According to the latest government figures, more people, mainly women, are being underpaid for their state pension.
New estimates suggest that 237,000 state pensioners received less than they were entitled to, which amounts to almost PS1.5bn.
This is 105,000 more people than the Department for Work and Pensions calculated a year earlier.
These include widows or divorcees, who may have been underpaid for many years.
This problem is a result of the “old” state pension system. It dates back to 1985. A 60% basic state pension could be claimed by married women with a modest pension. This is based on the record of husband’s contributions. However, this money was not automatically granted to them due to an error by the DWP.
Some will receive their entire entitlement along with widows or divorcees. However, this may be years later than they should have. Others will not be eligible to claim for missed payments exceeding 12 months.
The DWP first reported that 200,000 female pensioners owed a total of PS2.7bn. The estimated number of affected people was reduced to just over 130,000 after more information was collected. This totaled just over PS1bn.
These estimates are now being revised with the possibility of further revisions.
The National Audit Office stated that “DWP has performed additional reviews of its records in order to understand the pensioners affected but the full extent and severity of the underpayments won’t be known until each case has been reviewed.”
In January, the Public Accounts Committee (MPs) described the situation as “a shameful mess”.
According to the committee’s report, the errors were caused by outdated systems and manual processing of pensions at DWP. The report also stated that there was a possibility that the same errors that caused underpayments could occur in the correction program, which is the ninth such programme since 2018.
Sir Steve Webb was a former pensions minister and is now a partner in consultancy LCP. He said that the DWP also admitted to an error where credits for time at-home with children – previously known under home responsibilities protection – may have been missing from people’s National Insurance records, which could affect their state pension.
He stated that “not only is the cost for the underpayment correction exercise going up, but DWP are now admitting a whole other category of errors.”
In both cases, it will be women who are most affected by the mistakes. This information should be made more transparent than figures hidden in annual reports. For far too long, too many people have been paid too little.
