The Government’s bill to correct state pension blunders that shortchanged tens of thousands of people looks set to top £1billion this year, new figures reveal.
A scandal uncovered by former Pensions Minister Steve Webb and This is Money five years ago has so far led to £800million-plus in payouts, mostly to elderly women.
The average arrears payment issued to some 130,000 married women, widows and widowers and people aged over 80 was just over £6,000, the latest report from the Department for Work and Pensions shows.
The DWP’s correction exercise has resolved most cases now, but meanwhile separate HMRC errors that created holes in many mums’ National Insurance records have cost the Government a further £125million to date.
HMRC, which has sent more than 370,000 letters to those who might have missed out, has processed 40,000 cases of shortfalls related to ‘Home Responsibilities Protection’ so far.
But it has not issued new figures since September, and a pending update on its ongoing investigation is expected to see a sharp rise in the amount paid out.
Scandal: We first unearthed the underpayments in early 2020 (stock image)
Webb says the total Government bill is set to pass the £1billion mark this year, with women the biggest losers from multiple state pension mistakes.
‘We have become so used to stories about state pension errors that it is easy to become dulled to the scale of what went wrong,’ he says.
‘The vast majority of those who lost were women, some of whom were underpaid for decades or even went to their grave never paid the right state pension.’
Webb, who is This is Money’s retirement columnist and a partner and LCP, adds: ‘The remaining corrections need to be handled as a matter of urgency.
‘This should never be allowed to happen again.’
Rachel Vahey, head of public policy at AJ Bell, says: ‘This is one of the biggest benefit scandals of modern times.
‘DWP miscalculations have left thousands of pensioners – mainly women – short on their state pension payments.
‘The DWP has obviously been hard at work over the last six months, identifying another 11,000 cases of underpayment, which has ratcheted the bill up from £736million to a staggering £805million today.
‘But despite this progress, this appalling situation is not yet resolved. The DWP has confirmed they have completed the vast majority of reviews, but it will take another two years, to the end of March 2027, before all cases are resolved.
‘Once all compensation has been paid, the Government needs to undertake a comprehensive review of its processes to ensure these mistakes are never repeated.
‘Trust in pensions is fragile at the best of times and failures such as this will not help.’
In the past few weeks, bereaved families who waited years to find out if relatives lost out on state pension have been informed the Government has abandoned further investigation of their cases.
This is one of the biggest benefit scandals of modern times
It has long been feared some might never see a penny, because until the debacle came to light the DWP used to destroy records four years after the death of a pensioner and their surviving spouse.
Deletions were paused after it was discovered many records were riddled with errors. This policy will stay in place until 31 December 2026.
But some 2,500 families may never know if their late relatives were underpaid potentially vast sums in state pension.
They have had a glimmer of hope after Liberal Democrat Work and Pensions spokesman Steve Darling pressed the Government on their behalf.
Any who manage to unearth ‘relevant proof’ such as old DWP letters and bank statements which say how much relatives were paid could persuade the Government to reopen cases.
