Since a formal review began last year, 31,817 cases were identified by the Department for Works and Pensions (DWP) between January 2021 and October 2022 whereby people weren’t paid the amount they were owed.

However, the DWP has estimated that as many as 237,000 pensioners have been underpaid by around £1.46bn.

The National Audit Office (NAO) has suggested that 134,000 pensioners have been underpaid more than £1bn. If these pensions could be traced they would be an average of £8,900 each.

There have been a series of errors by the DWP in recent years.

Earlier this year we reported that six new blunders had been discovered and in June it was revealed that millions of pensioners have been receiving the wrong amount of income due to an IT problem first discovered in the 1990s but which has just come to light.

Women mainly affected by pension errors

Women who retired under the old state pension system are largely affected by the underpayment errors.

Many of these women did not receive the correct state pension they were entitled to under their husband’s national insurance record. While others were not given an increase in their pension payments when their husband died.

The underpayments have been separated into three categories:

• There were 13,157 underpayments to married women who should have received an upgrade to a 60% basic state pension when their husband died. They have been paid a total of £91.1million. That works out at an average of £6,929 each.
• There were 7,876 underpayments to widowers who should have received their partner’s state pension when they died. They have been paid a total of £84 million or £10,772 each.
• There were 10,784 underpayments to pensioners over the age of 80 who should have been automatically upgraded to a 60% basic state pension. They have been paid back 334.2 million or an average of £3,172 each.

If you fall into any of these groups, it is worth checking now if you have been underpaid. You can do this by contacting the government’s Pension Service to query the amount.

Tom Selby, head of retirement policy at AJ Bell, said: “This saga is particularly tragic as many of the people affected will have been struggling unnecessarily for years. What’s more, the NAO estimated around 40,000 of the people who were due a repayment had sadly 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.”

“Pensioners let down on a massive scale”

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “The DWP has let pensioners down on a massive scale – particularly women who tend to retire on lower incomes anyway.

“Today’s data shows the DWP has so far handed back more than £209m to people affected by state pension underpayments. This is progress but a drop in the ocean when compared to the almost £1.5bn estimated to have been underpaid overall.

“In some cases, these underpayments have stretched back decades and even though DWP has pledged to hire more people to speed up the process, it is clear many could be waiting for some time still before they are reunited with their money.”

Backlog of 60,000 pension credit claims

Almost 60,000 pension credit claims made between April and August this year have not yet been processed, figures obtained through a Freedom of Information (FOI) request by AJ Bell have revealed.

A total of around 111,550 pension credit claims were made in this period, according to the DWP. Of those 37,438 of these claims were successful, while 15,580 claims were rejected, implying that around 71% of pension credit claims are successful.

While 58,532 of claims had not been processed by 26 October. If a similar percentage of these claims are successful, it means almost 80,000 claims will have been made in the first five months of the 2022/23 tax year.

This suggests that claims have spiked significantly in response to the cost-of-living crisis.

Selby added: “The combination of a cost-of-living crisis and a DWP awareness campaign appears to have dramatically increased the number of pension credit claims made by retirees on low incomes. However, a huge backlog risks undermining efforts to boost take-up of this valuable benefit.

“It is vital the DWP gets its house in order and processes these outstanding claims as soon as possible. It would be criminal if a campaign designed to boost take-up of pension credit was successful, only for this success to be undermined because the government had failed to build sufficient capacity to deal with this extra demand.”