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Are thousands of
older women being short-changed on their state pension?

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A new research paper published today by pension consultants Lane Clark & Peacock suggests that tens of thousands of older women may be entitled to a higher rate of state pension than they are currently receiving. The issue appears to be particularly acute for older married women who may not realise that they had to put in a claim for a higher pension when their husband turned 65. But there also appear to be problems for other married women, for some widows and divorced women and for the over 80s. In some cases, affected women could be owed backdated payments running into thousands of pounds and the total amount owed could be up to £100m.

The problem affects a set of women covered by the ‘old’ state pension system – that is, those who reached state pension age before 6th April 2016. Under the old system, married women could claim an enhanced rate of state pension when their husband reached 65 in cases where they had only a small state pension entitlement in their own right. Parallel rules applied to widows and divorced women. At current rates, the pension that a married woman can claim based on her husband’s record of NI contributions stands at £80.45 per week, provided that their husband was receiving a full basic state pension. This is 60% of the full basic state pension rate of £134.25.

Since March 2008, married women on low pensions should have been awarded this 60% rate automatically when their husband turned 65 but before that date they needed to claim the uplift. Data obtained in a Freedom of Information request submitted earlier this year by LCP partner Steve Webb to the Department for Work and Pensions suggest that many tens of thousands of married women who would be eligible for this rate are not receiving it. In the majority of cases it seems likely that this is because they not actively claimed the uplift, but in some cases it will reflect the failure of DWP computers to automatically award the uplift. Where women needed to make a claim and do so only belatedly they can only backdate their claim for 12 months – any uplift for years before this is lost.

In addition to gaps for married women, the paper identifies other groups who may be missing out. These include:

  • Thousands of widows who appear to be on very low state pensions, well short of the expected rate for a widow claiming on her late husband’s record;
  • Thousands of divorced women who should, in principle, be benefiting from the ability to ‘substitute’ the NI record of their ex husband for the period up to the end of their marriage;
  • Thousands of women aged 80 or over who should in principle be entitled to an £80.45 pension on a *non-contributory* basis provided that they satisfy a simple residency test;

Without access to DWP administrative data, it is difficult to put precise figures on the numbers missing out, but by combining the FOI data with data from the DWP’s online ‘stat xplore’ tool and data from the DWP’s Family Resources Survey, LCP estimates that tens of thousands of women are being paid less in state pension than they are entitled to. Based on typical amounts repaid when women contact the DWP, the amounts underpaid could be up to £100m in total, not including ongoing increases in regular pension payments.

To help married women identify if they may be entitled to an increase, LCP has prepared a simple webpage calculator where women can enter details about their age and state pension receipt and that of their husband.

In addition to the aggregate FOI-based data, the paper also provides several case studies of women who have found out that they are being underpaid and who have been able to claim back thousands of pounds in back pension when this was drawn to the attention of the DWP. These are all readers of the ‘this is money’ website whose experiences first drew attention to a potential problem.

Steve Webb is now calling on the government to investigate this issue as a matter of urgency, and to automatically uplift the pensions of those who are entitled. He is also calling for a review of the 2008 rule change which means those who became entitled to a higher pension before that date can only now backdate a claim for 12 months.

Commenting, Steve Webb said:

“It is truly shocking that thousands of women are being short-changed on their state pensions. The system is highly complex and few will be aware of the special rules for married women, widows, divorced women and the over 80s. Yet each of these groups seems to be losing out in different ways. Whilst DWP is willing to put things right on a case-by-case basis when individuals get in touch, there is clearly a systematic problem here. It is time for the DWP to take this issue seriously and launch a full investigation into how so many women have been missing out for so long”.

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