Almost 2,000 people could be missing out on a “pensions goldmine” due to unclaimed payments following an investigation into government state pension errors.
The department for work and pensions (DWP) is currently sifting through hundreds of thousands of cases after investigations found more than 200,000 people have missed out on higher state pension payments dating as far back as 1985.
The errors related to inaccuracies in National Insurance records, meaning those who took time off to raise a family – particularly women - and claimed child benefit before 2000 may have missed out on a higher state pension payment.
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Former pensions minister Steve Webb, who uncovered the discrepancies, has also highlighted other state pension mistakes.
More than £570 million worth of state pension underpayments have been identified by DWP so far but the payouts could be closer to more than £3 billion.
However, some pensioners who are owed money or their relatives may be missing out if they haven’t responded to DWP letters.
A freedom of information request by Webb, now a partner and consultancy LCP, revealed that as of the end of July 2024, 1,859 people who had received letters telling them about potential underpayments to their late parents or late spouse had not responded.
Unless DWP receives a reply to these letters, the underpayment will remain unclaimed and goes into the government's coffers.
Who is affected by state pension underpayments?
Most of the errors are from before the new state pension launched in April 2016 and affect married women who didn’t get an automatic increase when their husband retired under old rules.
It could also affect widowed pensioners from before 2016 who couldn’t get the full basic state pension based on their own contributions but could have inherited payments from their spouse or civil partner.
The DWP has been writing to those affected to get them to claim the money owed.
But Webb’s latest research shows there are cases where money could have been owed to a widow who has since died.
There are 1,671 letters to next of kin flagging potential underpayments of this sort to which DWP has yet to receive a reply, Webb said.
A further 131 relate to cases where a married woman’s low pension was not automatically increased when her husband retired, and 57 cases relate to underpaid pensions to the over 80s.
The DWP says it only works out the amount potentially owed when it receives a reply to the letter, but in the past underpayments have ranged from a few pounds to over £100,000, so it is worth checking the post.
Webb warns that these letters arrive “out of the blue” and people may not realise the importance of responding.
How to find out if you are affected by state pension underpayments
The DWP is supposed to write to you to tell you about potential underpayments and to arrange to get any money owed sent to you.
But, not everyone will get automatic payments and you may have to find out for yourself.
If you believe you may have been affected, contact the Pension Service directly.
LCP’s state pension underpayment tool also lets you work out what you could be owed.
You could be owed £1000s, so it is worth checking if you claimed child benefit before 2000.
“We know that well over 100,000 people were underpaid state pensions and DWP has spent more than three years trying to track them down,” says Webb.
“In thousands of cases, the person who was underpaid is sadly no longer with us, but their heirs should still benefit from any underpayment.
“Although not all underpayments are large, in some cases, people have received £100,000 or more, so the recipients of these letters could be sitting on a pensions goldmine. If you have received a letter from DWP about a potential underpayment to a loved one, I would urge you to respond as soon as possible.”
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