The Great State Pension Debacle
14 December 2022
Last year, the National Audit Office estimated that 134,000 pensioners – mostly women – were owed an average of £8,900 each, amounting to total underpayments of over £1 billion. This year, it raised those estimates even higher, saying that around 700,000 potential cases need to be reviewed by the government and there could be as many as 237,000 people affected.
Progress has been slow, to the end of October 2022, the Department for Work and Pensions (DWP) has reviewed 111,503 cases1 and identified 31,817 (29%) have been underpaid and underpayments totalling over £209.3m paid.1 The numbers keep on rising as new errors are identified.
How has this happened & what is being done about it?
The State Pension underpayments saga is due to a variety of factors including computer errors, information not being recorded properly on people’s records, the complexity of the pension system, and the way it was designed after the Second World War.
The DWP is now working its way through its records. Some people have already received their State Pension top-up and others will get their missing payments automatically this year or next, but some people will need to make a claim themselves.
How much unpaid State Pension could I be owed?
Initially, the average payment was estimated at just under £9,000 but individual amounts paid vary widely, partly because different types of claims have different backdating rules, and also because some people may be able to claim in more than one category.
Some married women who were only receiving a SERPS pension and no State Pension have received £40,000 or more, while other people may not receive any backdating at all, but at least will receive the full amount from now on. To make matters more complicated, there are cases for which a current or historical underpayment of State Pension has been identified but where a corresponding overpayment of another benefit (for example, Pension Credit) has occurred as a result – meaning that there was no net underpayment to the individual!
Do be aware that some (not all) back payments may affect your tax situation or benefits entitlement.
|Category||Cases reviewed||Underpayments identified||Average Arrears||Total amount repaid|
Has my State Pension been underpaid?
There are several different groups of people affected by unpaid pensions – and more groups may yet be identified….. Sadly, there are no simple answers to this so please take the time check whether you may have been affected.
The first question is relatively simple: did you or a loved one reach State Pension age before or after April 2016?
- Reaching State Pension age in April 2016 or afterwards means you or they are unlikely to be affected by the underpayments issue because you receive the new State Pension.
- Reaching State Pension age before April 2016 means you or they may be affected, especially if you didn’t have a full National Insurance record or full State Pension entitlement.
Underpaid State Pension checklist: who can claim?
The main affected groups identified so far include the following and which require an individual to claim personally are as follows:
- People who are married or in a civil partnership whose spouse/partner turned 65 before 17 March 2008 and whose State Pension is less than 60% of their partner’s basic State Pension. For example, many married women didn’t know they were entitled to 60% of their husband’s pension under the old pension system, so did not claim it. They could now be owed a boost, including some backdated payments.
- People who got divorced post-retirement and whose pension does not take account of their ex-spouse’s (or civil partner’s) National Insurance contributions. These people may also be owed a top-up.
- People who are married or in a civil partnership who turned 65 before 17 March 2008, are not receiving anything in basic State Pension, but are receiving a small amount from additional State Pension (also called SERPS). Some of this group have been receiving as little as £1 a week and can claim 60% of basic State Pension back to the date their spouse reached 65. The amounts involved can be significant.
Automatic identification (eventually)
If you are in the below groups, in theory, you should be notified by the DWP automatically; however, given the backlog, you may want to check for yourself.
- Anyone who is 80 or more and is not currently getting at least £85 a week. These pensioners don’t need a full National Insurance contributions record, but they do have to satisfy a basic residency test.
- People who are widowed and whose State Pension did not increase when their spouse died. Potentially, depending on their late spouse’s National Insurance record, they could be entitled to a boost up to the full State Pension (currently £141.85), plus some of their additional State Pension.
- People who now receive the correct level of pension but perhaps were underpaid (receiving less than 60% of the full basic pension) while their spouse was still alive. This has happened with some widows whose spouse reached pension age after 17 March 2008
- The families or heirs of people who were underpaid State Pension while alive. Some will be notified automatically, but others may have fallen through the net because records no longer exist for them, so will need to claim (see below).
It’s possible that men may be eligible for underpaid State Pension top-ups. But, in practice, they are more likely than women to have a full National Insurance record, less likely to rely on a spouse or partner for their State Pension entitlement and, therefore, less likely to qualify for a top-up.
Are you receiving the correct State Pension payments?
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How can I make a claim for an underpaid State Pension?
The State Pension correction exercise is being managed by the Pension Service, and you can contact them by phone on 0800 731 0469 (Monday to Friday, 8am to 5pm) When contacting them, it’s recommended that you have:
- Your National Insurance number
- Details of what you currently receive (this should be on your annual statement)
- Your spouse or civil partner’s name, date of birth, date of death (if applicable) and National Insurance number
- Details of how much your spouse or civil partner receives in State Pension (or whatever they received before their death)
Alternatively, you can write to them at: The Pension Service, Post Handling Site A, Wolverhampton, WV98 1AF.
What if the person who has been underpaid has died?
Thousands of people who were underpaid their State Pension have already died, and their families or heirs may be eligible for the underpayments. The DWP recently launched a dedicated website page to help these families. The page explains who may be affected, and there’s a link to request information.
Wider lessons from State Pension underpayments
Whether or not you or a loved one are owed underpaid State Pension, there’s a big lesson here for all of us: it’s really important to get to grips with the State Pension, what you are entitled to, and whether it is paid to you correctly.
Whatever age you are, whatever your marital or civil partnership status, and whatever your pension arrangements, it’s worth doing some homework on your State Pension entitlement, and any other pension plans you have.
 Cases may be checked for more than one potential cause of error; therefore, an individual State Pension claim may be counted in more than one category.
All authors have considerable industry expertise and specific knowledge on any given topic. All pieces are reviewed by an additional qualified financial specialist to ensure objectivity and accuracy to the best of our ability. All reviewer’s qualifications are from leading industry bodies. Where possible we use primary sources to support our work. These can include white papers, government sources and data, original reports and interviews or articles from other industry experts. We also reference research from other reputable financial planning and investment management firms where appropriate.
Saltus Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority. Information is correct to the best of our understanding as at the date of publication. Nothing within this content is intended as, or can be relied upon, as financial advice. Capital is at risk. You may get back less than you invested. Tax rules may change and the value of tax reliefs depends on your individual circumstances.
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