Tens of thousands more women have been underpaid their State Pension than previously expected, according to the Department for Work and Pensions (DWP) – but yet more may have missed out.
In its annual report, the DWP now estimates that 237,000 pensioners have been underpaid the State Pension they were due, with the total now totting up to £1.46 billion in arrears, with underpayments dating back as far as 1985. This is an increase of 105,000 people and £429 million compared to last year’s estimates.
The problems mainly affect women born before 6 April 1953, and the change is mainly due to a hike of over half a billion pounds owed to widowed pensioners. The average amounts returned to widows in the UK came to just over £10,000, which could make a big difference during the current cost of living crisis.
The DWP is midway through a massive correction exercise, to identify errors stretching back more than 30 years and put them right. It’s thrown 460 staff at the underpayments problem, as of March 2022, to process cases and sort out the errors. However, the DWP isn’t even pretending that it will repay all the arrears, confessing that it doesn’t expect to be able to trace the next of kin for all the underpaid pensioners who have since died.
Who is affected?
There are three main groups of people who are affected:
Married pensioners who reached State Pension age before 6 April 2016 with little or no pension in their own right, but who were entitled to more based on their spouse’s National Insurance record (‘spouse top up’ or ‘category BL uplift’). The wife’s payments should have been pushed up to 60% of her husband’s basic State Pension, once he turned 65. Since 17 March 2008, this increase should have been applied automatically, but computer failures mean it didn’t always happen. Before then, married women had to claim the increase when their husbands turned 65, but many didn’t.
Widowed pensioners, who should have inherited extra State Pension payments after their spouse died (‘missed conversions’).
Pensioners over 80 on low pensions, who were entitled to 60% of the basic State Pension after turning 80 (‘category D uplift’).
Who else has now been identified as affected?
Recently, The DWP has admitted that even more people have been underpaid their State Pension, due to a new error where credits for time at home looking after children were missing from National Insurance records. For people who reached State Pension age before 6 April 2010, Home Responsibilities Protection (HRP) reduced the number of qualifying years needed to get a State Pension, where someone stayed at home to look after children for whom they received Child Benefit, or to look after someone who was sick or disabled.
Apparently, HMRC failed to record some periods of HRP, which could really reduce State Pension payments to parents and carers. However, the DWP can’t work out how much has been underpaid or correct payments, until the HMRC identifies those affected.
The Public Accounts Committee warned that yet more groups of pensioners may have been underpaid, but not yet detected, such as divorcees, while the DWP hasn’t ruled out that even more groups may be identified.
How to check about underpaid State Pensions
The DWP launched a new page on 8 July to help families of people who were underpaid their State Pension, but sadly died before the problem was corrected. The new page allows next of kin to ask for more information if they think someone who died was owed extra State Pension – and potentially claim the missing money.
It should help families of those who were married, divorced or widowed when they died, or died when over 80, but didn’t get the automatic increases to their State Pension they were owed. Usefully, the page includes a table showing how much people should have received, at 60% of the basic State Pension, in previous years.
The people the DWP are most likely to have problems tracking down are:
Married women, whose husband claimed his State Pension before 17 March 2008, but they reached State Pension age before their husband and didn’t make a new claim for extra pension.
People who were already claiming their State Pension and then got divorced or had their civil partnership dissolved, but didn’t tell the DWP about it.
A member of a couple where both had reached State Pension age, but the husband, wife or civil partner of the person who has died hadn’t yet claimed their State Pension.
For more about who missed out and why, see the previous post: Are you or retired female relatives owed thousands of pounds in underpaid State Pension?
If you think you may have been underpaid your State Pension, or someone you know may have been that has now deceased, you can contact the Pensions Service on 0800 731 0469.
These new problems that have been identified with State Pension underpayments come in addition to all the women born in the 1950s who suffered financially and emotionally, when the age they were due to receive their State Pension was hiked up further and faster than expected, from 60 to as high as 66.
Faith Archer is a Personal Finance Journalist and Money Blogger at Much More With Less.
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.