"Not only is the cost of the underpayment correction exercise set to soar, DWP are now admitting a whole new category of errors."
Last year’s annual report estimated that around 134,000 people had been underpaid state pensions worth around £1 billion in arrears. Today’s report says that further scans have shown that the number affected is closer to 220,000 and the bill will run to over £1.3 billion.
In addition, the annual report admits for the first time to an error whereby credits for time at home with children (previously known as ‘home responsibilities protection’) may be missing from people’s NI records. These credits can have a very substantial impact on people’s state pension entitlement, and the majority of those affected will be women.
Steve Webb first raised this issue with DWP in 2008 and a correction exercise was undertaken which eventually refunded around £35m. However, DWP have now admitted ongoing problems are being investigated with HMRC, though is unable to assess the scale of the problem.
In its report, DWP says: "The second largest reason for State Pension underpayment is primarily attributable to historic periods of Home Responsibilities Protection (HRP) not being recorded accurately on National Insurance records. For people reaching State Pension age before 6 April 2010, HRP reduced the number of qualifying years needed for a basic State Pension where someone stayed at home to care for children for whom they received Child Beneft or a person who was sick or disabled. For people reaching State Pension age since 6 April 2010, previously recorded periods of HRP were converted into National Insurance credits.
"Errors have occurred where periods of HRP were due but not accurately recorded on someone’s National Insurance record. State Pension payments are calculated and administered by the Department, based on the National Insurance records supplied by HM Revenue and Customs, these errors may therefore have impacted an individual’s State Pension award. Activity has been underway in HM Revenue and Customs, supported by the Department, to understand more about the scale, potential causes and options to correct these cases. Investigations are complex, involving the use of tailored data reports. The potential numbers of people affected and estimates of cost are unlikely to be available until autumn 2022 at the earliest."
Steve Webb, partner at LCP, said: “DWP’s annual report reveals a shocking level of error in state pension payments. Not only is the cost of the underpayment correction exercise set to soar, DWP are now admitting a whole new category of errors. In both cases it is women who will bear the brunt of the errors. We need much greater transparency about all of this rather than leaving it to figures buried in the small print of annual reports. Far too many people have been underpaid for far too long.”
