Govt facing £3bn bill to address underpayment of women's state pensions

The government is facing a “mind-numbing” £3bn bill over the six years to 2025-26 in order to address the "systematic underpayment of state pensions", figures from the Office for Budget Responsibility (OBR) have revealed.

The OBR’s economic and fiscal outlook predicted that these costs will peak at £0.7bn in 2021-22, in order to address the underpayment of women's state pensions.

However, it clarified that some costs are expected to fall outside of the forecast period, and that any costing is subject to a “high degree” of uncertainty as the true extent of the underpayment is “not yet established”.

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

The problem 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.

The OBR’s report confirmed that subsequent DWP investigations between May and December 2020 have uncovered a “systematic underpayment of state pensions”, meaning that “tens of thousands” of married divorced and widowed people may have been underpaid since 2008.

Webb described the OBR's estimation as "mind-numbing", with previous predictions for the potential costings placed at around £100m.

“When I first looked into this issue a year ago I had no idea it would explode into such a huge issue," he continued.

“Repayments of £3bn over the next five years could imply huge numbers of women have been short-changed, potentially for a decade or more.

“The government needs to devote serious resources to getting these repayments out quickly as these women have waited long enough”.

The government has previously emphasised that analysis of relevant records was "ongoing", with Pensions Minister, Guy Opperman, confirming that the DWP had "quadrupled" the workforce addressing the problem from 37 to 100 in recent months.

    Share Story:

Recent Stories


Making pension engagement enjoyable through technology
Laura Blows speaks to Nick Hall, business development director and Chartered Financial Planner at UK-based Wealth Wizards about the opportunities that technology provides for increasing people’s engagement with pensions and increasing their retirement wealth.

ESG & DC – creating the right tools
In the latest of our series of Pensions Age video inteviews Francesca Fabrizi, Editor in Chief of Pensions Age is joined by Manuela Sperandeo, Head of Sustainable Indexing EMEA, BlackRock and Mark Guirey, Executive Director, Asset Owner and Consultant Coverage - MSCI to discuss some key trends of ESG investing among UK pension funds today

Multi asset credit
Pensions Age editor, Laura Blows, discusses multi asset credit with Royal London Asset Management senior fund manager, Khuram Sharih
Pensions Age podcast: buy-outs and buy-ins for member and employer nominated trustees
Pitfalls and good practice when approaching insurers with Pensions Age editor, Laura Blows, Martin Parker (Just Group) and Akash Rooprai (ITS)