Older people in receipt of the State Pension are being urged to make sure the data the Department for Work and Pensions (DWP) holds on them is correct after a new report revealed a staggering £670 million was underpaid in the 2022/23 financial year.
The Fraud and Error report said that official error was the main cause of State Pension underpayments, accounting for £580 million in the financial year ending in 2023. Underpayments due to claimant error accounted for £90 million.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, explained that the underpayments mostly affect women who retired under the Basic State Pension system who did not receive uplifts they were due. She warned that “many of these underpayments go back years and amount to thousands of pounds” and that even though a DWP correction exercise is making headway in issuing refunds, but “the scale of the problem is vast, and it will take time to complete”.
There are now 12.6 million people claiming their State Pension, comprised of:
- 9.7m on the Basic State Pension
- 2.9m on on the New State Pension
Last year's underpayments total was more than six times the £100 million that was overpaid in State Pensions in the financial year ending 2023. Overpayments were down from £130 million the previous year.
Failure by the DWP to take action on changes to marital status or at age-related trigger points remained the main source of official error underpayments, the document said. Issues included the incorrect recording of National Insurance contributions and pensions not being uplifted for people who had been widowed and were entitled to amounts inherited from a partner.
The proportion of claims that were underpaid remained at six in 100 in both the financial years ending in 2023 and 2022 - this proportion relates to the DWP's caseload, including historic errors. The share of claims that were overpaid stayed at two in 100 claims in both the financial years ending in 2023 and 2022.
Commenting on the report, Ms Morrissey said: “State Pension underpayments hit a high with an eye-watering £670m underpaid in the financial year end of 2023. This perhaps comes as no surprise given the huge exercise the DWP is undergoing to correct historical errors that meant many people did not receive uplifts to which they were entitled.
“This primarily affected women retiring under the Basic State Pension system who were due uplifts in their pension when their husbands retired or died. Many of these underpayments go back years and amount to thousands of pounds.
“The Government is making headway in making these repayments, but the scale of the problem is vast, and it will take time to complete but in the meantime many of these people have been under financial strain that they didn’t need to be.”
The retirement specialist explained that the issue was primarily caused by the complexity of the Basic State Pension system. She said: “The current system is much more straightforward, but it is important to get a State Pension forecast to check that what is on record is correct.
“Incorrect recording of National Insurance contributions is highlighted as another reason behind underpayments, so it is worth making sure that the data held for you is correct.”
Sir Steve Webb, a former pensions minister who is now a partner at consultants LCP (Lane Clark & Peacock) said: "Urgent action is needed to drive up standards of administration so that pensioners can have confidence that the pension they are being paid is correct."
Spending on State Pensions increased from £104.5 billion in the financial year ending 2022 to £109.7 billion in the financial year ending 2023. The State Pension is the benefit with the highest expenditure and accounts for nearly half of total benefit spending, the DWP document said.
A DWP spokesman said: "Our priority is ensuring pensioners receive the financial support to which they are entitled, and State Pension underpayment rates due to official error remain low at 0.5% of expenditure.
"Where errors do occur, we are committed to fixing them as quickly as possible."
DWP is taking action to correct historical underpayments made by successive governments. It has said it reviewed an average of more than 15,000 cases per month between November 2022 and February 2023.
State Pension underpayment progress - February 2023
Payments made between January 2021 and February 2023 are listed below.
Married (Cat BL)
- Cases reviewed: 82,225
- Underpayments identified: 22,276
- Average arrears: £6,630
- Total amount repaid: £147.7 million
Widowed
- Cases reviewed: 54,150
- Underpayments identified: 9,928
- Average arrears: £11,521
- T otal amount repaid: £113.2 million
Over 80
- Cases reviewed: 37,163
- Underpayments identified: 14,512
- Average arrears: £2,710
- Total amount repaid: £39.3 million
Who may be due back payments for State Pension?
There are six particular groups strongly encouraged to contact the pension service to see if they could be entitled to more State Pension.
- Married women whose husband turned 65 before March 17, 2008 and who have never claimed an uplift to the 60% rate
- Widows whose pension was not increased when their husband died
- Widows whose pension is now correct, but who think they may have been underpaid while their late husband was still alive, particularly if he reached the age of 65 after March 17, 2008
- Over-80s who are receiving a basic State Pension of less than £80.45
- Widowers and heirs of married women , where the woman has now died but was underpaid state pension during her lifetime
- Divorced women , particularly those who divorced after retirement, to check that they are benefiting from the contributions of their ex-husband
You can also find full guidance on transferring Basic State Pension payments on GOv.UK here.
How to check if you are affected or make a claim
A phone call to the pension service is the quickest way to find out if you are eligible for a State Pension refund.
The best number to call is 0800 731 0469 but full contact details can be found on the Gov.uk website here.
Earlier this year, a DWP spokesperson said: “The action we are taking now will correct historical underpayments made by successive governments. We are fully committed to addressing these errors, not identified under previous governments, as quickly as possible.
“We have set up a dedicated team and devoted significant resources towards completing this, with further resources being allocated throughout 2023 to ensure pensioners receive the support to which they’re entitled.”
To keep up to date with the latest State Pension news, join our Money Saving Scotland Facebook page here, follow us on Twitter @Record_Money, or subscribe to our newsletter which goes out Monday to Friday - sign up here.
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