More people – mostly women – have been underpaid their state pension than previously thought, latest government figures show.
By Kevin Peachey www.bbc.co.uk
A new estimate suggests 237,000 state pensioners were paid less than their entitlement, with a total of nearly £1.5bn underpaid.
That is 105,000 more people affected than the Department for Work and Pensions (DWP) calculated a year ago.
They include widows and divorcees who could have been underpaid for years.
The problem dates back to 1985 and relates to the “old” state pension system. Married women who had a small pension of their own could claim a 60% basic state pension based on their husband’s record of contributions. But an error at the DWP meant they were not automatically given this money.
Along with widows and divorcees, some will eventually receive all their entitlement, although years later than they should have done. Others will only be able to claim for 12 months of missed payments.
When figures were first revealed by the DWP, it was thought that 200,000 female pensioners were collectively owed up to £2.7bn. After more details were collected, the estimated numbers were scaled back to just over 130,000 people affected, at a total of just over £1bn.
Now those estimates have been changed again, with the prospect of more revisions to come.
“DWP has carried out additional reviews of its records to understand the pensioners that may be affected, but the full extent of the underpayments will not be known until every case has been reviewed,” the National Audit Office said.
The situation was described as “a shameful shambles” by the Public Accounts Committee of MPs in January,
The committee’s report said the errors were the result of outdated systems and heavy manual processing of pensions at the DWP. It also said there was a risk that the errors that led to underpayments in the first place could be repeated in the correction programme, the ninth such exercise since 2018.
Former pensions minister Sir Steve Webb, who is now a partner at consultancy LCP, said the DWP had also admitted to an error in which credits for time at home with children – previously known as home responsibilities protection – may be missing from people’s National Insurance records and therefore affect their state pension.
“Not only is the cost of the underpayment correction exercise set to soar, DWP are now admitting a whole new category of errors,” he said.
“In both cases it is women who will bear the brunt of the errors. We need much greater transparency about all of this rather than leaving it to figures buried in the small print of annual reports. Far too many people have been underpaid for far too long”.