New state pension errors revealed; savers urged to take action themselves

Newly identified state pension underpayment isues may not be fixed for "several years", LCP has warned, urging those impacted to take action themselves through a new campaign.

The consultancy launched the campaign to encourage parents who have potentially missed out of pension payments to check if they are entitled to home responsibilities protection (HRP) or National Insurance (NI) credits, and to ensure that it is reflcted on their NI record.

The campaign was launched following the Department for Work and Pensions (DWP) July 2022 annual report, in which it identified a new category of error, revealing that HRP is now the “second largest” source of error in state pensions.

The error was unearthed when DWP undertook its first full review of state pension fraud and error since 2005-06, which identified some cases where parents should have been receiving credits for time at home with children, but this was not on their NI record.

In its annual report, the DWP confirmed that it is working with HMRC to assess the scale of the problem, but the results will not be known before the autumn at the earliest.

LCP suggested that, in theory, if the Department for Work and Pensions (DWP) and HMRC agree that there is a significant error, they may launch a large-scale correction exercise which may pick errors up at some point.

However, it warned that given that the current correction exercise on state pension errors is due to run until late 2024, meaning that there is a risk that these new errors may not be fixed for several years.

In the meantime, parents will be “continuing to lose out” through “underpaid” state pensions, which is why, in the opinion of LCP, “fixing the problem for themselves may be the best strategy”.

LCP partner, Steve Webb, commented: “The DWP has admitted that even more people are being underpaid state pension than previously thought, with a whole new category of errors coming to light.

“Yet again, this error overwhelmingly affects women, and undoubtedly means that many thousands have been underpaid for years.

“Rather than wait for the government to fix the problem, I would encourage anyone who has received child benefit since 1978/79 to check that the relevant credits are on their NI record.

"If not, this can be fixed by filling in a form, and the result could well be a higher pension and a worthwhile lump sum”.

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

The department has since stressed that "lots of lessons" were learned from the official underpayment of state pensions, however, repeatedly committing to addressing this issue, and offering an apology to those impacted.

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