State Pension  

‘Years of human errors’ led to £1bn pension underpayments, NAO finds

The other was DWP’s prioritisation of processing of new claims over reviewing existing claims.

“In addition, it found caseworkers made errors when they did process prompts because front-line staff found instructions difficult to use and lacked training on complex cases,” the report stated, adding there was “no single person taking responsibility for the overall award” of a pension.

The NAO also criticised the department’s quality assurance, which it said had “missed opportunities to detect, correct or prevent the errors”. 

This was because from 2009 onwards, the NAO found that state pension quality assurance focused on checking changes such as address or death of a spouse, rather than the overall accuracy of the payment. 

As for dealing with enquiries, DWP has not historically recorded how many people contact it to complain of underpayments or how many arrears payments it makes, according to the report.

The reason these 134,000 pensioners slipped under DWP’s radar was due to the government department’s large-scale approach to fraud and error, which failed to detect incremental errors which have added up to more than £1bn over time.

“While the state pension underpayments affected a large number of people, the amount of incorrect expenditure in any one year was so low [DWP’s] sampling-based measurement activity was unable to detect there was a significant problem,” the report found.

The NAO said DWP “is yet to implement” a new, recommended measure to detect underpayments, and still does not assess how individual under-or-over payments can link to wider errors.

Addressing the errors

Of the £1bn owed to UK pensioners, the bulk (£568m) is owed to 44,000 widows and widowers who should have inherited more state pension entitlement from their deceased partner.

Some £339m is owed to 53,000 pensioners who should have benefited from their spouse’s or civil partner’s National Insurance record. And £146m is owed to 37,000 pensioners who should have had an increase in their pension at their 80th birthday.

DWP has already paid out £14m of arrears to around 2,000 pensioners. It has also paid £300,000 of discretionary interest payments. 

But in an effort “to be consistent”, the department decided to stop paying these discretionary payments from January 2021.

Between January 11 and September 5 this year, the department reviewed 72,780 cases and paid out arrears of £60.6m. This represents 11 per cent of all cases reviewed during this period.

The report said the department was prioritising pensioners over the age of 80 or those who have been bereaved of their spouse, as well as continuing to respond to pensioners who contact it with a query about their payments.

Currently, DWP is following a Legal Entitlements and Administrative Practices (LEAP) exercise.

This has seen the department recruit a total of 544 staff. It now expects the LEAP to take until the end of 2023, at a staff cost of £24.3m.