The government is due to refund £3bn to women who have been underpaid state pensions according to the latest documents released by the Office of Budget Responsibility.
The figures are contained in the OBR’s latest economic and fiscal outlook, which it publishes alongside the Budget.
The size of this repayment has been described as “mind-numbing” by former pensions minister Steve, now a partner at consultants LCP.
The OBR document states: “The DWP identified underpayments to state pension relating to entitlements for certain married people, widows and over-80s back to 1992. Our forecast reflects an initial estimate that it will cost around £3 billion over the six years to 2025-26 to address these underpayments, with costs peaking at £0.7 billion in 2021-22”
It adds that an administration error identified in March 2020 suggested that a small number of people had been underpaid. However a fuller investigation suggests the problem may be more extensive.
The OBR document adds: “The underpayment affected married women whose husbands reached pensionable age before 2008 and who were unknowingly entitled to ‘enhanced pension’ that would have boosted their payments by up to 60 per cent.
“DWP investigations between May and December 2020 uncovered a systematic underpayment of state pensions, meaning tens of thousands of married, divorced and widowed people may have been underpaid since 2008.”
A repayment programme began on 11 January 2021. The OBR says that the costing is subject to a “high degree of uncertainty” as the true extent of the underpayment is not yet established.
Last year Webb tabled a freedom of information inquiry to the DWP which revealed large numbers of women were getting state pensions below the expected rate. Subsequent campaigning revealed other groups of women including widows and the over 80s may also have been affected.
The DWP has set up a special unit employing more than 100 civil servants to look into this issue, but today is the first time the scale of the problem has been publicly stated.
Webb says: “This figure is truly mind-numbing. When I first looked into this issue a year ago I had no idea it would explode into such a huge issue.
“Repayments of £3 billion over the next five years could imply huge numbers of women have been shortchanged, potentially for a decade or more. The government needs to devote serious resources to getting these repayments out quickly as these women have waited long enough”.