£209m paid to address state pension underpayments; 'gigantic task' ahead

The Department for Work and Pensions (DWP) has repaid a total of £209.3m to individuals impacted by historical state pension underpayments as of 31 October 2022, having identified 31,817 underpayments.

The problems affected married women whose husbands reached pensionable age before 2008, as well as widows and those over 80, who were unknowingly entitled to an 'enhanced pension' that would have boosted their payments by up to 60 per cent.

According to the DWP’s latest update, the DWP has reviewed a total of 111,953 cases between 11 January 2021 and 31 October 2022, identifying 31,817 underpayments within these cases.

A total of £91.1m was repaid to the 13,157 cases involving a married woman, with an average arrears amount of £6,929, while a total of £84m has been paid in relation to the 7,876 widowed cases, with an average £10,772 payment,

In addition to this, £34.2m was repaid in relation to 10,784 cases involving over 80s, with an average payment of £3,172.

Despite this progress, industry experts have emphasised that there is still much more work ahead, with previous estimates from the DWP suggesting that as many as 237,000 pensioners have been underpaid around £1.46bn.

Indeed, LCP pointed out that the current £209m paid out to nearly 32,000 people by the DWP represents just 13 per cent of the estimated total number of people and 14 per cent of the estimated money due.

The firm also noted that although the DWP had previously suggested that the department expected to complete the process by the end of 2023, the recent 2022 Annual Report said there was a risk that the project could run “..through to late 2024”.

However, LCP suggested that even this may seem optimistic, as analysis found that even if the DWP's monthly run rate was upped from the current 2,000 payments per month to 3,000 cases, it would take another five years or more to finish the job.

“The scale of these underpayments is so great that putting it right could easily end up taking four years or more from start to finish," LCP partner, Steve Webb, stated.

"It is quite shocking that well over a hundred thousand pensioners are to this day receiving the wrong rate of pension, and the DWP is clearly way behind schedule in fixing the problem.

"With cost-of-living pressures affecting many elderly people on low incomes, it is essential that the pace of fixing these errors is stepped up and people get the money they are due as soon as possible”.

Adding to this, Hargreaves Lansdown senior pensions and retirement analyst, Helen Morrissey, argued that the DWP "has a gigantic task ahead of it to resolve these issues and it must pull out all the stops to make sure it happens as soon as possible”.

“The DWP has let pensioners down on a massive scale – particularly women who tend to retire on lower incomes anyway," she continued.

"Today’s data shows the DWP has so far handed back more than £209m to people affected by state pension underpayments. This is progress but a drop in the ocean when compared to the almost £1.5bn estimated to have been underpaid overall.

"In some cases, these underpayments have stretched back decades and even though DWP has pledged to hire more people to speed up the process, it is clear many could be waiting for some time still before they are reunited with their money."

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