- The government has now identified over £570 million in state pension underpayments between 11 January 2021 and 29 February 2024 as part of a historic correction exercise (State Pension underpayments: progress on cases reviewed to 29 February 2024 - GOV.UK (www.gov.uk))
- Almost 100,000 underpayments have been located, worth around £5,900 each on average
- The Office for Budget Responsibility has previously estimated the correction exercise could eventually cost the DWP almost £3 billion (OBR supplementary release)
- Administration errors over decades by the DWP which led to people being underpaid their state pension have previously been labelled a “shameful shambles” by MPs (“Shameful shambles” of DWP’s long term underpayment of state pensioners with “little interest” in full consequences - Committees - UK Parliament)
Tom Selby, director of public policy at AJ Bell, comments:
“The news that the DWP has now identified over £570 million in state pension underpayments is undoubtedly positive for the progress of its correction exercise, though there remains a long way to go if the near £3 billion in expected total costs are to be reconciled and sadly that means many more of those affected will still be awaiting payment.
“This saga is particularly tragic as many of the people affected will have been struggling unnecessarily for years. What’s more, the National Audit Office (NAO) has previously 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.
“While retirees will see their state pension increase by 8.5% in April, this is likely to drag some pensioners with other sources of income into paying income tax for the first time since leaving work. Many will already be feeling the squeeze and a windfall payment worth thousands of pounds could make a real difference.
“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.”
Background
The scandal of state pension underpayments relates to those who should have been entitled to uplifts under the pre-2016 system, but due to administrative errors did not receive them. These errors have been found to date back as far as 1985.
The main people likely to have been underpaid their state pension include:
- ‘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;
- ‘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.
*Investigation into underpayment of State Pension - National Audit Office (NAO) report
