Over the past few years, significant underpayments in the UK State Pension system have come to light, particularly affecting women. In a troubling report from the National Audit Office, it was revealed that approximately 134,000 pensioners, mostly women, were underpaid an average of £8,900 each, totaling over £1 billion in missed payments. This figure has since risen, with the Department for Work and Pensions (DWP) estimating that 700,000 cases need to be reviewed, with up to 237,000 people potentially impacted.
Despite efforts to correct these underpayments, progress has been slow. By the end of October 2022, only 111,503 cases had been reviewed, with 29% identified as underpaid, resulting in over £209.3 million in repayments. The numbers continue to grow as more errors are identified.
How Did This Happen?
The underpayment issue stems from various factors, including computer errors, incorrect record-keeping, and the complexity of the pension system, which was designed after World War II. The DWP is currently reviewing pension records, and while some people have already received their top-up payments, others may need to make a claim to receive what’s owed.
How Much Could You Be Owed?
The amount of underpayment varies depending on the individual’s situation. Initially, the average backpayment was estimated at £9,000, but the figures can be significantly higher or lower depending on the specific case. For instance, some married women who were only receiving a SERPS pension have received upwards of £40,000, while others may not receive any back payments but will still get the full amount moving forward.
In some cases, back payments may impact your tax situation or affect other benefits you receive.
Which Groups Are Affected?
The underpayment issue has affected several groups, but identifying whether you are eligible for a refund requires checking your specific circumstances. Here’s what to look out for:
- Married Individuals and Civil Partners: If your spouse or partner turned 65 before 17 March 2008 and your State Pension is less than 60% of their pension, you may be entitled to a top-up. Many women didn’t know they were entitled to 60% of their husband’s pension under the old system and may now be owed significant back payments.
- Divorced Pensioners: Those who divorced after retirement and whose pensions don’t take their ex-spouse’s National Insurance contributions into account could also be eligible for a boost.
- People with SERPS Pensions: Some individuals who are married or in civil partnerships but were only receiving a small amount from SERPS may be owed backdated payments, especially if they were entitled to 60% of the basic State Pension.
How to Check if You Are Affected
The first step is to determine whether you or someone you know reached State Pension age before or after April 2016. If you reached State Pension age after this date, you are less likely to be affected, as you would be receiving the new State Pension.
If you or your loved one reached State Pension age before 2016, you may be affected, especially if your National Insurance record isn’t complete or you haven’t received the full State Pension entitlement.
Automatic Identification of Underpayments
Some people will be notified automatically if they are owed back payments. However, with the backlog in processing, it’s important to check yourself if you think you might be affected. The following groups should expect to be contacted by the DWP:
- Individuals over 80 who aren’t currently receiving at least £85 a week.
- Widows whose State Pension didn’t increase after the death of their spouse.
- Individuals who were receiving less than 60% of the full basic State Pension while their spouse was still alive.
What to Do if You Think You’re Affected
If you suspect that you have been underpaid, contact the DWP’s Pension Service on 0800 731 0469. Be prepared with your National Insurance number, details of your current pension payments, and information about your spouse or civil partner, including their name, date of birth, and National Insurance number.
If the person who has been underpaid has passed away, their family or heirs may be eligible for the back payments. The DWP has set up a dedicated page on its website to help these families.
Key Takeaways
Understanding your State Pension entitlement and ensuring it is paid correctly is crucial for everyone, regardless of age or marital status. If you think you may have been underpaid, it’s worth taking the time to investigate and make a claim if necessary. Properly managing your pension and keeping track of your records can help avoid future issues.
If you’re unsure about whether your State Pension is correct or need help with your retirement planning, it’s always a good idea to seek advice from a professional. By staying proactive, you can ensure that your pension is properly managed and that you are receiving what you are entitled to.
