DWP to repay £3bn in underpaid state pensions

Around 200,000 women are to receive letters to say they are owed an average £13,500 due to state pension administrative errors dating back to 1992.

The underpayment came to light in a report published yesterday by the Office for Budget Responsibility on its “economic and fiscal outlook”.

It cites the Department for Work and Pensions’ discovery of underpayments of state pension relating to entitlements for certain married people, widows and over-80s going back to 1992 and estimates that it will cost around £3 billion over the six years to 2025-26 to address these underpayments, with costs peaking at £0.7 billion in 2021-22. However, it says there is uncertainty about the total cost.

The DWP says the administration error was identified in March 2020. This follows a Freedom of Information request by former pensions minister Sir Steve Webb. It affects married women whose husbands reached pensionable age before 2008 and who were unknowingly entitled to ‘enhanced pension’ that would have boosted their payments by up to 60 per cent. DWP investigations between May and December 2020 uncovered a systematic underpayment of state pensions, meaning tens of thousands of married, divorced and widowed people may have been underpaid since 2008.

It says a repayment programme began on 11 January 2021.

Sir Steve Webb, a partner at LCP law firm, said: “This figure is truly mind-numbing. When I first looked into this issue a year ago I had no idea it would explode into such a huge issue. Repayments of £3 billion over the next five years could imply huge numbers of women have been shortchanged, potentially for a decade or more. The government needs to devote serious resources to getting these repayments out quickly as these women have waited long enough.”

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