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Recent data from the Department for Work and Pensions (DWP) has unveiled a concerning rise in the number of underpaid state pensioners in 2024/25, with a staggering £450 million in owed payments.
In a worrying trend, six out of every 100 pensioners did not receive their full entitlement, marking an increase from five out of 100 in the previous year. This oversight has resulted in an average loss of £5,770 for each affected individual.
The Impact of Oversights on Pensioners
The increase in underpaid claims primarily affects parents, particularly mothers, who were short-changed due to missing credits for time spent raising children at home.
This issue arose despite the DWP’s extensive four-year “correction” operation, which reimbursed over £800 million in overdue payments to more than 100,000 elderly individuals, including widows, married women, and those over the age of 80.
The Role of Home Responsibilities Protection (HRP)
At the heart of this issue is the Home Responsibilities Protection (HRP) program, which was meant to provide National Insurance credits to individuals who paused their careers to care for family members or children.
Introduced to ease the qualification process for state pensions, HRP was phased out in 2010 and replaced by National Insurance credits.
However, an investigation has revealed that thousands of Child Benefit claim forms submitted before 2000 did not request a National Insurance number, leading to potential misattributions of HRP.
This has affected many stay-at-home mothers who claimed Child Benefit between 1978 and 2000.
The DWP and HM Revenue and Customs (HMRC) are working together to reach out to those who might have been impacted, with new data expected shortly.
Mistaken Overpayments by DWP
The situation has been compounded by further mistakes, with recent data indicating that DWP overpaid £90 million in state pension funds in the previous year.
This has added to the ongoing chaos surrounding pension payments and underscores the importance of accuracy in such a critical system.
Expert Opinion on Pension Payment Failures
Sir Steve Webb, former pensions minister and partner at LCP pension consultants, expressed his disbelief at the growing rates of underpayments, stating, “It is astonishing that six in every 100 state pensioners are being underpaid.”
He also highlighted the long-term impact, saying that for some pensioners, these errors could amount to thousands of pounds in losses.
Webb emphasized the critical need for accuracy, pointing out that individuals who have worked hard throughout their lives should be entitled to receive their pension at the correct rate.
He stressed the importance of ensuring that these issues are promptly addressed, especially considering the complexity of the pension system, which makes it difficult for individuals to ascertain whether they are receiving the right amount.
The Need for Action
Despite correction efforts, the data shows that underpayment rates are rising. Webb urged the DWP to intensify their efforts to identify and fix these errors urgently, stating, “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.”
Key Figures in Pension Underpayment and Overpayment
| Category | Amount Owed to Pensioners | Average Loss per Affected Pensioner |
|---|---|---|
| Total Underpaid State Pension Claims | £450 million | £5,770 |
| Overpaid State Pension Claims | £90 million | N/A |
| Total Reimbursement for Previous Errors | £800 million | N/A |
The ongoing issues surrounding underpaid and overpaid state pensions highlight serious flaws in the system that need urgent attention. With millions of pounds still unaccounted for and many pensioners facing financial hardship, it’s crucial that the DWP and HMRC continue their efforts to correct these mistakes.
The complexity of the pension system makes it difficult for individuals to ensure they are receiving the right amount, but the government must take greater strides in addressing these errors to guarantee that hard-working individuals get the pensions they rightfully deserve.
FAQs
Why are state pensioners being underpaid?
State pensioners are being underpaid due to errors in the DWP’s processing system, which missed credits, particularly for those who took time off work to raise children or care for family members. These errors have caused significant financial losses for affected individuals.
How is the DWP addressing these underpayments?
The DWP, in collaboration with HMRC, is actively contacting those who may have been affected by missing National Insurance credits or incorrect Home Responsibilities Protection (HRP) claims. They are working on rectifying these errors and reimbursing pensioners where necessary.
How much is the average loss for underpaid pensioners?
On average, underpaid pensioners have missed out on £5,770. This amount represents the difference between what they should have received and what they were actually paid.