Pensioners lose billions after a ‘catalogue of blunders’ by ministers

The Government has spent more than £1bn rectifying eight state pension mistakes, after repeatedly underpaying pensioners and keeping taxpayers in the dark.

There has been a “catalogue of blunders” made by the Department for Work and Pensions, according to former pensions minister Sir Steve Webb. A Freedom of Information Request lodged by LCP, a consultancy, has uncovered eight separate errors which have left retirees out of pocket since 2007 – more than one every two years. Six of these mistakes were not publicly known until now.

The DWP has refused to say how much these errors have cost taxpayers in total, but experts said the sum was in the nine figures. The issues range from those affecting a handful of people to multi-million pound mistakes. 

In one case alone, 134,000 women were underpaid more than £1bn after miscalculations were made on their state pension payments. Those affected are due an average £8,900 payout, while one in eight are due windfalls of more than £40,000 to make up for the wrongful underpayment. In one instance a woman was underpaid from 1985 to 2021. 

Six mistakes had not previously been made public including underpayments for surviving spouses, those deferring the state pension and some transgender women. Incorrect payments were also made to retirees eligible to receive a second or additional state pension. In one case the Government took three years to identify a widespread problem with payments to some married women. 

Sir Steve, who is now partner at LCP, said he was “astonished” the errors had not been made public and accused the department of taking a “hush hush” attitude to mistakes. He said: “The DWP needs to have greater transparency so that the public is told when things have gone wrong. Whilst anyone can make a mistake, what is worrying about this catalogue of errors is how long it can take for anyone to spot that anything is wrong.”

The former pensions minister warned some of the errors in the way the state pension was calculated would still be ongoing despite having been identified.

The Government was forced to conduct a large-scale correction exercise from 2009 to 2011 costing £83m after parents who were due “home responsibilities protection” for time at home with children were never recompensed on their state pension record. This was one of the two only cases to have previously been made public.

A scathing report from Westminster’s Public Accounts Committee, published in January, warned the system had been “unfit for purpose” for decades. It said plans to reimburse many of the women who were underpaid were a “shameful shambles”. 

Millions of pensioner records had also been kept on an IT system that dated back to 1988 and was “intrinsically vulnerable” to errors, according to the MPs on the committee. 

Many of those who were forced to get by on a reduced stipend for years would still be out of pocket, even after the Government reimbursed them, experts have warned. This is because lump sum payments of arrears could affect pensioners’ current or future entitlement to other benefits, including pension credit, social care or housing benefit.

A spokesman at the DWP said: “This year we will spend over £100bn on the state pension and our priority is ensuring every pensioner receives all the financial support to which they are entitled. These correction exercises highlight how, where errors do occur, they are identified and rectified.”

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