The Department for Work and Pensions has underpaid 134,000 pensioners - 90 per cent of which are understood to be women - by more than £1bn, according to a damning report from the National Audit Office.
The NAO blamed “years” of “human errors” within the department, calling the billion-pound underpayment “inevitable” given DWP’s “high degree of manual review and complex rules”.
Pensioners affected by the department’s errors are those who first claimed state pension before April 2016 and who do not have a full National Insurance record or who should have inherited additional entitlement from their deceased partner.
Of the 118,000 pensioners the department could trace, it found it had underpaid them by an average of £8,900 each.
But some underpayments were as large as £128,448, with the earliest dating back to 1985.
Some 15,000 pensioners may not receive a payout, due to the fact the department “does not believe it will be able to trace or pay the pensioner or their next of kin”.
The NAO found 94,000 pensioners affected by DWP’s historic underpayments were thought to still be alive, meaning 40,000 could have died before receiving compensation.
So far, DWP has traced approximately 118,000 pensioners, so some of these 40,000 will receive payouts via next of kin.
Whilst the department said it will not know the demographics of pensioners likely to be affected until it completes its correction exercise, the report highlighted that 90 per cent of those who claim the types of state pension affected are women.
Responding to the report Meg Hillier MP, chairwoman of the committee of public accounts, said: “Many pensioners - most of whom are likely to be women - have been short-changed by thousands of pounds which they are still yet to receive many years later.
“This is not the first widespread error we have seen in DWP in recent years. Correcting these errors comes at great cost to the taxpayer.
“DWP must provide urgent redress to those affected and take real action to prevent similar errors in future.”
The figures in the NAO’s report are based on estimates produced by DWP for its accounts, including amounts paid before April 2021.
Whilst these figures were audited, its report suggested they are still subject to a “great deal of uncertainty”.
“Although these estimates have been subject to our audit,” the NAO’s report said, “a great deal of uncertainty remains and the true number of pensioners affected and the value of underpayments will only become clear once the department has completed its review of all possibly affected cases.”
Repeated human errors
The report found underpayments made by DWP were due to “repeated human error over many years”, “some level of which was almost inevitable given the system’s high degree of manual review and complex rules”.
The department itself blamed two sources for the error. One was its caseworkers, who sometimes failed to manually set and later action IT system prompts on pensioners’ files to review payments at a later date.