Huge state pension error means thousands were underpaid by up to £128,000 – are you owed cash?

HUGE state pension errors that led to one woman missing out on a whopping £128,000 of payments have been branded a “shameful shambles”.

Hundreds of thousands of Brits were not paid the state pension amount they were entitled to for years, with some mistakes dating as far back as 1985, it had emerged.

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Retirees were underpaid by more than £1billion in total, it was revealed last year, with each missing out on £8,900 on average.

The damming comments come in a new report investigating the mistakes after they were uncovered at the Department for Work and Pensions (DWP).

A probe by the Public Accounts Committee (PAC) found that there is still a risk that errors leading to the underpayments could happen again – and that more people could be affected.

Dame Meg Hillier, MP and chair of the committee, said: “Small errors that were not recognised each time added up over years to significant sums of money.”

“The DWP is now on its ninth go at fixing these mistakes since 2018, the specialised staff diverted to fix this mess costing tens of millions more to the taxpayer and predictable consequences in delays to new pension claims.

“And there is no assurance that the errors that led to these underpayments in the first place will not be repeated in the correction exercise.”  

The DWP has been contacting those affected by the errors, mostly women who are widowed, divorced or who have some of their entitlement based on their husband’s pension contributions.

But many people could still be missing out on significant sums because there is little guidance for those concerned they are being underpaid their state pension.

People are being “left in the dark over their entitlement”, the committee said.

Steve Webb, former pensions minister and now partner at LCP, helped uncover the errors and believes many more people are affected.

He said: “There are still far too many people missing out on the state pension to which they are entitled. DWP needs to track them all down as a matter of urgency.”

“The committee are right to be highly critical of DWP over this whole debacle. 

“It is shocking that DWP’s regular checks regarded the level of error on state pensions as too small to be worth investigating when in reality many thousands of people have missed out on potentially life-changing amounts of money. 

He called on the government to more to help as divorced women have not yet been identified in the DWP’s efforts to make repayments.

One divorced woman won back a £60,000 lump sum after missing out on the money for years.

Those affected by the error identified by the DWP are pensioners who first claimed the state pension before April 2016 and did not have a full national insurance record.

They should have received increases to the basic state pension but didn’t due to an error that the National Audit Office has blamed on complex rules and outdated IT systems that require claims to be made manually instead of being automated.

But some who have since passed away and their families may never get what they are owed.

Dame Hillier said: “Departments that make errors through maladministration have a duty to put those it wronged back in the position they should have been, without the error.

“In reality DWP can never make up what people have actually lost, over decades, and in many cases it’s not even trying.

“An unknown number of pensioners died without ever getting their due and there is no current plan to pay back their estates.”

Who is affected by state pension underpayments?

Around 130,000 retired stay-at-home mums may have missed out on a pension hike when their husbands retired.

Their payments should have risen to 60% of their husband’s basic state pension, the amount women with low national insurance contributions got under the old pension system.

In the previous tax year when the issue was first uncovered, they would get £80.45 a week, 60% of their husband’s £134.25 a week. Instead, they are getting more like £67 a week.

The injustice only affects wives who retired before 2016. After this date women’s pensions were no longer linked to their husbands.

How much you’ll get in compensation depends on when your husband retired.

If it was between April 2008 and 2016, you’ll get all your losses back as the Government should have increased your pension automatically.

Those whose husbands retired before 2008 had to apply for the extra cash, although in many cases they lost out because they didn’t know about it.

Women in this position can only get a year of backdated payments.

This online tool was launched by former pensions minister Steve Webb on behalf of actuarial firm LCP, after he first uncovered cases of women being paid the wrong state pension via his This Is Money column.

If you use the LCP calculator and think you’re eligible for a top-up in either scenario, then the DWP should pick up the error in their own records too.

The DWP started working to fix the problem on January, 11 2021 and says it expects to make repayments by the end of 2023.

If you are owed money, you’ll likely have to sit tight and wait for the DWP to send you a letter confirming your payment.

Those considered at “high risk” like those over 80 and widows are being prioritised.