Officials have identified more than £450 million worth of underpayments in its latest review of state pension administrative errors.
The Department for Work and Pensions (DWP) is currently working on a correction scheme after investigations found more than 200,000 people missed out on higher state pension payments dating as far back as 1985.
Errors were uncovered by former pensions minister Steve Webb in 2020 and have been attributed to DWP staff incorrectly recording National Insurance contributions.
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New figures published today (15 May) show that six in every 100 state pension claims were being underpaid by the DWP in 2024/25 – up from five in 100 the previous year.
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This is despite the completion of a massive four-year-long ‘correction’ exercise which has paid out more than £800 million in arrears to over 100,000 widows, married women and over 80s.
Steve Webb, partner at pension consultants LCP said: “It is astonishing that six in every hundred state pensioners are being underpaid.
“In some cases these underpayments have been going on for years and could amount to thousands of pounds. When people have worked hard all of their lives, they have a right to expect that their pension will be paid at the correct rate.”
According to the figures, one of the main sources of underpayments is cases where parents – mostly mothers – are missing credits for time spent at home bringing up children.
HMRC and DWP are currently in the middle of a large-scale correction exercise which involves contacting both pensioners and people of working age who may be missing ‘Home Responsibilities Protection’, in particular for Child Benefit claims made before the year 2000.
Before this point it was not necessary to include a National Insurance (NI) number on a Child Benefit claim and this meant that claims were not automatically linked to the NI contributions database to generate credits.
HMRC has already written to hundreds of thousands of pensioners to mention potential HRP, but the letter promoted online tools to check entitlement and to make a claim, which may have been off-putting to many older pensioners.
New figures on progress with this exercise are due to be published next week.
Webb says: “Given how complex the system is, it can be hard for people to know if they are getting the right amount or not, so it is all the more important that the Government gets it right.
“You would have hoped that all of the recent correction exercises would have resulted in a falling rate of errors, so it is all the more shocking to see underpayment rates increasing.
“DWP needs to redouble their efforts to track down these errors and fix them as a matter of urgency."
The Office for Budget Responsibility has previously estimated that the correction exercise could eventually cost the DWP almost £3 billion.
A Government spokesperson said: “This Government is determined to protect pensioners and ensure they receive the financial support they deserve.
“We have identified an issue relating to the records of people who first claimed Child Benefit before May 2000 and we are addressing this.
“While most people’s records will not be affected, HMRC has now written to everyone they believe could be, and we have an online tool to help people check whether they need to claim.”
Who are the underpayments affecting?
Most of the state pension errors are from before the new state pension launched in April 2016.
Married women who didn’t get an automatic increase to their state pension when their husband retired under old rules are believed to be one of the main affected groups.
Payouts to this group are currently at £5,553 on average, the DWP said, while a total of £252.8 million has been paid out across 321,439 cases.
It could also affect widowed pensioners from before 2016 who were not entitled to a full basic state pension based on their own contributions but could have inherited payments from their spouse or civil partner.
Average payouts to this group are at £11,725 and £483.4m has been repaid so far after a review of 465,316 cases.
How to check if your state pension payments are correct
The DWP has confirmed to the Work and Pensions Committee that it has completed the vast majority of reviews, but is still waiting for people to contact them with information meaning the exercise won’t be fully completed until March 2027.
People should be contacted automatically if they are owed money, but there have been warnings that many married women are not being reached.
While the DWP says it has been trying to locate those who were underpaid, not everyone will get a letter and you may have to contact the DWP yourself for redress.
If this is the case you should contact the Pension Service or use consultancy LCP’s state pension underpayment tool to work out what you could be owed.
Rachel Vahey, head of public policy at AJ Bell, said: “The DWP is calling on customers to provide additional information to put an end to this sad episode. But that relies on these people getting online and engaging with the DWP.
“Once all compensation has been paid, the government needs to undertake a comprehensive review of its processes to ensure these mistakes are never repeated. Trust in pensions is fragile at the best of times and failures such as this will not help. Sadly, it will likely take years, if not decades, to rebuild the confidence lost as a result of this scandal.”
