Thousands of women in their 60s and 70s could be in for a pensions boost as the government aims to contact all those impacted by state pension errors.
HMRC will write to people, many of them older women, to find out if they have information missing from their national insurance (NI) records which could affect their state pension.
Some people may have credits, previously known as home responsibilities protection (HRP), missing from their NI records.
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The National Audit Office (NAO), which scrutinises public spending for Parliament, estimated that 210,000 people have been underpaid £1.3 billion of state pension due to historical issues relating to HRP.
But it said the estimate from the DWP is “very uncertain” and could range from £310 million to £1.5 billion.
HRP was a scheme between 1978 and 2010 that helped protect parents’ and carers’ entitlement to the state pension. The mistakes relating to the HRP were recognised in a DWP annual report in July 2022 and described as the “second largest source of error in state pensions”.
If someone claimed child benefit before May 2000 and did not provide their NI number on the claim, their NI record may not show the correct number of qualifying years of HRP, which could affect their state pension entitlement.
HMRC is using NI records to identify as many people as possible who might have been entitled to HRP between 1978 and 2010 and have no HRP on their NI record.
It will write to people who meet these criteria, to find out if they are eligible to claim. If they are eligible, they can claim it online.
DWP will recalculate the state pension entitlement and let people know whether they are due any arrears.
Steve Webb, partner at LCP and the former pension minister, said: “Missing out on protection for time at home with children could make a huge difference to a mother’s pension entitlement, and lump sum payments of arrears could run into many thousands of pounds for those who are affected.
“I hope that this correction process will be completed as quickly as possible.”
When will HMRC contact you over state pension errors?
HMRC will start contacting those affected from autumn 2023 in phases, in order of how close they are to the state pension age. Those over state pension age will be contacted first.
Some people who were paid the wrong state pension may have died and their families will be entitled to check their eligibility and make a claim for any arrears.
The Department for Work and Pensions (DWP) and HMRC are working together to find people affected and correct their records so they receive the right amount of state pension.
State pension errors: The “married woman’s rate” of basic state pension
The DWP has also admitted to other errors relating to widows and divorcees who could have been underpaid the ‘married woman’s rate’ of basic state pension for years. This separate problem dates back to 1985 and relates to the "old" state pension system.
Married women aged 80 or over are being urged to check if they are receiving their full state pension after a document revealed hundreds of thousands of them are missing out under the underpayment correction scheme. It is thought that just over 130,000 people are affected, at a total of just over £1bn.
In this instance, the Department of Work and Pensions (DWP) has no plan to contact these women, making them responsible for claiming.
If you have the full 30 qualifying years of National Insurance contributions, you’re entitled to the full basic State Pension, currently £156.20 per week.
And if you’re married or in a civil partnership, and you both have the full 30 qualifying years, you’ll get double the amount.
However, if you’re a married woman and don’t have the full number of qualifying years, and your spouse retired before April 2016, you could be entitled to the so-called “married woman’s rate” of state pension.
This rate is set at 60% of the basic state pension your spouse gets. So, if your basic state pension payment is less than 60% of your spouse’s, you could be entitled to more.
In other words, married women could be entitled to a higher state pension (up to £85) based on current rates, but only if they claim it from the DWP.
Who’s missing out on the state pension correction scheme?
Before 2008, married women were legally required to claim the top-up, but following a rule change in March 2008, married women in this position should have automatically received an uplift in their state pension to 60% of their husbands' payout.
However, the DWP has excluded the “pre-March 2008” women from the automatic uplift as they were previously responsible for claiming it themselves.
It added it “took a number of steps to inform these individuals about their eligibility,” sent out forms about four months before a customer reached state pension age and men were given an extra claim so their wives could request the top-up.
It was unclear how many women were missing out, but a document discovered by former pensions minister Steve Webb showed that “in the low hundreds of thousands” of women could be in this position.
State pension underpayments
The government has identified many issues with historic state pension payments in recent years and has been working to remedy them.
It identified 46,000 underpayments worth £6,400 on average between January 2021 and February 2023, a total of £300m.
While this is “clearly positive… this is still a long way short of the £1bn the National Audit Office estimates is owed to pensioners”, said Tom Selby, head of retirement policy at AJ Bell.
“This saga is particularly tragic as many of the people affected will have been struggling unnecessarily for years. What’s more, the NAO estimated around 40,000 of the people who were due a repayment had died without receiving it.”
“It is shocking that the government knows that hundreds of thousands of older married women could be on a higher pension but has done nothing to make them aware in the fifteen years or more since their husband retired,” added Webb.
“I would encourage any married woman with a husband over 80 and who has a basic pension under £85 per week to check if she may be entitled to a higher pension”.
How can I claim and what state pension will I get?
Women who file a claim to the DWP will get a 12-month lump sum and the right amount of state pension going forward, but they will not get a full back payment covering the lost years.
To check if you are being underpaid, you can use this tool on Webb’s firm LPC, and you can contact the DWP about a correction on their website.
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