Up to 10 million people who claimed Universal Credit could have shortfalls in their state pension due to a computer failure, a Government watchdog has revealed.
The figure includes up to 137,000 people who are already receiving their state pension, although the exact total is unknown and those potentially being underpaid have not yet been informed by the Department for Work and Pensions (DWP), according to the National Audit Office (NAO).
The blunder could mean that some people may have potentially been underpaid their state pension in retirement and others may have wasted money buying National Insurance top-ups they didn't need. And lost NI credits for current Universal Credit claimants could mean they receive a reduced state pension when they retire unless their records are fixed in time.
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The error occured when the DWP moved to adding National Insurance credits to claimants' records manually in 2017/18. Prior to that date, the credits were added automatically. The change means that potentially millions of people may not have had their records updated.
The National Insurance credits are critical because your state pension entitlement is based on your National Insurance record, and you need around 35 qualifying years of National Insurance contributions to get the full new state pension, or 30 years for the full basic state pension.
Those who are not making contributions through their work payroll may receive National Insurance credits to help build up qualifying years. People out of work or caring for children or elderly relatives or those claiming sickness benefits may be eligible for the credits.
It is unclear exactly how many people have been affected and not everyone who is affected is definitely being underpaid. Others may already have enough National Insurance contributions from employment or other sources to be paid the maximum state pension.
The issue was first uncovered following an investigation by This is Money in February and the NAO this week said in its report: "System issues' causing problems in the National Insurance database for the past six years were not fixed until February this year HMRC began correcting records in February 2023 and expects this work to be completed by the end of March 2024.
“Individuals who claimed Universal Credit during the intervening period have credits missing from their National Insurance record. Around 10 million people made a claim to Universal Credit during the affected six-year period. Unless these people have a National Insurance credit for some other reason, then their National Insurance record will be incorrect.
“If these people use the Government’s state pension forecast, they will see an inaccurate valuation of their state pension. There is therefore a risk that some people may have unnecessarily purchased voluntary Class 3 National Insurance contributions to top-up their state pension. DWP has not informed potentially affected claimants about these issues.”
Guy Opperman, MP for Hexham and minister of state at the DWP, told This Is Money: "The Department has been working with HMRC to resolve this issue. We expect NI records will be fully updated by HMRC over the course of 2023/24, any State Pension entitlement will be reassessed, and any underpayment addressed accordingly."
It is understood that if anyone purchased unnecessary National Insurance top-ups, they will be issued a refund. The DWP will ask HMRC to make arrangements for a refund.
The revelations come after the Government also confirmed last week that mums are missing out on an estimated £1billion in state pension due to holes in their child benefit records. That was after a separate discovery in 2020 that some 237,000 elderly women were underpaid an estimated total of around £1.5bn in state pension.
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Former Pensions Minister Steve Webb says: "These new official figures show the vast number of people who may currently have errors on their NI records. 'It is not good enough for DWP to say that it will all be fixed and it doesn’t matter. 'Some people have already retired without the problem being fixed, whilst others may have wasted money paying voluntary NI for those years."
