The all-party Work and Pensions Committee of the House of Commons has just published a letter to the DWP raising concerns about potentially underpaid state pensions to those who have divorced. The letter refers to evidence supplied by LCP Partner Steve Webb to the Public Accounts Committee in which he pointed out that there seemed to be a significant number of divorced women with low state pensions. This raised questions, he said, about whether the rules in place to help such women were working effectively. The latest letter from the Work and Pensions Committee also asks about the position of some divorced men who may also potentially lose out from any failures in the system.

Under the old state pension system (for those who reached pension age before 2016), there were two main ways in which a divorced woman could benefit from her ex-husband’s contributions:

1. Where a woman divorced and did not remarry before pension age, her state pension at retirement could take account of her ex-husband’s contributions up to the date of their divorce; where his NI record was better than hers, she could ‘substitute’ his record for that period; provided that the woman gave full details of her ex-husband at retirement this calculation should be done automatically.
2. Where a woman divorced after retirement and notified DWP, DWP should then reassess her state pension, taking account of her ex-husband’s contributions right up to her retirement.  In many cases, this would entitle her to a full basic state pension.It is the second group where there is the most potential for underpayments.  The current mass correction exercise relates to errors where something changed post retirement (eg a woman’s husband retired or her husband died or she turned 80) and DWP failed to do a reassessment, so it would not be a total surprise if the same had happened in some divorce cases.

For men, since 1979 they have been able to substitute the contributions of an ex wife when being assessed for state pension. As most men get a full basic pension in their own right this has not really been relevant to most men, but there could be individual cases where a man needed to use his ex-wife’s contributions and this was not done correctly.

The DWP has been given until 1st May to reply.  They had initially said that they had “no evidence of systemic error due to missing action taken on notifications of divorce”, but the Committee is asking them to review the decision not to check further for such cases.

Commenting, Steve Webb, partner at LCP, said:

“Given the massive scale of errors on state pensions for married women, widows and the over 80s, it is stretching belief to think that divorced people’s pensions have all been worked out perfectly. A particular issue is cases where DWP was notified of a divorce post-retirement and whether this always resulted in a state pension reassessment. For any given individual, the difference could be very substantial, especially where a woman had a poor NI record, but her ex-husband had a full record. DWP should do a thorough search for potential errors of this sort.”