State pension underpayments hit £670m – are you owed money?

Around £670m in state pensions was underpaid in the 2022-2023 financial year, the Department of Work and Pensions has revealed.

This is the latest development in the ongoing scandal surrounding the groups of pensioners – mainly women – who did not receive the full state pension they were entitled to.

Here, Which? explains the cause of the underpayments and how to get your money back if you’re impacted.

6 in 100 state pension claims underpaid

The figures were revealed in the DWP’s annual report into fraud and error in the benefit system, which estimates how much money the department incorrectly pays – either by paying people too much money, or by not paying enough.

The report revealed £670m in state pension payments was underpaid, and £100m was overpaid – down from £130m the previous financial year.

The state pension underpayment rate hit 0.6% – the highest on record – and up from the £540m underpaid in the previous year.

The DWP said that ‘official error’ was the main cause of state pension underpayments, accounting for £580m. Underpayments due to claimant error accounted for £90m. 

The proportion of claims that were underpaid remained at six in 100 for the 2021-2022 and 2022-23 financial years, however the DWP told Which? this figure includes historic errors. 

• Find out more: how much state pension will I get?

Why are people being underpaid?

Official error was the main type of underpayment, which means the benefit has been paid incorrectly due to a failure to act, a delay or mistaken assessment by DWP, a local authority or HMRC. 

Errors relating to the DWP failing to take action on changes to marital status or age-related trigger points remained the main source of official error underpayments.

These include: 

• People who are married or in a civil partnership who reached state pension age before 6 April 2016 and may be automatically entitled, following a 2008 legislative change, to a Category BL State Pension uplift based on their husband, wife or civil partner’s National Insurance contributions.
• People who have been widowed and their state pension was not uplifted to include amounts they are entitled to inherit from their late husband, wife or civil partner.

Errors relating to the incorrect recording of a claimant’s National Insurance contributions remained the second-largest source of official error. 

The main type of underpayment within this category relates to historic recording of Home Responsibilities Protection (HRP). 

For those who reached state pension age before 6 April 2010, HRP reduced the number of years needed to qualify for a basic state pension in instances where someone stayed at home and cared for children for whom they received child benefit, or cared for a person who was sick or disabled.

For people reaching state pension age on or after 6 April 2010, previously recorded periods of HRP were converted into National Insurance credits.

Errors occurred where periods when HRP were due were not accurately recorded on someone's National Insurance records.

• Find out more: new state pension error impacting mothers explained

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‘Scale of state pension underpayments truly shocking’

Former pensions minister Steve Webb, who first brought the state pension underpayment scandal to light, along with pensions consultancy Lane, Clark and Peacock (LCP) in 2020, said the continued scale of underpayments was ‘truly shocking’. 

He said: ‘Whilst it is right that there is a focus on fraud in the benefit system, DWP should be equally concerned where it is not paying people what they are entitled to. 

‘Urgent action is needed to drive up standards of administration so that pensioners can have confidence that the pension they are being paid is correct.’

In response, the DWP told Which?: ‘Our priority is ensuring pensioners receive the financial support to which they are entitled, and state pension underpayment rates due to official error remain low at 0.5% of expenditure. 

‘Where errors do occur, we are committed to fixing them as quickly as possible.’

• Find out more:- underpaid state pensioners receive £300m in repayments 

What is DWP doing to fix the errors?

The DWP started the correction exercise – known as a Legal Entitlements and Administrative Practices (LEAP) process in January 2021. It's due to be completed by the end of this year. 

To date, the government has repaid £300m to around 46,0000 pensioners who were underpaid their state pension, due to system errors.

However, there's still a long way to go to correct the mistake – the DWP estimates that as many as 237,000 pensioners have been underpaid, with underpayments totalling £1.46bn.

The DWP told Which? it reviewed an average of 15,000 cases per month between November 2022 and February 2023, compared to an average of just 5,000 cases per month over the first 22 months of the exercise. 

In terms of the error mainly impacting mothers and HRP not being recorded accurately, the DWP is currently investigating the scale of this issue with HMRC, which administers the NI records.

The DWP said in most cases people in receipt of child benefit between 1978 and 2010 will have had HRP applied automatically to their National Insurance record.

But its early analysis indicates that this did not happen for some people who first claimed child benefit before May 2000.

• Find out more: 6 state pension errors uncovered – could you be owed money?

What to do if you're impacted

Where underpayments are identified during the correction process, the DWP will contact you to inform you of the changes to your state pension.

However, not all groups will be automatically compensated, and if you are one of the following groups you should contact the Pension Service:

• A married woman whose husband claimed his state pension before 17 March 2008.
• You are aged over 80 and either not receiving any state pension, or are receiving Graduated Retirement Benefit only.
• You are divorced and want to know how this exercise affects your state pension.

If you think you may be impacted by missing HRP credits, and you have received child benefit since 1978-79, you should check that the relevant credits are on your NI record. 

You can use the government website to check your state pension forecast and your National Insurance record.

• Find out more: 9 pensioner perks and benefits to boost your income

How much is the state pension worth?

If you reached state pension age after 6 April 2016, you will receive the new state pension. The 'full level' of this is worth £203.85 a week, or £10,600 in the 2023-24 tax year.  

But remember that what you get depends on your National Insurance contributions record, so you could get less than this.

If you reached the state pension age before 6 April 2016, you receive the basic state pension. This is £156.20 a week in 2023-24 (£8,122.40 a year). 

• Find out more: how much do you need to retire?

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