More people – especially women – have been underpaid on their state pensions than previously thought, the latest government figures show.
A new estimate suggests 237,000 state pensioners were paid less than their entitlement, for a total of almost £1.5bn underpaid.
That is 105,000 more people affected than the Ministry for Work and Pensions (DWP) calculated a year ago.
This includes widows and divorcees who may have been underpaid for years.
The problem dates back to 1985 and affects the “old” statutory pension system. Married women who had a small pension of their own could claim a 60% basic state pension based on their husband’s contribution records. But an error at DWP meant they didn’t get that money automatically.
Along with widows and the divorced, some will eventually receive all of their entitlements, albeit years later than they should have. Others can only claim 12 months of missed payments.
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When the DWP first released figures, it was believed that 200,000 female pensioners were owed up to £2.7bn in total. After more details were gathered, the estimated number was reduced to just over 130,000 people affected, with a combined value of just over £1bn.
Now those estimates have been changed again, with the prospect of further revisions.
“DWP has conducted additional reviews of its records to understand pensioners who may be affected, but the full extent of underpayments will not be known until each case has been reviewed,” the National Audit Office said.
The situation was described as “a shameful mess” by MEPs’ Public Finance Committee in January.
The committee’s report says the errors were the result of outdated systems and extensive manual processing of pensions at the DWP. There is also a risk that the errors that led to underpayments in the first place could be repeated in the correction programme, the ninth such operation since 2018.
Former Pensions Secretary Sir Steve Webb, who is now a partner at consultancy LCP, said the DWP had also admitted to a mistake where time at home with children credits – formerly known as protection of domestic responsibilities – were included in people’s social security files could be missing and thus affect their statutory pension.
“Not only will the cost of correcting underpayment skyrocket, DWP is now admitting to a whole new category of mistakes,” he said.
“In either case, women will bear the brunt of the mistakes. We need a lot more transparency about all of this, rather than relying on the numbers buried in the fine print of annual reports. Far too many people have also been far underpaid for long.”
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