The Department for Work and Pensions (DWP) revealed thousands of retirees were underpaid between 11 January 2021 and 28 February 2023.
This comes a few days after International Adviser published a story that the UK government has reportedly postponed plans to increase the state pension age to 68.
According to the department’s case review data, 46,716 underpayments with a total of £300.1m ($369m, €339m) were indentified.
The mis-calculations affected three groups. These are:
- ‘Category BL’ pensioners: pensioners who are receiving a low basic state pension in their own right, but are entitled to increase it using their living spouse or civil partner’s contributions once their partner becomes entitled to state pension;
- ‘Widowed pensioners’: widows and widowers who are not entitled to a full basic state pension based on their own contributions can inherit a basic state pension from their spouse or civil partner up to the full basic state pension rate; and
- ‘Category D’ pensioners: men and women previously receiving no or low amounts of basic state pension, who may be able to increase their state pension from age 80.
Some 22,276 Category BL pensioners were underpaid £147.7m, 9,928 widowed pensioners were underpaid £113.2m and 14,512 Category D pensioners were underpaid £39.3m.
A report by the National Audit Office (NAO) published in 2021 also found that there had been significant issues with the DWP’s payment of the statement pension, with an estimated 134,000 pensioners being underpaid over £1bn – on average £8,900 each.
Critical
Tom Selby, head of retirement policy at AJ Bell, said: “While it is clearly positive the government has identified over £300 million of state pension underpayments, this is still a long way short of the £1bn the National Audit Office estimates is owed to pensioners.
“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.”
Steve Webb, partner at LCP, added: “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 DWP 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. 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.”
