NAO calls out pension scandal

The Department for Work & Pensions (the Department) estimates that 134,000 pensioners have been underpaid a total of over £1 billion in State Pension. This was due to repeated human errors over many years.

So who is affected? The errors relate to pensioners who first claimed State Pension before April 2016. It is likely to affect those who did not have a full national insurance record. Needless to say the problem was not picked up by government but by individual pensioners, concerned experts and the media.

The National Audit Office say this was almost inevitable given the complex rules and high degree of manual review necessary when assessing claims. The Department started exploring the ‘potential for error’ from April 2020 and confirmed that there was a significant issue in August 2020. It started to review cases from January 2021 and will contact pensioners if it finds that they have been underpaid.

The Department estimates that it will need to pay the affected pensioners it can trace an average of £8,900 per pensioner affected. The Department has not assessed the demographics of pensioners likely to be affected, but most are likely to be women.

The National Audit Office is quick to point out that “the Department’s estimates are highly uncertain and the true value of the underpayments will only become clear once it has completed its review of all affected cases.”

Between 11 January and 5 September 2021, the Department reviewed 72,780 cases it had identified as being at risk of having been underpaid or who contacted it querying their payment, and paid £60.6 million of arrears to 11% of these cases. The Department is prioritising individuals who fall into “at risk” categories, such as those who are widowed or over age 80.

The Department may find it particularly difficult to correct underpayments of pensioners who have died. It does not know how many pensioners who have died have been underpaid as, for data protection reasons, it does not usually keep records for more than four years after a pensioner’s death, and if married, their spouse’s death.

Leave a Reply