More than £1bn in state pensions underpaid due to 'repeated human errors'

More than £1bn-worth of state pensions have been underpaid due to repeated human errors which were almost inevitable amid complex rules and outdated IT systems, a spending watchdog has said.

The Department for Work and Pensions (DWP) estimates it underpaid 134,000 pensioners and those it can trace will be paid an average of £8,900, the National Audit Office (NAO) said.

Most of those affected are likely to be women and the true value of the underpayments will only become clear once the DWP has completed its review of all cases, the watchdog added.

An estimated £339m will go to pensioners who should have benefited from their spouse’s or civil partner’s national insurance (NI) record; £568m to widows and widowers who should have inherited more state pension entitlement from their deceased partner; and £146m to pensioners who should have had an increase in their pension at their 80th birthday.

Meg Hillier, chair of the Committee of Public Accounts said: “Many pensioners – most of whom are likely to be women – have been short-changed by thousands of pounds which they are still yet to receive many years later.

“Although it is positive that DWP is now working to put this right, this is not the first widespread error we have seen in DWP in recent years. Correcting these errors comes at great cost to the taxpayer.

“DWP must provide urgent redress to those affected and take real action to prevent similar errors in future.”

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The errors affect pensioners who first claimed state pension before April 2016, do not have a full NI record, and should have received certain increases in their basic state pension.

Errors happened because state pension rules are complex, IT systems are outdated and unautomated, and the administration of claims requires a high degree of manual review and understanding by case workers, the NAO said.

“This makes some level of error in the processing of state pension claims almost inevitable,” it added.

In January 2021, the DWP started reviewing cases at risk of underpayment – an exercise originally expected to take over six years to complete.

Following a decision to recruit additional staff, the Department revised the completion date to the end of 2023.

The Department does not know how many pensioners who have died have been underpaid as, for data protection reasons, it does not usually keep records for more than four years after a pensioner’s death, and if married, their spouse’s death, according to the report.

As at August 2021, the Department had not approved a formal plan to trace the estates of deceased pensioners.

Gareth Davies, the head of the NAO, said: “The impact of the underpayment of state pension on those pensioners affected is significant.

“It is vital that the Department for Work and Pensions corrects past underpayments and implements changes to prevent similar problems in future.”

A DWP spokesperson said: “We are fully committed to ensuring the historical errors that have been made by successive governments are corrected, and as this report acknowledges, we’re dedicating significant resource to doing so.”

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