Problems remain in the National Insurance payments recording system, the National Audit Office has said.

In a new report parliament's spending watchdog said on Thursday that the agency is successfully combating fraud and error. But it warned that employers are still lodging inaccurate information on end of year submissions

"In some instances, the Inland Revenue receives end of year information from employers about NI contributions paid by employees which cannot be matched to the relevant contributor records," said the NAO.

"This is the result of inaccurate information received from employers on end of year submissions."

Where the revenue cannot trace and update contributor records, the cases are kept permanently on non-matched suspense files in case the individual queries the completeness of their record.

The NAO reported that these files now contain over 100 million items relating to the last 29 years. If non-matching items could be traced up to three million could have an impact on benefit payment.

In 70 per cent of cases it was likely to be less than £2 a week - with some amounting to as much as £250 a year.

NAO chief Sir John Bourn said: "The Inland Revenue continue to face challenges in maintaining individuals' National Insurance contribution records, upon which large amounts of the public's benefit entitlement depend.

"The quality of the contributions information received from employers remains a particular and enduring difficulty that various measures are addressing."