payments in 2009 which are less than the annual inflation uprating,' Mr Byrne said.

Opposition parties said it was right that those who had been overpaid saw their pensions adjusted to the correct amount.

'For people who have to adjust their pension income downwards it will be difficult. I don't think the government has any choice but to do that,' Cable told Sky News.

'The problem for the taxpayer out there is they finish up having to pay the bill for it.' Conservative shadow secretary to the Treasury, Philip Hammond, said the government needed to say how long it had known about the problem.

'It is completely unacceptable for the government just to tell pensioners they have been affected but refuse to give them the full facts until January,' he said.

'Ninety-five thousand people will now face a Christmas of uncertainty and fear, wondering what is going to happen to their pensions.' However charity Help the Aged said the government's response appeared to be 'fair and reasonable'. -- REUTERS