DWP 'determined' to rectify state pension underpayments by end of 2023

The Department for Work and Pensions (DWP) has said that "lots of lessons" have been learned from the official underpayment of state pensions, confirming that the government is "absolutely determined" to rectify the issue by 2023.

Issues around the underpayment of state pensions were first highlighted in March 2020 by LCP partner, Steve Webb, after a freedom of information request revealed that "tens of thousands" of women were not receiving the correct state pension uplifts.

Figures from the Office for Budget Responsibility have suggested that the government could face a £3bn bill over the "systematic underpayment", with a recent report from the National Audit Office estimating that DWP has underpaid over £1bn in state pensions to around 134,000 pensioners.

A recent progress update from the DWP has now confirmed the number of cases identified so far, revealing that a total of 9,491 underpayments of state pension were identified between 11 January and 30 September, with those affected owed a total of £60.8m.

The update showed that, of 25,990 cases reviewed involving married women, 2,681 underpayments totalling £20.8m were found, with an average arrears payment of £7,772.

Of the 6,467 cases involving widows, meanwhile, 2,381 underpayments totalling £20.2m were identified, representing an average arrears payment of £8,628.

A further 4,429 underpayments totalling £19.7m were also identified amongst those over 80, out of 6,050 cases reviewed, with an average payment of £4,455.

The legal entitlements and administrative practice exercise being run to identify those individuals who had been underpaid their state pension commenced on 11 January 2021, and is expected to be completed by end of 2023.

Speaking at a Public Accounts Committee evidence session today (28 October), DWP permanent secretary, Peter Schofield, also reiterated the governments commitment to this timeline.

He said: "I do want to apologise on behalf of DWP to all of those affected by this official error that has obviously been going on for many many years.

"We want to assure you that we are absolutely doing what we can to take those [lessons] on board and make changes and improve things.

"The message for those who will have missed out is I am absolutely sorry and we are doing everything we can now to get the money paid to those who are entitled to it, and we are resourcing this.

"We are absolutely determined to pay this money to those who are entitled by the end of 2023."

However, Schofield also said that the proportion of underpayments due to official error in the state pension system is "very low", estimating that it impacted around 0.3 per cent of individuals, which last year would have equated to £310m out of a total budget of £101.2bn.

He also stressed that there are positives to come out of the issue, with DWP "learning and developing how to run scans on these very old systems that pick up these cases.

He said: "We slightly take it for granted that we can identify the 400,000 in the haystack we need to look at, but this is new technology on old systems. What this now means is if we can get out quality assurance right, we can pick up the patters and run regular scans.

"We need to learn faster and we ned to learn faster going forward than we have been in the past."

However, Hargreaves Lansdown senior pensions and retirement analyst, Helen Morrissey, warned that the DWP's assertion that the issue has only hit 0.3 per cent will come "as no comfort to the estimated 134,000 pensioners who have been underpaid.

She stated: "The situation was caused by a mixture of antiquated systems and human error and DWP have questions to answer on whether lessons have indeed been learned quickly enough given the time it has taken to address a problem that has rumbled on for many years.

"The one positive is that the system for the new state pension is more modern with increased automation and we should not see such a situation repeated in future though this system is also under immense pressure right now as staffing issues mean many people are facing delays in receiving their first state pension payment."

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