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State pensions underpaid to the tune of £600m

State pensions underpaid to the tune of £600m
Paloma Kubiak
Written By:
Paloma Kubiak
Posted:
21/03/2024
Updated:
21/03/2024

Almost 100,000 state pension underpayments have been identified, with £571.6m owed, a historical correction exercise undertaken by the Department for Work and Pensions (DWP) reveals.

A total of 97,016 underpayments have been identified between 11 January 2021 and 29 February 2024, DWP confirmed.

As part of its historical correction exercise, 43,367 state pension underpayments were identified for pensioners in receipt of a low basic state pension in their own right, but who are also entitled to an increase using their living spouse or civil partner’s contributions – once they’re entitled to the state pension.

The state pension underpayments here stood at £243.8m, with the average payment at £5,713.

Widowed pensioners who aren’t entitled to a full basic state pension based on their own contributions can inherit a basic state pension from their spouse or civil partner. But here, DWP found 21,175 cases of underpayments, totalling £262.3m. The average payment here was £12,486.

Meanwhile, those who may be able to increase their low or no state pension from the age of 80 had £65.5m flagged in underpayments. This was in 32,474 cases, with an average underpayment of £2,192.

According to investment platform AJ Bell, taken together, these underpayments are worth an average of £5,900 each.

Tom Selby, director of public policy at AJ Bell, said: “The news that the DWP has now identified over £570m in state pension underpayments is undoubtedly positive for the progress of its correction exercise, though there remains a long way to go if the near-£3bn in expected total costs are to be reconciled, and sadly that means many more of those affected will still be awaiting payment.

“This saga is particularly tragic as many of the people affected will have been struggling unnecessarily for years. What’s more, the National Audit Office (NAO) has previously estimated around 40,000 of the people who were due a repayment had died without receiving it.

“It is absolutely critical all those affected by this scandal receive the money they are owed as quickly and efficiently as possible.”

Selby added that, once compensation has been paid, “the Government needs to undertake a comprehensive review of its processes to ensure these mistakes are never repeated”.

He said: “Trust in pensions is fragile at the best of times and failures such as this will not help. Sadly, it will likely take years, if not decades, to rebuild the confidence lost as a result of this scandal.”

It comes on the same day as a damning report by the Parliamentary and Health Service Ombudsman (PHSO) ruled in favour of the WASPI women, stating they were not adequately communicated with over plans to equalise the state pension age. It has called for compensation for the women, passing its findings to Parliament to take further.

Related: State pension could be worth £13k by 2030