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DWP: Pensioners miss out on £1bn over decades after government’s State Pension mistakes

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State pensions have been systematically underpaid for years due to repeated human error brought about by complex rules and outdated IT systems, an independent watchdog has found.

It is estimated that the Department of Work and Pensions (DWP) has underpaid 134,000 pensioners since 1985, with those it can trace being paid out an average of £8,900.

It is thought that one in eight pensioners are missing over £40,000 from their payments.

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The DWP has been facing massive scrutiny since former minister Sir Steve Webb discovered numerous mistakes last year.

The National Audit Office (NAO) has released a scathing report detailing the DWP inadequacies including slow and old computer systems, complicated and confusing procedures, and caseworkers without a good grasp of the process.

The NAO concludes: “This makes some level of error in the processing of state pension claims almost inevitable.”

Most pensioners affected by errors are likely to be women, particularly widows, and the true value of underpayments will only be confirmed once the DWP has completed its review.

It is estimated that pensioners who should have benefited from their spouse’s or civil partner’s national insurance but did not are likely to receive £339 million.

Widows and widowers might be owed £568 million because they should have inherited an increased state pension entitlement from their deceased partner.

Pensioners who should have had a pension increase at age 80 are estimated to be owed £146 million.

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The DWP’s mistakes generally affect people who first claimed their state pension before April 2016, do not have a full NI record, and should have had certain increases acknowledged that weren’t.

The DWP does not possess the means to review individual complaints or errors making it very difficult to assess whether the errors have a systemic cause.

In January 2021, the DWP started reviewing cases at risk of underpayment with the process expected to take 6 years to complete until a recruitment drive saw that date revised back to 2023.

Between January 11 and September 5 2021, the Department reviewed 72,780 cases it had identified as being at risk of having been underpaid – often cases of widows and people who turned 80.

During this period they paid a total of £60.6 million of arrears to 11% of cases.

Pensioner received an extra £30 a week after review

A DWP spokesman said: “Anyone impacted will be contacted by us to ensure they receive all that they are owed.”

Lynda Hallaway is an example who has benefited from the review.

She was refunded a lump sum of £9,160 after her husband John queried why her pension was so small.

Lynda, 74, was getting only £57 a week despite John, 73, reaching pension age in 2012.

The mother of two from New Ellerby, near Hull, now gets £80.45.

She said: “I had no idea my pension was being underpaid. It was only by chance my husband heard about it.

“I would encourage any woman who thinks her pension is underpaid to get it checked.”

A third of people affected have now died

One group that will be harder for the DWP to trace is those who were underpaid and are now deceased because their records are only kept on file for four years after their death.

As of August 2021, the DWP had not approved a formal plan to trace the estates of dead pensioners.

Gareth Davies, the head of the NAO, said: “The impact of the underpayment of state pension on those pensioners affected is significant.

“It is vital that the Department for Work and Pensions corrects past underpayments and implements changes to prevent similar problems in future.”

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Commenting on the issues facing the DWP, former pensions minister Sir Steve Webb said:

“The National Audit Office report confirms that over 130,000 people, mostly women, were failed by the DWP.

“It is going to take more than 500 civil servants more than two years to check cases and pay money due.

“Sadly, in around a third of the cases they have identified, the person who was underpaid has now died.

“DWP say they will pay to surviving spouses or to the next of kin.

“But their records are not good and in around 15,000 cases they think they will never find anyone to pay.

“We have had a state pension system so complicated that people didn’t know if they were getting the right amount and officials who ran the system often didn’t understand all the rules and regulations.

“As well as paying these women the money they are due, the DWP needs a culture change so that people are encouraged to look for mistakes and put them right.”

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https://www.mylondon.news/news/uk-world-news/dwp-pensioners-miss-out-1bn-21641762