The Department for Work and Pensions (DWP) has issued a warning that over half a million state pension claimants may be receiving less than they are entitled to, potentially losing thousands of pounds throughout their retirement without realizing it.
Scope of the Problem
It is feared that approximately one in 20 pensioners are being underpaid, with errors potentially costing retirees tens of thousands of pounds over a typical retirement spanning more than 20 years. Former Liberal Democrats Pensions Minister Sir Steve Webb has raised the alarm, noting that the DWP continues to report that five in 100 state pension claims are incorrect even after four years of checking hundreds of thousands of cases.
Expert Warnings
Sir Steve, now a partner at pension consultancy LCP, stated: "We have almost reached the stage where people should start from the assumption that their pension may be wrong and make sure they check thoroughly that everything is in order." He added: "The numbers involved may be small for a giant bureaucracy, but they can be life-changing amounts for those affected."
Historical Errors
In 2021, the DWP admitted that historic calculation errors had left an estimated 200,000 elderly women underpaid, with the current bill for arrears standing at approximately £800 million. Three categories of women were primarily affected: widows who did not receive inherited pension entitlements following their husband's death, married women whose payments should have reflected their spouse's contribution record, and those over 80 receiving below £110.75 weekly whose pensions should have been reviewed and increased.
Childcare Periods
Between 1978 and 2010, individuals who stepped away from employment to raise children were entitled to have years deducted from the 39-year requirement for a full basic state pension. A parent spending 19 years caring for children should therefore have needed just 20 years of National Insurance contributions. However, these childcare periods were frequently not recorded correctly on National Insurance files, meaning credits for time at home were never applied.
Calls for Action
Sir Steve, who created the Triple Lock metric, said: "Given that issues around missing HRP have been common knowledge for years, it is particularly remarkable that DWP has not reviewed the claims process and added questions about children to the state pension claim form." Morgan Vine of Independent Age, a charity supporting older people facing financial hardship, commented: "Budgets are being stretched to breaking point, forcing many older people living on low incomes to make drastic cutbacks on essentials such as food and water." Baroness Altmann, another former pensions minister, added: "Underpaying one in 20 older women means hundreds of thousands of them have less money to live on than they should."
