Around £500m has been identified in State pension underpayments for the period between 11 January 2021 to 31 October 2023.
The government said more than 82,000 underpayments have been located, worth just over £6,000 each on average.
These errors have occurred due to administration errors, such as incorrect recording of claimants' National Insurance contributions, made by the Department for Work and Pensions. These errors have been found to date back as far as 1985.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
While the DWP 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.
“While it is clearly good news the government has identified almost £500 million of state pension underpayments, this is still well below the near £3 billion in total costs the DWP is expected to incur once the correction exercise has been completed," Tom Selby, head of retirement policy at AJ Bell, said.
Former pensions minister, Steve Webb, who is now partner at consulting form LCP, said the continuing scale of state pension underpayment was truly shocking, as this is not just a historical problem with 6 in 100 new pension claims being underpaid.
“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," Webb said.
Who are the underpayments affecting?
The majority of errors affected married women who didn’t get an automatic increase to their state pension when their husband retired.
There were also errors recording credits for time spent at home with children.
The married woman’s rate of state pension is available to married women who do not have the full 30 years of National Insurance Contribution. The rate is set at 60% of the basic state pension your spouse gets.
This means married women could be entitled to claim up to £85 based on current rates. But currently hundreds of thousands of women could be missing out.
The errors were “primarily caused by the complexity of the basic state pension system”, said Helen Morrissey, head of retirement analysis at Hargreaves Lansdown.
The DWP is in the midst of a correction scheme to adequately pay over 200,000 people who are receiving the wrong state pension.
“Many of these underpayments go back years and amount to thousands of pounds. Government is making headway in making these repayments, but the scale of the problem is vast, and it will take time to complete but in the meantime many of these people have been under financial strain that they didn’t need to be,” said Morrissey.
The DWP also said the state pension overpayment rate was 0.1%, or £100m, for the 2022/2023 financial year.
How to check if you’re getting the right state pension
Under the DWP’s correction scheme, most should be contacted automatically, but many married women are not.
If this is the case you should contact the Pension Service, and to check if you are being underpaid, you can use this tool on LPC.
-
Why Chinese stocks are so far out of favourThere’s little appetite for Chinese stocks despite low valuations.
-
The 62 UK areas where you could be priced out of using your Lifetime ISASaving for your first home in Croydon, Ealing, Brent or any one of these other locations? You could be at risk of being priced out of using your Lifetime ISA
-
What is the state pension triple lock?Explainer The UK state pension triple lock is loved by pensioners but hated by economists. But what is the triple lock - and what does its future hold?
-
How much state pension will I get?Advice Several factors determine how much state pension you'll get when you hit retirement age. Here's how to work out exactly what your entitlement is.
-
State pension age could rise to 68 by 2040, says work and pension secretaryNews Decision on increasing the state pension age past 67 is delayed and will not be made by the current government
-
State pension top-up deadline extended again to April 2025Pensions Spending just over £907 to purchase NI credits could add £7,740 a year to your pension pot – and now the government has extended the deadline to buy back missing credits.
-
State pension age could rise to 68 as early as 2035 – what it means for youNews State pension age increases could be accelerated, with the change to 68 coming in as early as 2035, affecting those who are 54 and under today.
-
State pension errors: HMRC contacts thousands of women over missing paymentsNews HMRC has sent out 325,000 letters so far. The average underpayment is £5,400 - could you be affected?
-
Triple lock to stay: how will it affect your pension?Analysis Triple lock looks set to stay, but what it is and what does it mean for your retirement income?
-
State pensioners probably aren’t going to get an 8% pay rise next yearNews The “triple-lock” could in theory mean an 8% rise in state pensions this year. But that’s not going to happen. Saloni Sardana explains what the triple lock is, and why the chancellor wants to scrap it.
