Despite making progress the government must do more to deal with past problems in the state earnings related pension, parliament's spending watchdog has said.

In a report released on Thursday, the National Audit Office praised much of the action taken by the Department for Work and Pensions to provide accurate information on the problem.

The issue arose when the then Department of Social Security failed to advertise a change in legislation that would halve the maximum amount of Serps pension that could be inherited by a surviving spouse in the event of their partner's death.

The change was set out in a 1986 Act, and should have come into force in April 2000. But the government continued to give incomplete and incorrect advice about the change to the public until as late as 2000.

As a result, an unknown number of people may have made decisions about their future pension provision based on an incorrect understanding about the pension that would be inherited by their spouse after their own death.

When this became known in 1999 it caused distress to many people who had thought they had made adequate provision for their spouses.

Critics said the problem had revealed poor communications and organisational failings in Whitehall.

Reviewing how the DfWP has since responded to the problem, the spending watchdog said that many recommendations of earlier reports were now being implemented.

The department has since invested "considerable resources "in publicising the changes and have taken reasonable steps to ensure that more than 20 million individuals were made aware of them before the regulations came into effect in October 2002.

But the report found that ministers and officials "could have done more to bring the possibility of potential compensation to the attention of relevant customers".

The NAO also recommended that more should be done to ensure staff and the public receive up-to-date and accurate information.

"The inherited Serps problem was a major failure of administration which caused anxiety and distress for many people," said NAO chief Sir John Bourn.

"I welcome the department's positive response to the recommendations made by the National Audit Office and the Committee of Public Accounts and the action which the department have taken so far to reduce the likelihood of such a mistake being made again.

"However, more still needs to be done. It is crucial that the momentum generated over the past two years is maintained if the department's customers are to be confident that the information and advice they receive is accurate, timely and delivered in the most appropriate manner."