State pension underpayments total over £1bn

Years of human error led the Department for Work & Pensions (DWP) to underpay over £1bn in state pension payments to around 134,000 pensioners, according to the National Audit Office (NAO).

The organisation’s investigation into underpayment of state pension said the DWP had estimated that it will need to pay the affected pensioners it can trace a total of £1.053m, representing an average of £8,900 per pensioner affected.

It added that the errors affect pensioners who first claimed their state pension before April 2016, do not have a full national insurance record, and should have received certain increases in their basic state pension.

The investigation concluded that some level of human error had been inevitable due to the complex rules and high degree of manual review necessary when assessing claims.

Additionally, the NAO said the relevant IT systems were “outdated and unautomated”, noting that DWP caseworkers often failed to set or action manual IT system prompts on pensioners’ files to review the payments at a later date, such as their spouse reaching state pension age or their 80th birthday.

Furthermore, the investigation found the DWP’s method of measuring, identifying and tackling large cases of fraud and error mean it had “missed earlier opportunities to identify underpayments”, noting that the department did not have the capability to review individual complaints.

NAO said quality assurance processes focused on checking changes to personal details, such as a change of address or the death of a spouse, rather than the overall accuracy of the payments being sent out to pensioners.

In January, the DWP began the process of reviewing cases and searching for underpayments, with this expected to cost £24.3m in additional staffing costs and last until the end of 2023.

Since it began, 72,780 cases have been reviewed and £60.6m has been paid in arrears, with pensioners who are widowed or over the age of 80 being prioritised.

However, the investigation from NAO noted that there was still no formal plan to trace the estates of deceased pensioners who might have been subjected to underpayments before passing away, with this made particularly difficult as the department does not usually keep records for more than four years after a pensioner’s death.

NAO head, Gareth Davies, said: “The impact of the underpayment of state pension on those pensioners affected is significant. It is vital that the DWP corrects past underpayments and implements changes to prevent similar problems in future.”

Commenting on the findings, LCP partner and former Pensions Minister, Steve Webb, said: “This report highlights the fact that DWP failed to act over a period of many years when errors were found in state pension assessments.

"Tens of thousands of married women, widows and the over 80s have been underpaid, with arrears in some cases exceeding £100,000.

"It is very worrying that errors are still being made as part of the correction exercise, where the highest standards of quality control should be in force. DWP also needs to do everything it can to track down the families of pensioners who have sadly died and never received the pension they were due.

"We now need full transparency from DWP about the correction process, with regular updates and a full explanation of exactly which cases are being reviewed. It should also explain how these errors were allowed to go on for so long and what lessons have been learned.”

A DWP spokesperson said: “We are fully committed to ensuring the historical errors that have been made by successive governments are corrected, and as this report acknowledges, we’re dedicating significant resource to doing so. Anyone impacted will be contacted by us to ensure they receive all that they are owed.

"Since we became aware of this issue, we have introduced new quality control processes and improved training to help ensure this does not happen again.”

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