State pension underpayments hit a record in 2022/2023, with £670m underpaid throughout the year, according to the Department for Work and Pensions. That’s significantly higher than last year’s £540m.
The DWP said the main reasons for underpayment were official errors, as well as incorrect recording of claimants' National Insurance contributions.
“The continuing scale of state pension underpayment is truly shocking,” sais Steve Webb, partner at LCP and former pensions minister. “Whilst it is right that there is a focus on fraud in the benefit system, DWP should be equally concerned where it is not paying people what they are entitled to.
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“What is particularly alarming is that these errors are not just historic problems, with 6 in 100 new pension claims being underpaid. Urgent action is needed to drive up standards of administration so that pensioners can have confidence that the pension they are being paid is correct”.
Who are the underpayments affecting?
The majority of errors affected married women who didn’t get an automatic increase to their state pension when their husband retired.
There were also errors recording credits for time spent at home with children.
The married woman’s rate of state pension is available to married women who do not have the full 30 years of National Insurance Contribution. The rate is set at 60% of the basic state pension your spouse gets.
This means married women could be entitled to claim up to £85 based on current rates. But currently hundreds of thousands of women could be missing out.
The errors were “primarily caused by the complexity of the basic state pension system”, said Helen Morrissey, head of retirement analysis at Hargreaves Lansdown.
The DWP is in the midst of a correction scheme to adequately pay over 200,000 people who are receiving the wrong state pension.
“Many of these underpayments go back years and amount to thousands of pounds. Government is making headway in making these repayments, but the scale of the problem is vast, and it will take time to complete but in the meantime many of these people have been under financial strain that they didn’t need to be,” said Morrissey.
The DWP also said the state pension overpayment rate was 0.1%, or £100m, for the 2022/2023 financial year.
How to check if you’re getting the right state pension
Under the DWP’s correction scheme, most should be contacted automatically, but many married women are not.
If this is the case you should contact the Pension Service, and to check if you are being underpaid, you can use this tool on Webb’s firm LPC.
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