Government to pay £3 billion in state pension payments to women

DWP reveals full extent of underpayment to retired women.

The government now faces a £3 billion bill to repay retired women for state pension underpayments.

Many married women who reached state pension age before April 2016 were entitled to receive a rate based on their husband’s national insurance record.

But an investigation found that many have missed out as they were unaware they could make a claim.

Before March 2008, a retired wife on the lower state pension rate had to claim for an uplift worth 60% of her husband’s state pension.

This was then supposed to be automatic but an investigation by personal finance website This is Money and former pensions minister Steve Webb discovered many retirees missed out.

Now the Department for Work and Pensions (DWP) has revealed the true extent of the underpayments.

The Office for Budget Responsibility (OBR), which assesses the government’s finances following the Budget, yesterday said it will cost around £3 billion over the next six years to address the shortfall for “certain married people, widows and over-80s.”

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The OBR says: “The underpayment affected married women whose husbands reached pensionable age before 2008 and who were unknowingly entitled to ‘enhanced pension’ that would have boosted their payments by up to 60%.

“DWP investigations between May and December 2020 uncovered a systematic underpayment of state pensions, meaning tens of thousands of married, divorced and widowed people may have been underpaid since 2008.”

Speaking to MPs in January, pensions minister Guy Opperman blamed manual errors for the faults.

He told MPs: “There is a junior civil servant at the DWP who sometime 12 to 20 years ago failed to uprate a particular entitlement of a particular person.

“Not everybody, in fact we’re quite clear it’s definitely not the majority, but some individual claims have not been manually uprated by an individual working in a pension centre.

“We then have to find those individual cases and then we have to try and reassess them.”

Webb, now a partner at consultancy LCP, describes the £3 billion figure as “truly mind-numbing.”

He says: “When I first looked into this issue a year ago I had no idea it would explode into such a huge issue.

“Repayments of £3 billion over the next five years could imply huge numbers of women have been shortchanged, potentially for a decade or more.

“The government needs to devote serious resources to getting these repayments out quickly as these women have waited long enough”.