Underpaid state pension blunder: Millions of pounds now paid out

Some 1,900 women so far are confirmed to have lost out on state pension in a scandal uncovered by This is Money. 

Blunders were detected in one in four of the 7,200 cases processed to date by a 37-strong team at the Department for Work and Pensions, according to figures disclosed by its top official.

And it still has a backlog of 3,800 cases of women who have contacted it out of concern they were underpaid.

Payouts are £10,000 on average in cases personally known to Pensions Minister Steve Webb, who initiated an investigation into the state pension debacle with This is Money after a question to his column this year. 

Webb estimates the DWP will pay out £25-30million just to women who have contacted it so far, and £100million by the time it has corrected errors for all married women.

>>>Are YOU being underpaid state pension? Find out how to check below

But the bill could escalate dramatically if errors in the state pensions of widows and over-80s are found to be widespread. 

We have already covered two cases of widows who received £115,000 and £117,000. 

The running total paid out to women known to either Steve Webb or This is Money so far has topped £1million.  

Webb’s petition calling on the Government to trawl its records for all women underpaid state pension, including widows, over-80s and those who have already died, has just hit 10,000 signatures 

That means the Government has to issue a formal response to Webb, who is concerned that unless it comes under public pressure the DWP will limit its search to married women whose husbands reached pension age after a key 2008 cut-off date.

Details of the 11,000 proactive queries from women about their state pensions to date emerged in recent evidence from the DWP’s Permanent Secretary, Peter Schofield, to the work and pensions committee of MPs.

Webb says this indicated that while many of the women who phoned in were on the correct rate, more than one in four of the 7,000-plus dealt with to date were confirmed to be receiving too little.

‘Assuming that the rate of successful claims remains at its current level, this suggests that nearly 3,000 of those who have so far made contact with the department will be owed money,’ he says.

Webb is now a partner at pension consultant LCP, which has developed a tool to help women find out if they are underpaid and should therefore contact the DWP. 

The DWP has said many times that it is ‘checking for further cases’ – read its full response below.

Schofield’s evidence confirmed that the work is ongoing, that the team of 37 civil servants working on it would be expanded, and that though initial trawls often identify very large numbers of potentially eligible people which need to be refined manually, in the end tens of thousands of women could be in line for payouts.

That means many more women currently unaware they are on the wrong state pension could be identified, according to Webb.

‘The vast scale of this under-payment is only now starting to come to light,’ he says.

‘Back in May we estimated that tens of thousands of women were not getting the right amount of state pension, and millions of pounds have already been paid over.

‘But it has become increasingly clear that the DWP’s trawl of its own records is uncovering a can of worms and the final bill seems set to be over £100million.

‘Many of these women have been underpaid for a decade or more, and the situation needs to be put right as a matter of urgency.’

In the meantime, Webb urges women worried about their state pension to check the LCP tool, and if it indicates a problem to apply to the DWP for a review of their state pension.

He says it’s unclear how long it will take for the government to complete its work, and also married women whose husbands turned 65 before 17 March 2008 will only get an uplift if they make an active claim so there is no time to waste.

Labour has pressed the Government to reveal the scale of its probe, how many women are being paid incorrectly and when they would all receive their money.

But the DWP sidestepped the opposition party’s recent questions in parliament, aside from making an assurance that staff training was being stepped up. 

Today, Shadow Pensions Minister Jack Dromey said: ‘Labour called for an inquiry and it is welcome that the Government are reviewing their records.

‘However, these comments show just how many women may have been cheated out of their full pension entitlements.

‘Some of those affected have suffered massive personal hardship because of the length of time for which they have been underpaid.

‘It’s time for the Government once and for all to take urgent action on this growing scandal and to make sure every woman affected is paid the pension to which she is entitled.’

Ros Altmann, a former Conservative Pensions Minister, has also demanded the DWP get to grips with the issue and urgently explain what has gone so badly wrong with its systems. 

Regarding the newly revealed figures, she says: ‘This is a really important issue. Women have much lower pensions than men and make up the majority of pensioners in poverty.

‘Many of them are living on far less than they are entitled to, because the DWP has failed to pay them the right amount.

‘I congratulate This is Money and Steve Webb and LCP for the work they have done to help highlight the problems and I am pleased to see the DWP is now looking into the matter properly.

‘These women need to be repaid urgently and the public needs to know why the mistakes have occurred. 

‘We deserve an explanation for the failure to correctly inform the women and to understand what has gone wrong, so that such mistakes are less likely to happen in future.

‘Of course, with a system that pays money to millions of people every week there are bound to be some mistakes, but this seems to have been a significant problem that affects only older women, who are some of the most vulnerable people in our society.

‘They deserve special attention urgently.’

What does the DWP say?

‘We are aware of a number of cases where individuals have been underpaid state pension. We corrected our records and reimbursed those affected as soon as errors were identified.

‘We are checking for further cases, and if any are found awards will also be reviewed and any arrears paid.’

It adds that married women who are already getting a state pension are required to make a separate claim to have it increased if their husband reached state pension age before 17 March 2008.

And it encourages anyone who thinks they have failed to claim a state pension increase they are eligible for to contact the department.

The DWP says that ‘interest and consolatory payments’ will be considered on a case-by-case basis and depend on individual circumstances.