Big state pension update for 130,000 owed compensation over underpayments – are you owed money?
HUNDREDS of thousands of pensioners have been given an update on a Government error that left them out of pocket for years.
A Department of Work and Pensions (DWP) administrative error meant some pensioners – mostly women – were not paid enough through their state pension, with some being underpaid for years.
The DWP has been looking into the issue since 2021 and trying to identify those who have been affected.
In a major update, it has now said 130,948 people were affected and that the average underpayment was just over £6,000.
As a result the Government has had to pay out £804.7million.
The Sun previously reported a widow had been paid out £23,000 after contacting the DWP repeatedly about underpayments.
The DWP said last year it had found 119,050 people who were underpaid, meaning a further 11,898 people affected have been identified.
Most of those affected are:
- Married women on low state pensions, whose pension was not automatically uplifted when their husband retired
- Widows or widowers whose state pension was not automatically reassessed when their spouse died
- Over-80s with low state pension entitlements who were not automatically uplifted when they turned 80
More than 50,000 of those underpaid were widows or widowers, 47,000 were married women, and 34,000 were over-80s.
Some of the errors date back to as early as 1985.
The DWP has been looking at hundreds of thousands of pension records to check if pensioners were paid the correct amount.
It says it has now reviewed the vast majority of records but it’s still waiting for some people to contact them with information, meaning the review isn’t likely to be fully completed until March 2027.
The Office for Budget Responsibility previously estimated the review could could eventually cost the DWP almost £3billion.
Rachel Vahey, head of public policy at AJ Bell, said this is “one of the biggest benefit scandals of modern times”.
“Despite this progress, this appalling situation is not yet resolved. The DWP has confirmed they have completed the vast majority of reviews, but it will take another two years, to the end of March 2027, before all cases are resolved,” she said.
“It is absolutely critical all those affected by this scandal receive the money they are owed as quickly and efficiently as possible.”
The DWP has now called on pensioners to provide it with additional information so it can review each record.
What are state pension errors?
STEVE Webb, partner at LCP and former Pensions Minister, explains what state pension errors are and how they can occur:
The way state pensions are worked out is so complicated that many thousands of people have been paid the wrong amount for years without even realising it.
The amount of retirement pension you get usually depends on your National Insurance (NI) record.
One big source of errors has been cases where NI records have been incorrect, particularly for years spent at home with children.
This is a system known as ‘Home Responsibilities Protection’.
Alternatively, particularly for older pensioners, the amount you get can depend on the NI contributions made by your spouse.
Errors have arisen where the Government has failed to adjust the pensions of married women when their husbands retired or failed to increase pensions when someone was bereaved and lost a husband or wife.
Although the Government has spent years trying to fix these problems, there are still many thousands of people – many of them older women – on the wrong pension.
If you have always thought that your pension seems low, then it is worth contacting the Pensions Service to ask them to check, especially if you spent time at home raising children or if you were widowed and your pension didn’t change when your spouse died.
Former pensions minister Steve Webb, who is now a partner at financial consultancy Lane Clark & Peacock, said: “We have become so used to stories about state pension errors that it is easy to become dulled to the scale of what went wrong…
“The vast majority of those who lost were women, some of whom were underpaid for decades or even went to their grave never paid the right state pension.
“The remaining corrections need to be handled as a matter of urgency. This should never be allowed to happen again.”
And there’s more people who have lost out
The DWP is also looking into another error affecting hundreds of thousands of mostly women.
As many as 370,000 people are thought to have missed out on Home Responsibilities Protection (HRP), a scheme set up to help protect parents’ and carers’ state pension.
The DWP started looking into this second error in January last year.
Those affected are mostly mothers who had children before the year 2000.
By September last year, HMRC had issued over 370,000 letters to people who might have missed out.
Some 19,000 applications were submitted to the DWP to reassess state pensions, and underpayments were found in just over 5,000 cases.
On average, each person had been underpaid £7,859, costing the Government £42million.
The DWP has not given a new update on how many corrections have been made regarding this error.
Former pensions minister Mr Webb estimates that between the two errors, it’s likely the total bill will cost the Government more than £1billion.
Have you been underpaid?
You can check if you’ve been underpaid and whether you need to make a claim by contacting the Pension Service.
But you can also use this online tool developed by LCP to help people understand what state pension they are entitled to inherit on top of their own state pension at go.lcp.com/inheritingstatepension.
The DWP also has a tool to help those receiving the new state pension assess their eligibility for inherited state pension amounts at gov.uk/state-pension-through-partner.
Plus, there is a guide on inheriting or increasing a state pension at gov.uk/new-state-pension/inheriting-or-increasing-state-pension-from-a-spouse-or-civil-partner.
How does the state pension work?
AT the moment the current state pension is paid to both men and women from age 66 - but it's due to rise to 67 by 2028 and 68 by 2046.
The state pension is a recurring payment from the government most Brits start getting when they reach State Pension age.
But not everyone gets the same amount, and you are awarded depending on your National Insurance record.
For most pensioners, it forms only part of their retirement income, as they could have other pots from a workplace pension, earning and savings.
The new state pension is based on people’s National Insurance records.
Workers must have 35 qualifying years of National Insurance to get the maximum amount of the new state pension.
You earn National Insurance qualifying years through work, or by getting credits, for instance when you are looking after children and claiming child benefit.
If you have gaps, you can top up your record by paying in voluntary National Insurance contributions.
To get the old, full basic state pension, you will need 30 years of contributions or credits.
You will need at least 10 years on your NI record to get any state pension.