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.

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.

An unknown number of pensioners will have died without receiving what they were owed, in what the Public Accounts Committee (PAC) has branded a “shameful shambles.”

The mistake was the result of repeated human errors which were "almost inevitable" amid outdated IT systems and complex rules, the watchdog said.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

There is currently no formal plan for contacting the next of kin where a pensioner who was underpaid is dead, the PAC said.

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

“Departments that make errors through maladministration have a duty to put those it wronged back in the position they should have been, without the error," Dame Meg Hillier, chairwoman of the PAC, said.

“In reality DWP can never make up what people have actually lost, over decades, and in many cases it’s not even trying. An unknown number of pensioners died without ever getting their due and there is no current plan to pay back their estates.

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

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.

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.

A DWP spokesperson said: “Resolving the historical state pension underpayments that have been made by successive governments is a priority for the department and we are committed to doing so as quickly as possible.

“We have set up a dedicated team and devoted significant resources to processing outstanding cases, and have introduced new quality control processes and improved training to help ensure this does not happen again. Those affected will be contacted by us to ensure they receive all that they are owed.

“We are carefully considering the content of the Public Accounts Committee’s report and will respond formally in due course.”