The Department for Work and Pensions (DWP) has provided a significant update on state pension errors leading to the underpayment of thousands of individuals. The DWP is currently investigating two sets of correction exercises.
The first correction exercise concerns married women whose state pension did not increase automatically upon their husband’s retirement, widows whose state pension was not reassessed automatically, and over-80s receiving low state pension income. These specific errors have been under investigation since January 2021.
Newly released figures reveal that a total of £804.7 million has been disbursed, with 130,000 individuals found to have been underpaid. This includes 50,261 widowed individuals, 47,004 married women, and 33,683 over-80s receiving low state pension income.
The average arrears for widowed women amount to £11,725, while married women have received an average of £5,553 in repayments. Over-80s, on average, have received £2,203.
The second correction exercise, initiated in January 2024, focuses on mothers who claimed Child Benefit before 2000 and may be missing Home Responsibilities Protection on their National Insurance record. This oversight could impact the correct calculation of their state pension entitlement, which depends on their National Insurance record.
HMRC has sent out over 370,000 letters to potentially affected individuals, processing more than 42,000 applications. Of these, 19,000 applications have been forwarded to the DWP, identifying state pension shortfalls in over 5,000 cases. The total arrears paid out now stand at £42 million, with an average payment of £7,859 per person.
Former pensions minister Sir Steve Webb, now a partner at LCP, highlighted that the total arrears paid for both correction exercises amount to £846 million. This figure includes the previous Home Responsibilities Protection exercise from 2008, where £83 million was paid to 36,000 individuals.
Considering the older correction exercise, the overall total paid for state pension errors reaches £929 million. The payouts under the current Home Responsibilities Protection exercise are expected to increase, with another update imminent.
Sir Steve emphasized the urgency of addressing the remaining corrections to avoid similar errors in the future, especially given that over 170,000 individuals stand to be affected, predominantly women who have been underpaid for extended periods or even until their passing.
Rachel Vahey, head of public policy at AJ Bell, described the situation as a significant benefit scandal, with DWP errors leaving many pensioners, mainly women, short on their state pension payments. While progress has been made in identifying more cases of underpayment, the issue remains unresolved, with the DWP projecting a resolution timeline extending to March 2027.
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