State Pension  

Pension underpayments: 'You’d think these were horrors from a bygone era'

Pension underpayments: 'You’d think these were horrors from a bygone era'

The industry has dubbed failings by the Department for Work and Pensions to the tune of £1bn “a national scandal” which has exposed not only “horrors from a bygone era” but ongoing issues.

Today (September 22) the National Audit Office published a report blaming the government department for “years” of “human errors” which resulted in 134,000 pensioners - 90 per cent of which are understood to be women - being underpaid state pension entitlements.

The failings, traced back as far as 1985, went on for long enough that 40,000 pensioners have likely died before receiving any compensation. A further 15,000 have been branded untraceable by the government.

The NAO’s findings have sparked outrage across the industry. Steve Webb, the former pensions minister who helped DWP identify these underpayments last year, said “the most distressing thing of all” was the fact the department was still making errors during the correction process earlier this year.

“You’d think these were horrors from a bygone era,” he told FTAdviser.

“There’s clearly not enough quality assurance, and recommendations around plans for people who have died have still not been worked out.”

The NAO said in its report DWP has since “strengthened its governance and quality assurance” over the process. “But it is likely that at least some errors remain, especially over more complex cases,” it concluded.

A DWP spokesperson said: “We are fully committed to ensuring the historical errors that have been made by successive governments are corrected, and as this report acknowledges, we’re dedicating significant resource to doing so. Anyone impacted will be contacted by us to ensure they receive all that they are owed.

"Since we became aware of this issue, we have introduced new quality control processes and improved training to help ensure this does not happen again.”

One woman approached Webb last summer, suspecting she was short on her state pension payments. She sent a letter to DWP last summer. The department replied saying her pension payments by the state were correct.

Webb was sure this wasn’t the case, so reached out to the UK’s current pensions minister Guy Opperman.

The department then said the woman was owed “more than double” the pension she had been paid. She was retroactively paid £30,000 to compensate for the mistake.

“This report found 130,000 cases of underpayments,” said Webb. “There must have been people who rang up and asked for pensions to be corrected. But no-one in DWP thought to say ‘why are all these people calling up?’”

Webb also highlighted the fact that as soon as the spouse of a deceased retiree dies, a four year clock starts ticking until DWP delete their records.

Unless children can prove their parents were underpaid according to bank statements - which many banks retrieve after a customer passes - cases such as this will be hard to prove.

“It’s a battle and it won’t be easy to win,” said Webb.