State Pension underpayments

State Pension underpayments

In 2020 it was revealed that around 130,000 married or widowed people had their state pension underpaid due to a computer error. People who reached pension age before 6th April 2016 may be affected.

The issue was caused due to the system giving a prompt when a change in rate may have been required. This then needed to be followed up by a manual action, and in some cases, this did not occur.

Department for Work and pensions annoncement

The Department for Work and Pensions announced in October 2020 that they would start to identify the people who had been underpaid and reimburse them.

In a statement from Guy Opperman, the Pensions Minister (Who has been reappointed after the cabinet reshuffle), he said the following:

“Rectifying these cases is a priority for the Department, and we will do it as quickly as possible.”

Who may have been underpaid their state pension

These cases are categorised into the following groups:

  • People who are married or in a civil partnership who reached State Pension age before 6th April 2016 and may be entitled to a Category BL uplift based on their partner’s National Insurance contributions.
  • Following a change in the law in 2008, when their spouse became entitled to a State Pension, some people should have had their basic State Pension automatically reviewed and uplifted. Underpayments occurred in cases when this did not happen.
  • People who have been widowed and their State Pension was not uplifted to include amounts they are entitled to inherit from their late husband, wife or civil partner.
  • People who have not been paid Category D State Pension uplift as they should have been from age 80.

What are is happening with the repayment

A formal correction exercise started in January 2021. Additional staff have been recruited to deal with the workload with the aim of completing the exercise by the end of 2023.

The current estimate is that arrears will total £2.7 billion.

An estimated £339 million will go to pensioners who should have benefited from their spouse’s or civil partner’s National Insurance (NI) record.

£568 million will go to widows and widowers who should have inherited more State Pension entitlement from their deceased partner.

A further £146 million is to be paid to pensioners who should have had an increase in their pension on their 80th birthday.

The DWP is prioritising individuals who fall into “at risk” categories, such as those who are widowed or aged over 80.

What if the pension holder is deceased

It’s unknown how many pensioners who have died have been underpaid. The issue in these cases is due to data protection records are generally not kept for more than four years. This could create questions regarding inheritance and assets left in a will. These assets would not have been known about during will writing but would still make up a portion of the estate.

 As of August 2021, the Department had not approved a formal plan to trace the estates of deceased pensioners.

What do you need to do if you think your state pension has been impacted

The DWP say claimants in the affected groups do not need to contact the DWP as they are ‘in the process of issuing letters to all those found to be underpaid. The letters explain how much they will be receiving in arrears and the reasons for the change to their State Pension rate.’

A DWP spokesperson said: “We are fully committed to ensuring the historical errors that have been made by successive [UK] Governments are corrected, and as this report acknowledges, we’re dedicating significant resources to doing so. Anyone impacted will be contacted by us to ensure they receive all that they are owed.

“Since we became aware of this issue, we have introduced new quality control processes and improved training to help ensure this does not happen again.”

You can check your state pension entitlement on the GOV.UK website

This blog has been written by Sovereign Planning, Professional Will Writers. We can help with all aspects of Will Writing, LPA, Trusts or Funeral Plans. Contact our expert team today.

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