Major state pension update as tens of thousands get up to £12k each after being underpaid – are you missing out?

The DWP has released the latest figures for its progress in setting things right - but thousands are still owed money back.

Steve Webb, former pensions minister and now partner at LCP said: "DWP still has a mountain to climb when it comes to paying all pensioners the amount they are due.

"It is a sorry chapter in the history of the Department when well over 1,000 civil servants have had to spend years painstakingly fixing state pension errors which should have been picked up much sooner."

Mr Webb also said it was a "tragedy" that tens of thousands of elderly women have died without ever receiving the money they were due.

Women retiring under the old state pension system are those mainly affected.

"It is vital that the process of fixing these errors continues to accelerate and that measures are taken to prevent the reoccurrence of such large-scale underpayments," Mr Webb added.

Of the 173, 538 accounts checked between January 11, 2021 and October 31, 2023, exactly 82,323 underpayments were identified.

This means that £497million in state pension underpayments was owed back.

It included 37,488 married pensioners who received an average of £5,931 each.

More than 26,940 over 80s got an average of £2,245 each.

And a total of 17,894 widowed retirees were paid out an average of £12,383 per person.

This compares with a total of £324million paid out to just over 50,000 pensioners as of the end of March 2023, as reported in the DWP’s latest annual report. 

The final total amount due to be paid as a result of this error is £1.17billion to around 170,000 pensioners, according to the DWP.

Shockingly, some of the underpayments go as far back as 1985.

Those affected by the error are pensioners who first claimed the state pension before April 2016.

These retirees were unlikely to 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to the basic state pension but didn't due to an error that the National Audit Office has blamed on complex rules and outdated IT systems that require claims to be made manually instead of being automated.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 have since passed away and their families may never get what they are owed.

The DWP has been contacting those affected by the errors, mostly women who are widowed, divorced or who have some of their entitlement based on their husband’s pension contributions.

But many people could still be missing out on significant sums because there's little guidance for those concerned they are being underpaid their state pension.

As well as the millions still to be paid out to widows in particular, the latest DWP annual report also owned up to a further £1billion in underpayments being owed to around 187,000 parents.

This arises from errors in recording Home Responsibilities Protection (HRP) for time at home with children on large numbers of National Insurance records.

The error, which was first revealed last year, has seen an estimated 187,000 people, miss out on money they are entitled to during retirement - most of them women who were stay-at-home mums.

Although HMRC has recently started a programme of writing to those who have potentially missed out on HRP, very few of those who have missed out have so far received what they're owed.

It's likely to take several years to reach all of those affected by this separate error.

Mr Webb said: "The process of correcting state pension errors began nearly three years ago but still only around half of the money owed has been paid.

"Worse still, when DWP recently decided to do the first proper checks on state pensions in years, they identified another £1billion in underpayments and work has barely begun on fixing those errors."

Who is affected by state pension underpayments?

Around 237,000 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.

In the previous tax year 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.