The Department for Work and Pensions has paid out £300mn in relation to 46,716 cases of state pension underpayments but critics say it is not handling the issue fast enough.
Data released by the government today (March 23), showed more than 46,000 underpayments were located between January 11, 2021 and February 28, 2023, worth £6,400 each on average.
This is an update on figures issued in November which showed 31,817 underpayments were identified and £209.3mn returned.
However the government still has a long way to go as the latest DWP annual report, published in summer 2022, estimated the total amount which would eventually have to be paid would be £1.46bn to 237,000 people.
According to Steve Webb, partner at LCP, this suggests the payment rate is now running at roughly £25mn being paid out each month.
At this rate it could take more than three more years to complete the task, with an end date somewhere in late 2026, he said.
Webb added: “The scale of these state pension errors is so great that DWP still has a billion pound mountain to climb in terms of identifying underpayments and putting them right.
“It is vital that the department devotes extra resources to make sure that huge numbers of people are moved on to the correct rate of pension as a matter of urgency.
"With the current cost of living crisis it is hard enough for older people to cope, without having to get by on a pension which is too low due to official error."
State pension underpayments
The issue of state pension underpayments was first raised by Webb and LCP back in May 2020, and relates to entitlements for certain married people, widows and the over-80s dating back to 1992.
It largely affects women retiring under the old state pension system. Many did not receive the state pension they were entitled to under their husband’s national insurance record.
Under the old system, married women could claim a basic state pension at 60 per cent of the full rate based on their husband'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 married woman had to make a 'second claim' to have her state pension increased when her husband turned 65 - and many women did not make such claims.
Trust in pensions is fragile at the best of times and failures such as this will not help.Tom Selby, AJ BellSubsequent DWP investigations uncovered systematic issues meaning tens of thousands of married, divorced and widowed people may have been affected.
The DWP began making repayments in January 2021.
Tom Selby, head of retirement policy at AJ Bell, said: “It is absolutely critical all those affected by this scandal receive the money they are owed as quickly and efficiently as possible.
“With many retirees struggling to make ends meet as inflation eats away at their living standards, a cash windfall worth thousands of pounds could prove a lifeline after years surviving on an artificially low income due to the DWP’s errors.
“Once compensation has been paid, the government needs to undertake a comprehensive review of its processes to ensure these mistakes are never repeated.
“Trust in pensions is fragile at the best of times and failures such as this will not help. Sadly, it will likely take years, if not decades, to rebuild the confidence lost as a result of this scandal.”
DWP said the latest update showed it reviewed an average of over 15,000 cases per month between November 2022 and February 2023, compared with an average of 5,000 per month in the first 22 months of the exercise.
This year the government will spend more than £110bn on the state pension and support 12.5mn pensioners.
A DWP spokesperson said: “The action we are taking now will correct historical underpayments made by successive governments. We are fully committed to addressing these errors, not identified under previous governments, as quickly as possible.
"We have set up a dedicated team and devoted significant resources towards completing this, with further resources being allocated throughout 2023 to ensure pensioners receive the support to which they’re entitled."
amy.austin@ft.com
