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State Pension underpayments: many thousand 'missing out on £8,900 each'

State Pension underpayments: many thousand 'missing out on £8,900 each'

New report reveals huge numbers are still waiting to be paid what they're owed in State Pension underpayment scandal.

John Fitzsimons

Investing and pensions

John Fitzsimons
Updated on 29 March 2023

The Government has paid out more than £300 million in underpaid State Pension, new figures from the Department for Work and Pensions (DWP) have revealed.

Since January 2021, more than 46,000 people have been identified as having been paid a smaller State Pension than that which they were entitled to.

The figures show that an average of £6,400 has been repaid to those pensioners, though sums will vary significantly between different cases. 

While this is obviously a welcome step, the reality is that an awful lot of work remains to be done on addressing the State Pension underpayment scandal.

A report last year from the National Audit Office suggested that around 134,000 pensioners have suffered from these underpayments, with a whopping £1 billion owed to them. 

The NAO calculated that on average the corrective payments would come to around £8,900 for each of those underpaid pensioners.

The reality is that the Government is taking far too long to actually correct the errors it has made, and innocent people are counting the cost of that tardy approach.

Who has been underpaid their State Pension?

The annual report from the DWP last year acknowledged three main groups whose pension payments have been subject to these mistakes.

First off are married women who should have received an upgrade to their basic State Pension when their husband retired.

The old rules of the State Pension meant that married women could claim an uplift to their pension, based on the National Insurance contributions of their husbands.

Unfortunately, this process was not automatic.

Instead, those wives had to formally apply to the DWP for the State Pension increase, yet in many cases, the relevant forms were sent to the husbands ‒ not exactly a shock then that these may not have been passed on to the wives.

These upgrades should also have gone to divorced women, based on the contributions of their former husbands.

Then there is the second group pinpointed by the DWP, widows and widowers who should have inherited an enhanced State Pension when their partner died.

The final group are the over 80s who were already receiving their State Pension, who should have received an automatic upgrade to a 60% basic State Pension but were not.

Woman working (Image: loveMONEY - Getty Images)

loveMONEY comment: not good enough

The underpayment of the State Pension has been absolutely disgraceful, not least the fact that it has taken so long for the authorities to actually take meaningful action on correcting the issue.

We’ve been writing about it for a long time at loveMONEY, so it’s not like the issue has only just emerged.

But what’s really heartbreaking is that even putting it right will, in some cases, be too little, too late.

Significant numbers of people who were owed higher payments will have passed away by now.

This scandal means that they will have lived out their final years with less money than might have been the case, in some cases left to scrape by.

The longer that the Government and taxman take in correcting the issue and handing the missing State Pension cash over to those who have been underpaid, the more pensioners will pass away in a poorer financial position than should have been the case.

Unfortunately, at this current rate, it’s likely that more pensioners will pass away before receiving the money they are owed.

That’s why it’s so crucial for those who suspect they are owed money to take action, to raise their case and see if they can get their payments made more quickly.

The pension analysts LCP have highlighted a document published by the DWP last year, which acknowledges that there are “low hundreds of thousands” of women who are not receiving the full State Pension which they are entitled to, but which the department has no plans to contact.

As Steve Webb, partner at LCP and a former Pensions Minister, points out it’s absolutely shocking that the Government knows there are so many women being underpaid, but are leaving it up to them to get in contact in order to claim an increase in their pension.

This simply highlights how crucial it is for any older woman who believes they may be missing out to be proactive and contact the Government to get their details reviewed.

Relying on the Government to clean up its own mess on this will simply take too long for many people to benefit.

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