2 November 2020
The Department for Work and Pensions (DWP) is likely to face a bill in excess of £100 million for underpaid state pensions, based on new evidence given to MPs by the DWP’s top civil servant, according to LCP Partner Steve Webb.
Earlier this month, Peter Schofield, Permanent Secretary at the DWP was quizzed by the Work and Pensions Select Committee on research by LCP about underpaid state pensions and a transcript has now been posted on the Select Committee’s website. The issue relates to the ‘old’ (pre April 2016) state pension system where women could claim a state pension based on the National Insurance record of a husband, ex husband or deceased husband. Although in most cases the system has worked correctly, a worrying number of cases have come to light where women were not benefiting correctly from these rules.
Ministers have so far said publicly:
- Anyone who thinks they have been underpaid should contact the Department;
- DWP is checking its own records to identify those who may have been underpaid;
- According to the Permanent Secretary’s new evidence, around 11,000 people have so far been in touch and 7,200 claims have been processed. A special unit has been set up, currently staffed by 37 civil servants, with more due to be added.
Many of the women who phoned in were on the correct rate but more than 1 in 4 of those processed to date (1,900) were confirmed to be receiving too little. Assuming that the rate of successful claims remains at its current level, this suggests that nearly 3,000 of those who have so far made contact with the Department will be owed money.
Based on dozens of cases notified directly to LCP, Steve Webb estimates that the average lump sum backpayment to date has been a little under £10,000. This would suggest that the DWP is likely to have to pay out £25m-£30m *purely to those who have phoned up* so far.
However, the Permanent Secretary admitted that the work to check DWP records is still ongoing. He indicated that initial trawls often identify very large numbers of potentially eligible people and these need to be refined manually to get down to those who are actually eligible. This process is likely to identify many more women who are not currently aware that they are on the wrong rate.
In LCP’s initial analysis, Steve Webb estimated that tens of thousands of people would end up receiving payments. When asked about this estimate, the Permanent Secretary said: “it could be, yes”. Based on average lump sum repayment levels of just under £10,000, this would imply a final bill well in excess of £100m.
In addition, the Permanent Secretary referred to reviewing the position of a) widows and b) the over 80s, who may be missing out for different reasons. Payments to these groups would add further to the total bill. A Parliamentary petition tabled by Steve Webb calls on the DWP to use its records to track down all the different groups who are being underpaid. It has just reached the 10,000 signature mark, which means the DWP will now have to give a formal response.
Commenting, Steve Webb said:
“The vast scale of this under-payment is only now starting to come to light. Back in May we estimated that tens of thousands of women were not getting the right amount of state pension, and millions of pounds have already been paid over. But it has become increasingly clear that the DWP’s trawl of its own records is uncovering a can of worms and the final bill seems set to be over £100m. Many of these women have been underpaid for a decade or more, and the situation needs to be put right as a matter of urgency”.
LCP has designed a website calculator to help married women work out if they are being underpaid. The site has had over a quarter of a million hits to date.