DWP could face £100m bill for underpaid state pensions - Webb

The Department for Work and Pensions (DWP) could face a bill of more than £100m for underpaid state pensions, according to analysis from LCP, which follows new evidence from DWP Permanent Secretary, Peter Schofield.

Schofield was questioned by the Work and Pensions Committee (WPC) on recent LCP research about underpaid state pensions, which warned that tens of thousands of women could be missing out on £100m in state pension uplifts.

The new evidence, made public in a transcript from the committee, confirmed that around 11,000 people have so far been in touch with the department on the issue, and 7,200 claims processed.

Of these claims already processed, 5,300 turned out to be correct, with around one in four confirmed to be receiving too little.

In relation to the full scale of the issue, Scofield also stated that "it could be" equivalent to the "tens of thousands" of people estimated in LCP's initial research.

However, Schofield also admitted that work to check DWP records is still ongoing, indicating that initial trawls often identify very large number of potentially eligible people, and are later refined down manually.

WPC member, Steve McCabe, also raised a specific query on costing, to ask whether it is true that DWP have spent “several million pounds” on the cases processed to date.

Schofield was unable to confirm the amount spent so far, although McCabe emphasised the importance of knowing costs so far in order to calculate total costs in the long urn.

A DWP spokesperson added: "We are aware of a number of cases where individuals have been underpaid state pension. We corrected our records and reimbursed those affected as soon as errors were identified.

"We are checking for further cases, and if any are found awards will also be reviewed and any arrears paid."

LCP partner, Steve Webb, warned that if the rate of successful claims remains at the current level, nearly 3,000 of those who have made contact with the department will be owed money.

He also estimated, based on dozens of cases notified directly to LCP, that the average lump sum backpayment to date has been a little under £10,000, suggesting that the DWP is likely to have to pay out £25-35m purely to those who have been in touch so far.

Considering this, and the potential scale of the issue, Webb warned that the DWP could be facing a final bill in excess of £100m.

He stated: “The vast scale of this under-payment is only now starting to come to light.

“Back in May we estimated that tens of thousands of women were not getting the right amount of state pension, and millions of pounds have already been paid over.

“But it has become increasingly clear that the DWP’s trawl of its own records is uncovering a can of worms and the final bill seems set to be over £100m.

“Many of these women have been underpaid for a decade or more, and the situation needs to be put right as a matter of urgency”.

This was echoed by WPC members, with McCabe warning that there could be “an awful lot more” people effected by the issues, and more potential claims "in the pipeline”.

In his response, Schofield stated: "We know we need to go through this. What we are saying to people is if you think you were underpaid then get in touch, absolutely.

"For everyone else we are using data analytics to try to narrow down the number of people who are affected by this and then we will work through it methodically.

"As I understand it, I do not think there is any way we have worked out yet other than to manually recalculate, so it does take time."

McCabe also raised a specific query on identifying those who are widowed and over 80 and have been underpaid, querying what action the DWP has taken as it already has the data.

However, Schofield explained that whilst this data is available, it "is a complex calculation".

He stated: "The key for us is using our data analytics tools to enable us to identify as quickly as we can those cases that are most likely to be incorrect, so we can use the resources we have to get money to them quickly.

"What we found in similar processes before—for example, on some of the PIP cases—our initial scans have suggested very large numbers of people might be affected by something like this, and then when we have gone through it we have realised that the numbers are significantly lower.

"Rather than starting with a very large number and working through them methodically, if we can do more by data analytics to narrow it down then we can get money more quickly to people.

He added: "Some of this requires some manual calculation and we need to be able to narrow down where we are going to do that manual recalculation so we can get money to the people who are affected the most quickly. We want to sort this out."

Schofield also confirmed that a special unit, currently staffed by 37 civil servants, has been set up to address the issue, with more staff due to be added.

He is also expected to provide the committee with a fuller briefing on the issue, as McCabe noted that “people are pretty concerned to discover this”.

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