Nearly £500million in state pension payments have been underpaid to thousands of claimants, according to figures from the Department for Work and pensions (DWP).
Analysts are sounding the alarm that some £450million in retirement benefit payments “not reaching the people entitled to them” due to system errors.
This includes many women impacted by historical issues with Home Responsibilities Protection, a now-defunct mechanism designed to protect the pensions of those with caring responsibilities.
Jon Greer, the head of retirement policy at Quilter, noted: “These legacy issues continue to plague the system despite a correction programme being in place.”
Nearly half a billion pounds in state pension payments have been underpaid, according to DWP figures
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Despite being smaller in proportion, underpayments of Pension Credit, still came to £70million. This is the DWP benefit reserved for older households on low income.
According to Quilter’s analysis, around £7 in every £10 underpaid was due to administrative failings rather than claimant error.
Outside of underpayments, DWP figures revealed that £190million in state pension payments were made incorrectly last year, despite an extremely low error rate.
The overpayment rate for the benefit, which currently supports over 12 million people across the UK, stands at just 0.1 per cent.
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State pension overpayments due to administrative mistakes by the DWP have tripled in value from £20million last year to £110million.
Pension Credit overpayments to benefit claimants have hit a record high of 10.3 per cent, costing taxpayers £610million over the past year.
As it stands, the state pension costs taxpayers approximately £142billion annually, making even small percentage errors significant in absolute terms.
This figure is expected to balloon thanks to the triple lock, which determines the annual rate hike for the state pension every year.
Currently, payment rates increase by either rate of consumer price index (CPI) inflation, average earnings or 2.5 per cent; whichever is highest.
This statistically significant increase in payment errors was driven by miscalculations on the additional components of the state pension, according to Greer.
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He added: “These elements, which sit on top of the basic state pension, are prone to error and highlight how even small administrative slips can snowball when dealing with such large sums.”
According to Greer, given Pension Credit targets some of the most financially vulnerable pensioners, the system faces challenges on multiple fronts.
“A large share of overpayments stemmed from people failing to declare financial assets or staying overseas for longer than the rules permit, highlighting the difficulty of monitoring eligibility for a means-tested benefit with complex rules,” he said.
“Given how vital these benefits are in old age, there’s little room for error.”
