What began with the government insisting that cases of women being underpaid state pensions were isolated and uncommon has turned into an official inquiry that could see the Department for Work and Pensions (DWP) pay out £2.7bn in compensation. The DWP said last week that 200,000 women may not be receiving as much state pension as they are entitled to. It estimates that the average woman is owed a top-up of £13,500.
The shortfall, initially uncovered by researchers at the insurer Royal London, stems from poor record keeping at the DWP over several decades. It failed to keep track of women who should have received enhanced pensions under the old state-pension system, which topped up the income paid to married women on smaller pensions through complicated links to their husbands’ entitlements. In some cases, women who have been receiving a state pension of only a few pounds each week have discovered, late in their retirement, that they are owed thousands, or even tens of thousands, of pounds. But many others have no idea they have missed out – and until earlier this year, the DWP had refused to launch a full-scale investigation.
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The DWP said last week that it now has 100 civil servants working on the inquiry. But it will take some time to complete: there are several hundred thousand cases still to get through.
A landmark ruling on age discrimination
Members of public-sector pension schemes affected by a landmark court ruling on age discrimination will be given an improved deal to ensure they can maximise their pension benefits, the government has announced.
This issue dates from reforms to public-sector pension schemes implemented by the government in 2015. As part of the changes, scheme members within a decade of retirement were allowed to remain in the existing, unreformed schemes, but younger members were moved into new schemes offering less generous benefits.
In 2018 the courts ruled that the reforms were illegal because they discriminated against younger scheme members. In response, the government has announced a new deal, which will use a device known as a “deferred choice underpin”. Members affected by the ruling will now have a choice when they reach retirement, with the option of receiving benefits calculated in line with the reforms, or as if the changes had never taken place.
Importantly, savers will be able to make a decision on an informed basis, according to the value of the two options when they retire, rather than having to make assumptions about the future today. Not everyone will be better off by simply keeping hold of their old benefits, so this is potentially valuable.
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