Report highlights pension underpayment

The Department for Work & Pensions underpaid 134,000 pensioners an estimated £1 billion + in State Pension due to repeated human errors over many years, according to the National Audit Office (NAO).

The errors affect pensioners who first claimed State Pension before April 2016, do not have a full national insurance record and should have received certain increases in their basic State Pension, with women worse hit than men. 

The Department is reviewing cases and estimates that it will need to pay the affected pensioners it can trace a total of £1,053 million, representing an average of £8,900 per pensioner affected. The NAO says the Department’s estimates are highly uncertain and will only become clear once it has completed its review of all affected cases.

It says the errors occurred because State Pension rules are complex, IT systems are outdated and unautomated and the administration of claims requires a high degree of manual review and understanding by case workers. “This makes some level of error in the processing of State Pension claims almost inevitable,” says the NAO report.

It adds that the Department’s approach of measuring, identifying and tackling the largest causes of fraud and error meant it missed earlier opportunities to identify underpayments. Also it does not have a means of reviewing individual complaints or errors, such as how many people are complaining about the same issues, to assess whether the errors have a systemic cause. Quality assurance processes focused on checking changes to case details, such as a change of address or the death of a spouse, rather than the overall accuracy of the payments.

In January 2021, the Department started reviewing cases at risk of underpayment in a Legal Entitlements and Administrative Practices (LEAP) exercise. This exercise was originally expected to take over six years to complete, but following a ministerial decision to recruit additional staff, the Department revised the completion date to the end of 2023.

So far it has reviewed over 72,780 cases and paid £60.6 million of arrears to 11% of these cases, with priority being given to individuals who fall into “at risk” categories, such as those who are widowed or over age 80. Some may have since died and the NAO says the DWP has not approved a formal plan to trace the estates of deceased pensioners.

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