Underpaid state pensioners receive £300m in repayments – are you owed money?
The government has repaid £300m to around 46,0000 pensioners who were underpaid their state pension by the the Department for Work and Pensions (DWP), due to system errors.
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.
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. It's been carrying out an official exercise to correct the errors since January 2021.
Here, Which? explains which groups are most likely to have been impacted by the errors, and how to check what your state pension is worth.
Why were pensioners underpaid?
Many pensioners have been left short-changed due to a combination of complex rules about entitlements under the old state pension system, and computer errors made by the DWP.
The scandal was first brought to light by former pensions minister Steve Webb and pensions consultancy Lane, Clark and Peacock (LCP) in 2020. Their findings prompted an investigation by the DWP, which found there had been a systematic underpayment of state pensions to certain claimants.
The DWP started the correction exercise – known as a Legal Entitlements and Administrative Practices (LEAP) process – last January. It's due to be completed by the end of 2023.
Which groups of pensioners were underpaid?
These official errors affect pensioners who started claiming the state pension before April 2016, who do not have a full National Insurance record, or who should have inherited additional entitlement from their deceased partner.
These pensioners come under the following categories:
- 'Category B pensioners': those who are receiving a low basic state pension in their own right, and are entitled to increase it using their living spouse or civil partner's contributions once their partner becomes entitled to the state pension.
- 'Widowed pensioners': widows and widowers who are not entitled to the full basic state pension based on their own contributions can inherit a basic state pension from their spouse or civil partner, increasing their payments up to the full basic rate.
- Category D' pensioners: men and women who previously received no state pension, or low amounts, who may be able to increase it from age 80.
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How much has been paid out so far?
In its latest progress update, published on 23 March, the DWP revealed that it had paid out £300.01m between 28 February 2023 and after its checking process identified 46,716 underpayments.
Here is the breakdown between each category of pensioners:
| Category | Cases reviewed | Underpayments identified | Average arrears payment | Total amount repaid |
|---|---|---|---|---|
| Married | 82,225 | 22,276 | £6,630 | £147.7m |
| Widowed | 54,150 | 9,928 | £11,521 | £113.2m |
| Over 80 (category D) | 37,163 | 14,512 | £2,710 | £39.3m |
Source: gov.uk
How long will all repayments take?
The DWP originally said the LEAP exercise was due to be completed by the end of 2023, however in its annual report published in July, it said there was a risk that the project could run ‘through to late 2024’.
In December, LCP partner Sir Steve Webb said he believed it could take even longer than this.
He said: ‘It is quite shocking that well over 100,000 pensioners are, to this day, receiving the wrong rate of pension, and the DWP is clearly way behind schedule in fixing the problem.
‘With cost of living pressures affecting many elderly people on low incomes, it is essential that the pace of fixing these errors is stepped up and people get the money they are due as soon as possible.’
In response, the DWP said: 'The action we are taking now will correct historical underpayments made by successive governments. We are fully committed to addressing these errors, not identified under previous governments, as quickly as possible.
'We have set up a dedicated team and devoted significant resources towards completing this, with further resources being allocated throughout 2023 to ensure pensioners receive the support to which they’re entitled.'
How to find out if you're owed money
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.
LCP has set up a dedicated page on its website, which explains in more detail which groups are owed money.
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What if the person who was underpaid has died?
The DWP has set up a section on gov.uk where you can request information about underpaid state pension for someone who has died. You will need to have the following information about the deceased:
- their full name
- their date of birth
- their date of death
- their last known address, including their postcode
- the full name of their husband, wife or civil partner, if they were married or in a civil partnership.
This applies to those living in England, Wales and Scotland.
The DWP says it will help process the application more quickly if you also have the deceased's National Insurance number.
You may be contacted for further information if the DWP has not kept records of the deceased.
If the deceased is owed money, the DWP will write to you with instructions on what to do next. If they are not owed money, the DWP will still write to you and let you know.
If you live in Northern Ireland, you can contact the Pension Centre on 0800 587 0892 and ask to have the records of a deceased person checked. If further information is needed, the Pension Centre will let you know.
- Find out more: 9 pensioners perks and 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. This is worth £185.15 a week, or £9,627.80 a year in 2022-23. This will rise by 10.1% in the 2023-24 tax year to £203.85 a week from April.
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 £141.85 a week in 2022-23 (£7,376.20 a year). This will rise to £156.20 from April.
- Find out more: state pension to rise by inflation in 2023
This article was first published on 5 December 2022, and was last updated on 27 March following the latest progress update into the exercise.