PENSION bosses have paid more than £40,000 to a large number of dead people, an investigation has revealed.

The overpayments were discovered after the Audit Commission probed 251 cases where people were listed as dead.

The occupational pensions are administered by Lancashire County Council for around 30,000 people previously employed by the county council and other organisations, including Lancashire Police, Lancashire Fire and Rescue and at schools controlled by Lancashire Education Authority.

The probe uncovered 31 cases where pensions were being paid to people who had died.

According to the county council, relatives of a pensioner, or their executor, must inform the pension fund when a death occurs.

The overpayments were for the financial year ending March 2005 but the county council is not looking at previous years because of the small sums involved.

However, a county councillor claimed many people were unaware of the rules and demanded that action be taken to make sure it doesn't happen again.

The Audit Commission matched up details from the county council's pension payroll with the Department for Work and Pensions list of deceased, to reveal 251 people appeared on the payroll when they seemed to be dead.

Further investigations revealed that 31 pensions were still being paid when the recipients had died.

Officials estimate that Lancashire County Council will save £53,676 from its probe, which also revealed some people were receiving too much.

Coun David Whipp, leader of the opposition Lib Dem group, said: "All we ever hear about from Labour is so-called joined-up thinking.

"But we have a situation where the Department for Work and Pensions know someone has died, but don't think to tell us.

"Surely it would make sense for the county council to at least ask if it can check up on National Insurance numbers.

"The amount we pay into pension funds has risen greatly and is a financial burden. Everything possible should be done to ensure money isn't going where it shouldn't. It doesn't make any difference whether or not the money is collected back, it is time and effort and money wasted in correcting mistakes."

A spokesperson for Lancashire County Council said: "It is usual for the council to be informed of pensioners' deaths by relatives or the executors of a person's will.

"Our initial investigation into the report found that 31 cases were still in payment. Overpayments had arisen in all of these cases." There was no evidence of deliberate frauded," he said "More than £19,500 of these overpayments have been recovered so far and we expect that the vast majority of this sum will be eventually be repaid.

"To put the overpayment in context, Lancashire County Council paid 30,710 pensioners a total of £104,933,000 during the year ending 31 March 2005.

"The £40,228 overpaid therefore represents 0.038 per cent of the total pension payroll."