How to get the maximum state pension and avoid missing out on cash in retirement

IN August, the Department for Work and Pensions (DWP) announced that 6% of State Pension claims are underpaid.

This means that approximately 750,000 people might not be getting the full amount they are entitled to. 

Depending on why your pension was underpaid, you might get the backdated payments automatically, or you might have to apply.

The primary reasons for these underpayments include errors in National Insurance (NI) records and the DWP’s failure to update pension amounts when circumstances change, such as after the death of a spouse.

National Insurance record mistakes 

One common issue is that some parents did not receive the correct “credits” for taking time out of work to raise children.

This is a particular problem for people who had caring responsibilities between 1978 and 1979 and should benefited from Home Responsibilities Protection (HRP).

HRP was designed to protect the pension record of those unable to work and pay NI contributions because of bringing up children.

But the Government has admitted that large numbers of parents – mostly mothers – are missing the credits. 

The DWP says that a computer error meant that 210,000 people didn’t get all the money they’re entitled to.

Around 150,000 of the affected people – most of whom are women – are still alive, while around 60,000 are deceased.

In its 2022/23 Annual Report, DWP said that just over £1 billion would have to be paid out in arrears.

The error came about because many Child Benefit claim forms submitted before 2000 did not include a National Insurance number and the HRP was not carried across to the National Insurance computer.

HMRC started writing out to potential victims last Autumn, but a report in July revealed that by the end of March 2024 DWP had assessed just 419 cases out of an expected 194,000. 

Just £2.2m in arrears had been paid out compared with an estimated final bill of £1.15 billion.

A more recent Freedom of Information request carried out by LCP found that the letters being sent only explained how to claim online, despite 29% of pensioners not using the internet.

Steve Webb, a partner at LCP and the former pensions minister said: “Once the government realised that nearly 200,000 mothers may have been underpaid their State Pension, action should have been taken to fix the problem with much greater urgency, especially as many of those who have lost out are now elderly. 

“Instead, the DWP has so far assessed fewer than 500 cases out of that total, and the exercise is proceeding at a snail’s pace.

When the Government talks about continuing the exercise into 2027/28, it is clear that this issue is not getting the priority that it deserves”.

If you reached pension age on or after April 6, 2010, it is easy to check for your credits using your NI record.

The years of protection should have been converted into full qualifying years of credits. If these aren’t showing, then you are missing out.

If you reached pension age before that date, you will need to call the NI contributions helpline to verify whether you received your credits. 

If you’ve got missing credits you need to fill in a form. It is called a CF411 form and it can be found on the government’s website.

Once this is done, your state pension should be recalculated and any missing money sent to you. However, getting what’s owed could take some time.

Universal Credit mistakes 

Many people receiving Universal Credit may not have received the automatic NI credits they were entitled to. 

If you received UC, and you’re not getting the full state pension amount, check your national insurance record to make sure you haven’t missed out.

If you’re not yet of state pension age, you can still check your record to make sure that all the years that should be recorded have been.

If any are missing, call the Universal credit helpline, or speaker to your work coach or case manager.

Married women and over-80s

There are significant issues affecting married women including:

• Married women who should have seen an increase in their pension when their husbands retired after March 17, 2008.
• Widowed women (and sometimes men) whose pensions were not reassessed following the death of their spouse.
• Over-80s who were on low pensions but should automatically be assessed for the higher £93.60 a week rate 

The exact rules depend on why your pension was underpaid and when you retired, but we break it down by group in our guide here.

The government is working to repay over £1.1 billion in owed funds.

It said it planned to review all approximately 650,000 cases by late 2024.

However, its annual report reveals that just under 100,000 people (99,558) had received payments by the end of March 2024, with a combined value of £594m.

This included around 44,000 married women, 23,000 widows/widowers and 33,000 over 80s.

You can either wait for the DWP to review your case or contact them directly if you have evidence of underpayment.

If you prefer not to wait, consider reaching out to your local MP to help speed up the process.

Anyone who gets less than £93.60 a week

Married women, widows and those aged over 80 should get their payments reassessed without having to take any action. 

But other groups, such as married women whose husband turned 65 before 17th March 2008 and women who divorced after pension age, will still need to contact the Department for Work and Pensions if they want their pension to be reassessed.

Indeed, Steve Webb says that anyone whose state pension is less than £93.60 per week should ask to get it checked.

Mr Webb said: “Now that the DWP has finished checking for state pension errors among married women and the over 80s, anyone still on a low pension needs to take action. The ‘magic number’ is £93.60 per week. 

“The vast majority of pensioners should be getting at least this amount.

Anyone on less than this amount needs to contact the Pension Service to see if an error has been made and/or if they need to put in a further claim to get the higher rate.”

Next of kin to affected people

Even if you’re not in an affected group, you might be the next of kin to someone who was owed money and has died before it can be reclaimed.

A response to a freedom of information (FOI) request by consultants LCP revealed that at the end of July 2024, 1,859 people who had received letters from the DWP telling them about potential underpayments of State Pension to their late parents or late spouse had not responded.

Unless the DWP receives a reply to these letters, the underpayment will remain unclaimed.

The DWP says that it only works out the amount owed once it has received a reply to the letter, but in the past underpayments have ranged from a few pounds to over £100,000.

These letters arrive seemingly out of the blue and people may not realise the importance of responding.

If the DWP cannot trace a next of kin, then any underpaid monies will be retained by the Government.

Webb said: “We know that well over 100,000 people were underpaid state pensions and DWP has spent more than three years trying to track them down.

“In thousands of cases, the person who was underpaid is sadly no longer with us, but their heirs should still benefit from any underpayment.”

He added: “The recipients of these letters could be sitting on a pensions goldmine.

“If you have received a letter from the DWP about a potential underpayment to a loved one, I would urge you to respond as soon as possible.”