‘Scandal': State pension underpayments reach £300million as ‘scale of error is so great'

Worried senior couple going over bills in a domestic room

Hundreds of thousands of Britons have been given their dues after an error meant some were underpaid the state pension. While the majority of payments were issued without error, a computer issue meant there were long-standing underpayments for many.

state pension underpayments

It is estimated as many as 237,000 pensioners had been underpaid around £1.46billion.

Now, new DWP data has shown it has identified 46,716 state pension underpayments, returning £300.1million.

The issue largely affects women who retired under the old state pension system.

Many did not receive the state pension to which they were entitled under their husband’s National Insurance record, while others did not get uplifts when their husbands died.

STATE PENSION WOMEN

The DWP is making progress in dealing with underpayments, stating it is determined to identify all of those affected and provide them with back payments.

Sir Steve Webb, partner at LCP, has warned the Government now has a “billion pound mountain to climb” as it attempts to rectify the error.

He said: “The scale of these state pension errors is so great that DWP still has a billion pound mountain to climb in terms of identifying underpayments and putting them right.

“It is vital that the Department devotes extra resources to make sure that huge numbers of people are moved on to the correct rate of pension as a matter of urgency.

state pension UK

“With the current cost of living crisis it is hard enough for older people to cope, without having to get by on a pension which is too low due to official error.”

A DWP report published in summer 2022, estimated the total amount which would eventually have to be paid would be £1.46billion to 237,000 people.

This suggests the DWP still needs to track down more than a billion pounds worth of underpayments.

Sir Steve said there are also about 190,000 people or their estates who are receiving or have received the wrong amount of pension.

However, the expert said progress towards the goal has been slow, with data suggesting the payment rate is now running at approximately £25million being paid out each month.

He suggested at such a pace, it could take more than three more years to complete the task, with an end date somewhere in late 2026.

The National Audit Office (NAO) estimated the average repayment to those people the DWP could trace would be £8,900.

But there is a race against time to identify people to ensure they benefit from the boost.

Tom Selby, head of retirement policy at AJ Bell, touched upon this issue and said: “This saga is particularly tragic as many of the people affected will have been struggling unnecessarily for years.

“What’s more, the NAO estimated around 40,000 of the people who were due a repayment had died without receiving it.

“It is absolutely critical all those affected by this scandal receive the money they are owed as quickly and efficiently as possible.

“With many retirees struggling to make ends meet as inflation eats away at their living standards, a cash windfall worth thousands of pounds could prove a lifeline after years surviving on an artificially low income due to the DWP’s errors.

“Once compensation has been paid, the Government needs to undertake a comprehensive review of its processes to ensure these mistakes are never repeated.

“Trust in pensions is fragile at the best of times and failures such as this will not help. Sadly, it will likely take years, if not decades, to rebuild the confidence lost as a result of this scandal.”

A DWP spokesperson previously told Express.co.uk: “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 – alongside publishing GOV.UK guidance for next of kin – with further resources being allocated throughout 2023 towards the underpayments exercise.”