DWP blunders led to £1bn pensions underpayments
Complex rules added to the problem, says the NAO
Outdated IT systems and complex rules have been blamed for more than £1 billion of state pensions being underpaid.
The Department for Work and Pensions (DWP) says 134,000 pensioners – mostly women – have been affected and will be due an average of £8,900 to make up for the missing payments..
The final value of the underpayments will only become clear once the DWP has completed its review of all cases, said the National Audit Office.
An estimated £339m will go to pensioners who should have benefited from their spouse’s or civil partner’s national insurance (NI) record; £568m to widows and widowers who should have inherited more state pension entitlement from their deceased partner; and £146m to pensioners who should have had an increase in their pension at their 80th birthday.
Meg Hillier, chairman of the Committee of Public Accounts said: “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.
“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.
“DWP must provide urgent redress to those affected and take real action to prevent similar errors in future.”
The errors affect pensioners who first claimed state pension before April 2016, do not have a full NI record, and should have received certain increases in their basic state pension.
The problem relates to the “old” state pension system where married women who had a poor pension in their own right could claim a 60% basic state pension based on their husband’s record of contributions.
A review is taking place to trace those affected by systemic failures to award these pension rises, stretching back to 1985. But only some women are being fully paid. Others will only be able to claim for 12 months of missed payments.
Sir Steve Webb, partner at consultancy LCP and a former pensions minister, unearthed the problems.
He said the department had “let down a generation of women”. He said officials should have been more curious about issues over many years.
The NAO identified complex rules around state pensions, and a high degree of manual activity combined with outdated IT systems.
“This makes some level of error in the processing of state pension claims almost inevitable,” it added.
The Department does not know how many pensioners who have died have been underpaid and had not approved a formal plan to trace the estates of deceased pensioners.
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.”
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.”