134,000 pensioners, 90 per cent of whom are women, were underpaid nearly £1 billion in state pensions, with 40,000 of them dying without receiving the right amount, according to the Department for Work and Pensions.
The Public Accounts Committee, which currently consists of 16 MPs, has published a report titled ‘Underpayments of the State Pension’ that investigates state pension underpayments and discovers that those most likely to have been underpaid include pensioners receiving a low basic state pension in their own right, widowed pensioners, and men and women who previously received no or low amounts of basic state pension.
These errors affect pensioners who first claimed state pension before April 2016 and do not have a complete National Insurance record, as well as those who should have inherited additional entitlement from a deceased partner. The average repayment is expected to be around £8,900, but it can range between £0.01 and £128,448.37. The corrections are expected to cost the Department £23.4m, with over 500 new employees hired by the time it is finished in late 2023.
The complexities of the state pension, according to the report, necessitate ‘human management,’ leaving room for ‘human errors.’ A complex and out-of-date IT system and quality assurance mechanisms are cited as the source of these errors.
Hargreaves Lansdown senior pensions and retirement analyst Helen Morrissey says: “Today’s report levels a series of stinging rebukes at the DWP, which failed to grasp the horrible human cost of its mistakes and has caused financial misery for over 100,000 pensioners.
“The report says it was complacent in its approach to state pension underpayments and showed a lack of clarity in how it communicated with those affected.
“The department was accused of focusing on percentages rather than recognising the very real financial difficulties being caused to people who had been underpaid. The human toll of this situation is massive –134,000 people are estimated to have been underpaid and many thousands of them have died without receiving what was due to them. It’s a scandal that could well grow with potential issues around underpayments to divorced women also highlighted.
“The DWP faces a costly exercise to correct these errors and will need to look at how IT systems and processes can be overhauled to prevent this from happening again. However, it also needs a fundamental review of how it communicates with people who come to them with concerns and the information it issues on a benefit that forms the very backbone of many people’s retirement planning.”