There has been a sharp rise in the number of people believed to have been underpaid state pensions in the UK, while many may also be missing care-giving credits from their national insurance (NI) records.
That is according to analysis of the Department for Work and Pensions' (DWP) latest annual report by Lane Clark & Peacock (LCP).
While last year’s report estimated that around 134,000 people have been underpaid state pensions worth around £1bn in arrears, the latest findings for 2021/22 suggest that the number affected is closer to 220,000, and that the bill will run to over £1.3bn.
In addition, the report admits for the first time to an error whereby credits for time at home with children – previously known as home responsibilities protection (HRP) – may be missing from NI records.
These credits can have a very substantial impact on state pension entitlement, and the majority of those affected will be women.
Steve Webb, partner at LCP, first raised the issue in 2008 and a correction exercise was undertaken which refunded around £35m. However, DWP has admitted that ongoing problems are being investigated, and that the findings are unlikely to be available until autumn 2022 at the earliest.
“DWP’s annual report reveals a shocking level of error in state pension payments,” Webb commented. “Not only is the cost of the underpayment correction exercise set to soar, DWP are now admitting a whole new category of errors.”
The report explains how the second-largest reason for state pension underpayment is attributable to historic periods of HRP not being recorded accurately on NI records.
For people reaching state pension age before 6 April 2010, HRP reduced the number of qualifying years needed for a basic state pension where someone stayed at home to care for children for whom they received child benefit or a person who was sick or disabled.
For people reaching state pension age since 6 April 2010, previously recorded periods of HRP were converted into NI credits.
However, the report states: “Errors have occurred where periods of HRP were due but not accurately recorded on someone’s NI record. These errors may therefore have impacted an individual’s state pension award.”
Webb said that women will bear the brunt of the errors, adding: “We need much greater transparency about all of this rather than leaving it to figures buried in the small print of annual reports. Far too many people have been underpaid for far too long.”
Image credit: iStock
Author: Chris Seekings