100,000 households to receive £5.9k each from DWP after underpayment of state pensions
ALMOST 100,000 households have received an average of £5,900 after receiving an underpaid state pension.
The government has identified 97,016 people who missed out on a total of £571.6 million in payments in 1985.
The underpayments were caused by a combination of old, complex AOW rules and IT errors.
The government is now going through the process of ensuring that those affected, an estimated 237,000, get back the money they should have received.
A number of groups of retirees are affected, including women who retired under the old state pension system.
Many of these women did not receive the benefits they were entitled to under their husband’s national insurance schemes.
Others did not receive the support they qualified for when their spouses died.
Helen Morrisey, head of pensions analysis at Hargreaves Lansdown, said: “Progress is being made to correct the widespread problem of state pension underpayments, but it is very slow.
‘Just over £571 million has been returned to date, but with estimates suggesting the scale of underpayments could be around £1.5 billion, there is still a long way to go.
“People have the expectation that the AOW amount they receive is correct, but a series of errors in an already overly complex system means that this expectation has proven to be incorrect for many thousands of people.”
The latest figures from the DWP show that 21,175 widowed women have been underpaid in their state pension, receiving an average refund of £12,486.
Meanwhile, 32,474 over-80s have received an average of £2,192 and 43,367 married pensioners received £5,713.
This compares with a total of 82,323 pensioners who had received compensation up to November last year.
According to the DWP, just over 50,000 people had received a total of £324 million by the end of March 2023.
A DWP spokesperson said: “The action we are taking now is to correct historic underpayments by successive governments.
“Our priority is to ensure that pensioners receive the financial support they are entitled to and we have put in place a dedicated team and committed significant resources to completing the correction.”
Who is affected?
About 237,000 retired stay-at-home mothers may have missed out on the correct state pension amounts.
The list of people who are underpaid is broad, but falls roughly into three categories.
First of all, this concerns married women who reached state pension age before April 2016, while their husbands were 65 years or older on or after March 17, 2008.
In second place are widows whose state pensions did not increase when their husbands died.
In third place are women aged 80 or over who receive £80.45 or less per week in state pension.
What can I do about it?
You can go straight to the DWP and ask if you are affected, but there are online resources and advice sites that can help you.
An online tool launched by former Pensions Secretary Steve Webb on behalf of actuarial company LCP can help married women check whether they may be affected.
What are the different types of pensions?
WE list the most important pension types and how they differ:
- Personal pension or personally invested pension (SIPP) – This is probably the most flexible form of pension. You can choose your own provider and how much you invest.
- Pension in the workplace – The government has made it mandatory for employers to automatically enroll you in your company pension unless you opt out.
These so-called defined contribution pensions (DC pensions) are usually chosen by your employer and you cannot change them. The minimum contribution is 8%, with employees paying 5% (1% tax reduction) and employers contributing 3%. - Final salary pension – This is also a company pension, but what you get when you retire is determined based on your salary, and you are paid a fixed amount each year when you retire. It is often called a gold-plated pension or a DB (Defined Benefit) pension. But they are generally no longer offered by employers.
- New state pension – This is what the state pays to those who reach state pension age after April 6, 2016. The maximum payout is £203.85 per week and this requires 35 years of National Insurance contributions. You also need at least ten years to even qualify for anything.
- Basic state pension – If you reach state pension age on or before April 2016, you will receive the state pension basis. The full amount is £156.20 per week and you need 30 years of National Insurance contributions to get this. If you have a basic AOW pension, you can also receive a supplement to the so-called supplementary or second AOW pension. Those who have accrued national insurance contributions under both the basic pension and the new state pension will receive a combination of both schemes.
If you use the LCP calculator and think you are eligible for a top-up, the DWP should also notice the error and contact you.
The DWP began resolving the issue on January 11, 2021 and is working to provide compensation to those affected.
If you owe money, you will probably have to wait for the DWP to send you a letter confirming your payment.
Those considered ‘high risk’, such as people over 80 and widows, will be given priority.
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