The Public Accounts Committee is calling for the government's pension payment system to be overhauled and underpayments to be treated more seriously as part of a critical report.
The report 'Underpayments of the State Pension', published this morning (January 21), highlighted a number of areas where the government needs to make changes to ensure maladministration and underpayment issues do not continue.
The DWP estimates it has underpaid 134,000 pensioners, mostly women, more than £1bn of their state pension entitlement, with some of the errors dating as far back as 1985.
Pensioners affected are those who first claimed the 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.
Overall, the committee found the DWP had been relying on a system that was not fit for purpose and failed to mitigate against this, which was a failure in the government’s responsibilities.
It also branded the department’s complacency on the underpayment issue a failure and warned there was still a risk that similar, unidentified errors exist elsewhere in the state pension system.
Meg Hillier, chairwoman of the Public Accounts Committee, said: “DWP is now on its ninth go at fixing these mistakes since 2018, the specialised staff diverted to fix this mess costing tens of millions more to the taxpayer and predictable consequences in delays to new pension claims.
"And there is no assurance that the errors that led to these underpayments in the first place will not be repeated in the correction exercise.
“This is a shameful shambles. The PAC expects DWP to set out the step changes it will make to ensure it is among their last.”
In its report it looked at the outdated systems, cost to the taxpayer, clarity of communications and the potential for further errors.
Here is what it found:
The system which controls the payment of the state pension is outdated and heavily manual, therefore opens itself up to human error, the PAC said.
This is not dissimilar to what the National Audit Office found in its report into the state pension issues back in September 2021.
The PAC found despite the complexity of state pension entitlements and the increased risk posed by manual processes, the DWP’s checks failed to identify the systematic underpayment of thousands of pensioners.
It stated: “The department repeatedly missed opportunities to upgrade and instead added new functionality by introducing additional systems on top of the first, some of which are also increasingly out-of-date, increasing the complexity of its administration.”
Therefore it has suggested, as a matter of urgency, that DWP should find a cost-effective way to upgrade its IT systems and better its administration processes so that repeated errors do not occur.
Cost to the taxpayer
Correcting these issues comes at a cost to the taxpayer as it requires specialist staff and training.