NEW state pension errors have been revealed which could mean retirees have missed out on cash they were entitled to over the years.
Hundreds of thousands of women were underpaid the state pension by more than £1billion in a blunder branded “shameful” by MPs.
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A major effort to repay those who missed out has been underway and one shortchanged pensioner got back a whopping £128,000.
And a previous blunder a decade ago saw around 36,000 people paid back £83m.
Now the government has revealed that there are further errors that could have left people underpaid their state pensions.
The Department for Work and Pensions (DWP) has admitted that there are six new scenarios where the calculations were incorrect since 2007.
The latest mistakes came to light after a freedom of information request submitted by Sir Steve Webb, the former pensions minister and now partner at LCP.
But the DWP has refused to say how many people are affected or how much they are owed, citing the cost of getting this information as too expensive.
Sir Steve said it was “surprising” that these errors and efforts to correct them have not previously been made public.
He said: “DWP need to improve on two fronts – better error checking to make sure people are not paid the wrong pension in the first place, and greater transparency so that the public is told when things have gone wrong.
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“Whilst anyone can make a mistake, what is worrying about this catalogue of errors is how long it can take for anyone to spot that anything is wrong.
“In one case it was three years after the new state pension was implemented before anyone spotted a systematic problem with the payments to certain married women.
New state pension blunders
One of the blunders affects those who reached state pension under the old system, but they have a partner who passed away and retired (or would have) under the new system introduced in 2016.
State pension for them should have been increased in a certain way, but an error was made working this out.
Under the old pension system couples often had some of their entitlement based on their partner’s contributions.
Another blunder left some women who paid the married woman’s stamp under the old system, without the full cash they were owed under the rules for the new pension system.
Around 10,000 women are estimated to be subject to the rule, but it’s not clear how many of these are affected.
But the sums some of them missed out on could be large over time if they got nothing, as it was worth more than £4,000 a year.
Further smaller errors uncovered by LCP include incorrect figures for maximum pensions being entered, some small underpayments of State Second Pension, and errors where people had unusually large amounts of deferred state pension.
State Second Pension was a top up to the old basic state pension and was previously known as state earnings-related pension scheme (Serps) before 2002.
There’s no indication of how many are affected by these further issues or how much they might be owed.
We’ve asked the DWP what people can do if they think they might be affected by these errors and will update when we hear back.
In previous cases, those affected have had to wait to be contacted by the DWP.
State Pension calculations can be complicated as many retirees have built up their entitlement under the new and old system.
Here’s the full list of underpayments, as described by the DWP:
- State Second Pension (S2P) Underpayments: This issue, identified via a staff query, related to the way in which the HMRC IT system calculated S2P amounts for some individuals. This resulted in small underpayments of S2P.
- Incorrect Maximum Additional State Pension Value (2010/11): During the 2010/11 uprating exercise an incorrect rate of maximum Additional State Pension was input into the system. The correct amount was £158.83, but £157.74 was used instead.
- New State Pension – Revaluation/Uprating of Inherited “old rule” amounts: This issue affects awards of inherited State Pension where the survivor is receiving their State Pension under the “old rules” (i.e. they reached State Pension age before 6 April 2016) and their deceased partner was or would have received their State Pension under the “new rules” (i.e. they reached or would reach their State Pension age on or after 6 April 2016). The IT system had incorrectly applied new State Pension revaluation/uprating rules instead of the pre 2016 rules to the inherited amounts.
- Reduced Rate Election (RRE) – Transitional Amounts: It was identified late in 2019 that some married women were not receiving the RRE transitional amount they should be getting in accordance with the law.
- Underpayments of Deferral Amounts: The PSCS [pension strategy computer system] had a field limit of £99.99 for deferral increments. This resulted in a very small number of State Pension customer only being paid the excess over the £99.99 limit and not the full increment value.
- Equal Treatment Exercise for Transgender Women: Transgender women born between October 31, 1953 and November 6, 1953 who had lived in their acquired gender for at least two years by October 2018 and have had gender reassignment surgery may be entitled to up to six days of backdated State Pension, as a result of a CJEU ruling. Prior to the exercise start date, Transgender women could only get their State Pension at the earlier female State Pension age if they had a Gender Recognition Certificate. State Pension ages equalised on the November 6, 2018.
Previous error – could you be owed cash?
An investigation by the Public Accounts Committee (PAC) into the previous error affecting over 130,000 women branded the failure a “shameful shambles”.
But many people could still be missing out on significant sums because there is little guidance for those concerned they are being underpaid their state pension.
People are being “left in the dark over their entitlement”, the committee said.
Those affected by the error identified by the DWP are pensioners who first claimed the state pension before April 2016 and did not have a full national insurance record.
They should have received increases to the basic state pension but didn’t due to an error that the National Audit Office has blamed on complex rules and outdated IT systems that require claims to be made manually instead of being automated.
But some who have since passed away and their families may never get what they are owed.
The DWP is aiming to identify all those affected and give backdated payments by the end of 2023.
Around 130,000 retired stay-at-home mums may have missed out on a pension hike when their husbands retired.
Their payments should have risen to 60% of their husband’s basic state pension, the amount women with low national insurance contributions got under the old pension system.
When the issue was first uncovered, they would get £80.45 a week, 60% of their husband’s £134.25 a week. Instead, they are getting more like £67 a week.
The injustice only affects wives who retired before 2016. After this date women’s pensions were no longer linked to their husbands.
How much you’ll get in compensation depends on when your husband retired.
If it was between April 2008 and 2016, you’ll get all your losses back as the Government should have increased your pension automatically.
Those whose husbands retired before 2008 had to apply for the extra cash, although in many cases they lost out because they didn’t know about it.
Women in this position can only get a year of backdated payments.
This online tool was launched by former pensions minister Steve Webb on behalf of actuarial firm LCP, after he first uncovered cases of women being paid the wrong state pension via his This Is Money column.
If you use the LCP calculator and think you’re eligible for a top-up, then the DWP should pick up the error in their own records too.
If you are owed money, you’ll likely have to sit tight and wait for the DWP to send you a letter confirming your payment.
Those considered at “high risk” like those over 80 and widows are being prioritised.
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