The most recent report by the public spending watchdog on the Department for Work and Pensions (DWP) accounts has revealed that around 237,000 people over State Pension age have been underpaid a total of £1.46 billion. The underpayments average around £8,900 per person.
Jenny Holt, Managing Director, customer savings and investments at Standard Life explained that the people most likely to have been affected by these underpayments are those who reached State Pension age before April 2016, particularly if they didn’t have a full National Insurance record or full State Pension entitlement. She said: “If you fall into this category then there are steps you can take to find out how much you might be owed and make a claim.
“Even if you’re not affected directly by this issue, it’s still important to take the time to understand the State Pension, know what you’re entitled to, and whether it is being paid to you correctly. Having this knowledge will help you spot any potential errors and ensure you’re receiving the money you’re due.”
Jenny continued: “Last year, the National Audit Office estimated that as many as 134,000 pensioners, mostly women, may not have received the full amount of State Pension they’re entitled to, being owed an average of £8,900.
“This amounts to total underpayments of over £1 billion and estimates this year are even higher, with around 700,000 potential cases needing to be reviewed by the UK Government and potentially as many as 237,000 people are affected - meaning almost 2% of everyone receiving a State Pension could be eligible for a top-up payment.
“These cases arise due to a variety of factors, including computer errors, information being incorrectly inputted in people’s records and the complexity of the State Pension system and its design, which originated not long after the Second World War.”
Who may be due back payments for State Pension?
There are certain groups of people among those who reached the State Pension age before April 2016 who are more likely to be affected by underpayment than others.
- Married people , or those with a civil partner, whose spouse or partner turned 65 before March 17, 2008 and whose State Pension is less than 60% of their partner’s basic State Pension. They could now be owed a boost, including some backdated payments, for which they will need to make a claim.
- People who got divorced or dissolved a civil partnership after they had retired and whose State Pension does not take into account their former partner’s National Insurance contributions. Potentially, these people could be owed a top-up on their pension, for which they would need to make a claim.
- People who are married or in a civil partnership and turned 65 before March 17, 2008 and are not receiving anything in basic State Pension but do receive a small amount from additional State Pension. Some people who fall into this group have been receiving as little as £1 a week and are eligible to claim 60% of the basic State Pension, backdated to when their spouse reached 65. They could potentially claim large amounts, and so people who think that they or their loved one are in this category should strongly consider making a claim.
- People who are 80 years old or over and are not currently receiving at least £85 a week from their State Pension. Pensioners in this group don’t need a full National Insurance contributions record, but they do have to satisfy a basic residency test. You should have been notified automatically by the DWP if you are in this group, but you may also want to check yourself.
- Widowed people whose State Pension did not rise when their spouse passed away. People in this situation may be entitled to an increase to the full State Pension, plus some of their additional State Pension, depending on their late spouse’s National Insurance Record. The DWP should automatically identify individuals in this group, but it is definitely worth double checking if you think it may apply to you.
- People who currently receive the correct level of State Pension but may have been underpaid (if they were getting less than 60% of the full basic State Pension) while their spouse was alive. Some widows whose spouses reached pension age after March 17, 2008 are in this position.
- The families of people whose State Pension was underpaid during their lifetime. Although some people in this category will be notified automatically, many may not be, because records for them no longer exist, and they have fallen through cracks in the system.
And it’s not just women who have been underpaid, Jenny explained: “While it is possible that men may be eligible for underpaid State Pension top-ups, they are in practice less likely to be.
“Since they are more likely than women to have a full National Insurance record and less likely to rely on a spouse or partner for their State Pension entitlement, men are less likely to fall into one of these listed categories.”
How much unpaid State Pension could I be owed?
The average amount owed in unpaid pensions was initially estimated at just under £9,000, however individual amounts paid out have varied widely.
This is partly due to different types of claims having different backdating rules and also because some people may be able to claim in more than one category.
Jenny warns that it’s also important to be aware that some back payments may affect your tax situation or benefits entitlement.
How to 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.
What if the person who was underpaid has died?
If the person who was underpaid their State Pension has passed away, the best thing to do is go to the DWP’s recently launched website that is dedicated to this issue, which explains who may be affected - find out more here.
To keep up to date with the latest State Pension news, join our Money Saving Scotland Facebook page here, or subscribe to our newsletter which goes out four times each week - sign up here.
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