State pensions: Could you have lost out on money due to errors in payments?

More than £1 billion worth of state pensions have been underpaid, a watchdog has said. Credit: PA

Hundreds of thousands of Britons have been underpaid their state pensions amounting to a total of more than £1 billion, a spending watchdog has said.

The Department for Work and Pensions (DWP) estimates it underpaid 134,000 pensioners and those it can trace will be paid an average of £8,900, the National Audit Office (NAO) said.

The mistake was the result of repeated human errors which were "almost inevitable" amid outdated IT systems and complex rules, the watchdog said.

Most of those affected are likely to be women - but the department does not know how many underpaid pensioners have already died.

The errors apply to people who first claimed state pension before April 2016, do not have a full national insurance (NI) record, and should have received certain increases in their basic state pension.

According to the NAO, the true value of the underpayments will only become clear once the DWP has completed its review of all cases.

Who will the money be repaid to?

  • An estimated £339 million will go to pensioners who should have benefited from their spouse’s or civil partner’s NI record

  • £568 million to widows and widowers who should have inherited more state pension entitlement from their deceased partner

  • £146 million to pensioners who should have had an increase in their pension at their 80th birthday

"Some of these errors date back as far as 1985" - ITV News Correspondent Lucy Watson

What can you do if you think you've been affected?

  • The DWP said anyone they find to have been affected will be contacted

  • The Department is prioritising individuals who fall into “at risk” categories, such as those who are widowed or aged over 80

  • Those affected will get everything they are owed returned, said the DWP

  • It is expected to take until the end of 2023 to review all "at risk" cases

However, the DWP does not know how many pensioners who were underpaid have already died.

This is because it does not usually keep records for more than four years after a pensioner’s death, and if married, their spouse’s death for data protection reasons, according to the NAO.

As at August 2021, the Department had not approved a formal plan to trace the estates of deceased pensioners.

Chair of the Committee of Public Accounts, Meg Hillier, said the DWP "must provide urgent redress to those affected and take real action to prevent similar errors in future".

“Many pensioners – most of whom are likely to be women – have been short-changed by thousands of pounds which they are still yet to receive many years later," she added.

“Although it is positive that DWP is now working to put this right, this is not the first widespread error we have seen in DWP in recent years.

"Correcting these errors comes at great cost to the taxpayer".

Pensioner Irene Wise tells ITV News her pension shortfall spanned eight years, amounting to at least £7,400

The errors were brought to the Department’s attention by individual pensioners, concerned experts and the media, the NAO said.

The DWP started exploring the “potential for error” from April 2020 and confirmed that there was a significant issue in August that year.

It started to review cases from January 2021 and will contact pensioners if it finds that they have been underpaid.

Errors happened because state pension rules are complex, IT systems are outdated and unautomated, and the administration of claims requires a high degree of manual review and understanding by case workers, the NAO said.

The report says the DWP does not now how many pensioners who were underpaid have died Credit: PA

Caseworkers often failed to set and later action manual IT system prompts on pensioners’ files to review payments at a later date, such as for when people reached state pension age or their 80th birthday, it said.

The Department does not have a means of reviewing individual complaints or errors - such as how many people are complaining about the same issues - to assess whether the errors have a systemic cause.

Quality assurance processes focused on checking changes to case details, such as a change of address or the death of a spouse, rather than the overall accuracy of the payments, the NAO continued.

Between January 11 and September 5 2021, the Department reviewed 72,780 cases it had identified as being at risk of having been underpaid or who contacted it querying their payment, and paid a total of £60.6 million of arrears to 11% of these cases.

Gareth Davies, the head of the NAO, said: “The impact of the underpayment of state pension on those pensioners affected is significant.

“It is vital that the Department for Work and Pensions corrects past underpayments and implements changes to prevent similar problems in future.”

The report said that Sir Steve Webb, a former pensions minister, and had provided the DWP with examples of underpayments.

Sir Steve, who is a partner at consultancy LCP (Lane Clark & Peacock), said the DWP must do everything it can to track down the families of underpaid pensioners who have died, and called for "full transparency" about the cases being reviewed.

“This report highlights the fact that DWP failed to act over a period of many years when errors were found in state pension assessments," he added.

“Tens of thousands of married women, widows and the over 80s have been underpaid, with arrears in some cases exceeding £100,000.

“It is very worrying that errors are still being made as part of the correction exercise, where the highest standards of quality control should be in force."

“It should also explain how these errors were allowed to go on for so long and what lessons have been learned," continued Sir Steve.

"There also needs to be a clear plan to help families where the person who was underpaid died more than four years ago where DWP no longer holds records.”

A DWP spokesperson said: “We are fully committed to ensuring the historical errors that have been made by successive governments are corrected, and as this report acknowledges, we’re dedicating significant resource to doing so. Anyone impacted will be contacted by us to ensure they receive all that they are owed.

“Since we became aware of this issue, we have introduced new quality control processes and improved training to help ensure this does not happen again.”