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Women pensioners set for £100m refund from DWP

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Written by: Emma Lunn
02/11/2020
The Department for Work and Pensions (DWP) could face a bill of more than £100m for underpaid state pensions.

YourMoney update 11/02/22: An estimated 134,000 women were underpaid state pension. But there’s more grief for this group as the lump sum refunds are subject to tax and may affect benefit claims. Click the story link for more information.  

The figure is based on new evidence given to MPs by Peter Schofield, permanent secretary at the DWP.

Schofield was quizzed by the Work and Pensions Select Committee on research by consultancy Lane Clark and Peacock (LCP) about underpaid state pensions. A transcript has now been posted on the committee’s website.

The issue relates to the ‘old’ (pre April 2016) state pension system where women could claim a state pension based on the National Insurance record of a husband, ex-husband or deceased husband.

Although in most cases the system has worked correctly, a number of cases have come to light where women were not benefiting correctly from these rules.

Although the DWP is checking its own records to identify those who may have been underpaid, anyone who thinks they have been underpaid should contact the DWP.

According to Schofield’s new evidence, about 11,000 people have so far been in touch and 7,200 claims have been processed. A special unit has been set up, currently staffed by 37 civil servants, with more due to be added.

Many of the women who phoned in were on the correct rate but more than one in four of those processed to date (1,900) were confirmed to be receiving too little.

Assuming that the rate of successful claims remains at its current level, this suggests that nearly 3,000 of those who have so far made contact with the DWP will be owed money.

LCP have analysed the figures and estimated that the average lump sum back-payment to date has been just under £10,000.

This would suggest that the DWP is likely to have to pay out £25m to £30m just to those who have contacted the department so far.

However, Schofield admitted that the work to check DWP records is still ongoing. He indicated that initial trawls often identify very large numbers of potentially eligible people and these need to be refined manually to get down to those who are actually eligible.

This process is likely to identify many more women who are not currently aware that they are on the wrong rate.

Steve Webb, LCP pensions expert, estimated that tens of thousands of people would end up receiving payments.

When asked about this estimate by Webb, Schofield said: “it could be, yes”. Based on average lump sum repayment levels of just under £10,000, this would imply a final bill in excess of £100m.

A parliamentary petition tabled by Steve Webb calls on the DWP to use its records to track down all the different groups who are being underpaid. It has just reached the 10,000 signature mark, which means the DWP will now have to give a formal response.

Webb said: “The vast scale of this under-payment is only now starting to come to light. Back in May we estimated that tens of thousands of women were not getting the right amount of state pension, and millions of pounds have already been paid over.

“But it has become increasingly clear that the DWP’s trawl of its own records is uncovering a can of worms and the final bill seems set to be over £100m. Many of these women have been underpaid for a decade or more, and the situation needs to be put right as a matter of urgency.”

LCP has designed a website calculator to help married women work out if they are being underpaid. The site has had over a quarter of a million hits to date.

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