The Department for Work and Pensions’ has said individuals may have been underpaid about £1bn in state pension payments due to missing information in their national insurance records.
In its annual report last year, the DWP reported an error in the NI records of some people – mostly mothers - who should have had NI credits for time at home bringing up children.
At that stage, DWP said that they were unable to estimate the scale of the problem, though subsequent ‘fraud and error’ statistics implied that underpayments relating to NI errors of this sort could amount to around £100mn per year.
However, in its annual report and accounts for 2022 to 2023, published today (July 6), the DWP said its central estimate is that 210,000 are owed money.
On this basis, average arrears payment would be just over £5,000, depending on how long the individual has been retired.
DWP estimates that it underpaid between £300mn and £1.5bn of state pension because of errors with the recording of Home Responsibilities Protection.
LCP partner Steve Webb said: “The scale of these errors is huge. It is shocking that so many women have been underpaid so much money.
“This makes it essential that things are put right as a matter of urgency.”
This comes as earlier today, the government announced that it will begin a large-scale write-out to parents who may be affected by the error.
HM Revenue & Customs said it will begin a search by writing to these individuals in the autumn.
People in scope will mainly be women in their 60s and 70s who made a claim for child benefit before May 2000.
If they made a claim without putting a NI number on their claim it is possible that their credits may not have been transferred to their account from the child benefit computer.
Alice Guy, head of pensions and savings at Interactive Investor, said it is “a tragedy” that many women are living in unnecessary poverty due to this latest problem with the state pension.
“Someone caring for their kids as a stay-at-home Mum for 16 years could receive a depressing £4,500 less state pension each year, by missing out on crucial national insurance credits due to this mistake,” Guy said.
“These are life-changing amounts and will make a huge impact on someone’s wellbeing in retirement.
“The state pension is crucially important, especially for many women who are less likely than men to have a private pension income and are more likely to be living in poverty in retirement.”
Guy added: “As a society we’ve decided to support women who take time out to care for their family by counting these years towards their state pension. It’s therefore very sad that these women have been let down by the system and are now more likely to be facing poverty in old age.
“It’s vitally important that the government work hard to contact everyone affected as soon as possible to sort out this mistake. Sadly, many women affected could have died in poverty due to this mistake, with a much lower income than they were entitled to.”
sonia.rach@ft.com
What's your view?
Have your say in the comments section below or email us: ftadviser.newsdesk@ft.com
