Retirees wrongly denied £450m in state pensions

Telegraph

15-05-2025

Retirees were underpaid nearly half a billion pounds in state pensions last year, official figures show.
Six in 100 state pension claims were underpaid – an increase of 20pc since the previous tax year – working out at an average underpayment of £5,770, figures show.
The Department for Work and Pensions (DWP) also overpaid an extra £90m as a result of its own errors last year compared to the previous year, paying out £110m too much.
In order to claim the 'full' new state pension, currently £11,973, a taxpayer must have accrued 35 years of National Insurance contributions and be older than the current state pension age of 66. Those with more than 10 years' of contributions get a reduced state pension.
The amount spent on the state pension increased by nearly 15pc last year, rising from £123.9bn to £142bn. The increase in spending was driven by the triple lock, which guarantees a rise of at least 2.5pc a year in payments. In April, payments increased by 4.1pc, to £230.25 a week for the new state pension.
Former pensions minister, Sir Steve Webb, partner at pension consultants LCP, said: 'It is shocking that six in 100 state pension claims are still being underpaid despite years of work to correct historic errors.
'After a lifetime of work and contributions, people have a right to expect to be paid the right amount of state pension.'
Sir Steve said that taxpayers struggle to know how much they are owed, 'so it's even more important that DWP gets it right'.
He added: 'DWP clearly needs to step up the amount of time spent checking cases and contacting those who may have been underpaid so that this problem can be brought under control.'
In the last four years, more than £800m in state pension arrears have been paid out to more than 100,000 pensioners by the department.
Jon Greer, of wealth manager Quilter, said: 'That includes many women who were impacted by historical issues with Home Responsibilities Protection, a now-defunct mechanism designed to protect the pensions of those with caring responsibilities.
'These legacy issues continue to plague the system despite a correction programme being in place.'
Between 1978 and 2010, those claiming child benefit for children under 16 or those with support for looking after a sick or disabled person, could top up their state pension entitlement with Home Responsibilities Protection.
But state pensions have been consistently underpaid to those who were paid child benefit before May 2000, and didn't provide their National Insurance number when they claimed it. This meant their records weren't properly updated, and they were underpaid when they came to retire.
Overpayments of pension credit, which is available to low-income pensioners, also hit a record high of 10.3pc, after Chancellor Rachel Reeves scrapped the winter fuel allowance for all but those who claimed the benefit.
The overpayments cost the taxpayer £610m a year, with fraud accounting for £270m of the total. Underpayments of pension credit came to just £70m, but nearly 70pc of this was due to administrative failings.
Mrs Reeves removed up to £300 from nearly 10 million pensioners last year when she scrapped the winter fuel payment, in an effort to save the Treasury £1.3bn.
This led tens of thousands of the poorest pensioners to apply for pension credit, in a bid to keep the winter fuel allowance. In the eight weeks after the announcement in July 2024, there were 74,400 applications for the benefit, an increase of 152pc on the eight weeks before.