So far, the government department has paid £94.3mn to those who reached state pension age before 2016 and are entitled to further payments which should have been paid to them automatically, but were not.
Between January 11, 2021 and 28 February, 28, 2022, the department’s checking process identified 14,239 underpayments. This is an increase on the 9,491 underpayments totalling £60.8mn it had identified by September last year.
It is worrying that they appear to be so behind schedule.Steve WebbOverall, DWP estimates it has underpaid 134,000 pensioners, which are mostly women, and has therefore set aside £1bn to fix the issue before the end of 2023.
“What’s striking about these numbers is that they are way behind schedule,” said Webb, partner at pension consultants LPC.
“They’ve paid just under £100mn, that’s less than a tenth of the money they’re due to pay. But we’re over a year in [to a three-year project].”
Currently, around 510 civil servants are working on this project within DWP. But earlier this week, Thérèse Coffey, secretary of state for work and pensions, said the government intends to get this up to 1,500 civil servants by the end of the year.
“I do understand it takes time to train and recruit people. They’re [DWP] ramping up. But I was quite surprised. Because we know where they were last September, we’ve got the figure for now, and they haven’t accelerated,” said Webb.
“Basically they’re paying out around £7mn a month. It’s true in the last figures, it’s true in these figures. So that’s quite worrying.
“We’re talking about people over 80. We’re talking about elderly widows. Some of them will die before this money is paid out. 40,000 of the 134,000 have died already.
“It is worrying that they appear to be so behind schedule. It really does need to accelerate because some of these people are probably scraping by, facing soaring fuel bills.”
A DWP spokesperson said: “The action we are taking now will correct the historical underpayments that have been made by successive governments and we are fully committed to addressing these as quickly as possible.
“We have set up a dedicated team and devoted significant resources towards completing this, with further resources being allocated throughout 2022 and 2023 towards the underpayments exercise.”
State pension errors
The issue of state pension underpayments was first raised by Webb’s firm LCP back in May, and relates to entitlements for certain married people, widows and the over-80s dating back to 1992.
The issue arose because people failed to bring claims they were entitled to.
Under the old system, married people could claim a basic state pension at 60 per cent of the full rate based on their spouse's contributions, assuming this would be a greater amount than the pension they would receive from their own contributions.
Since March 17, 2008, this uplift should have been applied automatically. Prior to this date, a spouse had to make a “second claim" to have their state pension increased when their partner turned 65 - and many women in particular did not make such claims.
Back in January, the Public Accounts Committee called for the government’s state pension payment system to be overhauled and underpayments to be treated more seriously, while warning that other errors could still be unidentified.
Its report, ‘Underpayments of the state pension’, highlighted a number of areas where the government needs to make changes to ensure maladministration and underpayment issues do not continue.
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 it said 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 existed elsewhere in the state pension system.
ruby.hinchliffe@ft.com
