Martin Lewis reacts to Chancellor’s pension reveals
Almost 120,000 senior women are being paid back £736 million due to past underpayments on the State Pensions, according to new figures from the Department for Work and Pensions (DWP).
The scandal means many older women were denied thousands of pounds, potentially as much as £11,900, which could have made a huge difference, particularly during the cost of living crisis.
The problem is centred on the fact married women whose husbands reached pensionable age before 2008, as well as widows and those over 80, did not receive an ‘enhanced pension’ that would have boosted their payments by up to 60 percent.
The DWP has published new updates on the progress of the State Pension Underpayments Legal Entitlements and Administrative Practice (LEAP) exercise and the Home Responsibilities Protection (HRP) corrections exercise. This ongoing scheme is designed to identify those involved and make sure they get the money they are entitled to.
Between January 11, 2021 and September 30, 2024, some 119,050 underpayments have been identified through the LEAP exercise, owed a total of £736 million.
In particular, a total of £250.6m had been repaid to the 45,907 cases involving married women, with an average arrears amount of £5,591, while a total of £417.2m had been paid in relation to the 39,706 widowed cases, with an average £11,905 payment.
In addition to this, £68.2m was repaid in relation to 33,437 cases involving over 80s, with an average payment of £2,202.
The government also provided an update on work to address Home Responsibilities Protection (HRP) errors.
According to the update, the DWP identified 5,344 underpayments between 8 January 2024 and 30 September 2024, who were owed total arrears of around £42m.
The error around HRP arose because many Child Benefit claim forms submitted before 2000 did not include a National Insurance number and this means that the relevant HRP was not carried across from the Child Benefit computer to the National Insurance computer.
DWP has now completed the LEAP correction exercises for married women and people in a civil partnership (category BL) and those over 80 (category D) and confirmed that “progress remains on track for the ‘Widowed’ cases to be completed by the end of 2024”.
Reasons for State Pension underpayments
In 2020, the DWP became aware of a number of individuals who had not had their State Pension increased, in accordance with the law, automatically when this should have occurred. This prompted the department to take action to investigate the extent of the problem.
There are three broad categories of State Pension underpayments:
- Cases covered by the State Pension Underpayments (LEAP) exercise
- Home Responsibilities Protection (HRP) cases where HRP has not been recorded accurately on National Insurance records
- Cases where National Insurance credits need to be updated for people who were claiming Universal Credit
State Pension Underpayments – LEAP exercise
The State Pension LEAP is the DWP’s largest underpayment correction exercise in progress. It has been established to identify where State Pension underpayments may have occurred in respect of the following groups of people:
- Category BL (Cat BL) – People who are married or in a civil partnership who reached State Pension age before April 6, 2016 and should be entitled to a Category BL uplift based on their partner’s National Insurance contributions.
- Missed conversions – People who have been widowed and their State Pension was not increased to include any amounts they are entitled to inherit from their late husband, wife or civil partner.
- Category D (Cat D) – People who reach age 80 and who are getting some Basic State Pension but less than the £85.00 (in 2022-23) and may therefore, subject to satisfying the appropriate residency conditions, be entitled to Cat D State Pension of £101.55 a week (2024/25 weekly rate).
State Pension underpayment progress – September 2024
The number of cases reviewed, arrears identified and payments made between January 2021 and September 2024 are listed below.
Married (Cat BL)
Cases reviewed: 321,142
Underpayments identified: 45,907
Average arrears payment: £5,591
Total amount repaid: £250.6m
Widowed (Cat B)
Cases reviewed: 445,188
Underpayments identified: 39,706
Average arrears payment: £11,905
Total amount repaid: £417.2m
Over 80 (Cat D)
Cases reviewed: 90,720
Underpayments identified: 33,437
Average arrears payment: £2,202
Total amount repaid: £68.2m
The scandal means many older women were denied thousands of pounds (Image: Getty)
State Pension underpayments progress – Home Responsibilities Protection
The DWP estimates it underpaid between £300 million and £1.5 billion of State Pension because of errors with the recording of HRP.
HMRC has issued over 370,000 letters to people who may have been underpaid their State Pension due to missing information on their National Insurance (NI) record. The issue affects mostly women in their 60s and 70s who may have HRP missing from their NI record.
HRP was a scheme designed to help protect parents’ and carers’ entitlement to the State Pension and was replaced by NI credits from April 6, 2010. HMRC is using NI records to identify as many people as possible who might have been entitled to HRP between 1978 and 2010 and have no HRP on their NI record.
After May 2000, it became mandatory to include a NI number on claims so people claiming after this point will not have been affected. It is estimated tens of thousands of people are due an average of £5,000 in back payments.
HRP underpayments – September 2024
Underpayments identified: 5,344
Average arrears payment: £7,859
Total amount repaid: £42m
State Pension National Insurance Credits
Some people who received Universal Credit may not have had their National Insurance Credits correctly attributed to their National Insurance record held by HMRC which could affect their State Pension.
National Insurance records are maintained by HMRC based on information from employers through PAYE, Self-Assessment tax returns from the self-employed and information provided by DWP on benefit receipt where that creates a National Insurance credit.
Between 2017-18 and 2022-23 information about Universal Credit entitlements could not be processed by the National Insurance Recording System. National Insurance credits can affect the value of a State Pension award, so there was a risk some people who had claimed Universal Credit and subsequently reached State Pension age may have been underpaid.
During this period the DWP put in place a manual system with HMRC to update an individual’s National Insurance record where they felt they qualified for National Insurance credits in respect of time on Universal Credit.
With the issues now resolved between the DWP and HMRC systems, claims data relating to the affected years can now be successfully processed by HMRC. When these records are updated information will be sent to the DWP who will then correct any State Pension awards that are affected.
