The Public Accounts Committee is calling for the government’s state pension payment system to be overhauled and underpayments to be treated more seriously, while warning that other errors could still be unidentified.
The report, ‘Underpayments of the state pension’, published on Friday, highlighted a number of areas where the government needs to make changes to ensure maladministration and underpayment issues do not continue.
The Department for Work and Pensions estimates it has underpaid 134,000 pensioners, mostly women, more than £1bn of their state pension entitlement, with some of the errors dating as far back as 1985.
Pensioners affected are those who first claimed the state pension before April 2016 and who do not have a full national insurance record, or who should have inherited additional entitlement from their deceased partner.
The DWP is now on its ninth go at fixing these mistakes since 2018 – the specialised staff diverted to fix this mess costing tens of millions more to the taxpayer and predictable consequences in delays to new pension claims
Meg Hillier MP
Overall, the committee found that the DWP had been relying on a system that was not fit for purpose and failed to mitigate against this, which was a failure in the government’s responsibilities.
It also branded the department’s complacency on the underpayment issue a failure and warned there was still a risk that similar, unidentified errors exist elsewhere in the state pension system.
Meg Hillier, chair of the PAC, said: “The DWP is now on its ninth go at fixing these mistakes since 2018 — the specialised staff diverted to fix this mess costing tens of millions more to the taxpayer and predictable consequences in delays to new pension claims.
“And there is no assurance that the errors that led to these underpayments in the first place will not be repeated in the correction exercise.
“This is a shameful shambles. The PAC expects the DWP to set out the step changes it will make to ensure it is among their last.”
Further errors could remain uncovered
The report looked at the outdated systems, cost to the taxpayer, clarity of communications, and the potential for further errors.
On the latter, given the nature of the underpayments identified, there is a risk that similar, unidentified errors exist elsewhere in the state pension caseload, the PAC said.
For example, the National Audit Office report published in September stated that the DWP did not find any significant evidence that it had failed to properly process divorce-related cases.
But Sir Steve Webb, former pensions minister and partner at LCP, who has helped people discover their underpayments, told the PAC he believes the scope of the correction exercise is too narrow.
Webb believes the exercise should be extended to include divorced women, as he has identified several cases of underpayments to date where similar manual processing errors have occurred.
Therefore, the PAC said the DWP should write to the committee to explain how it has assessed the risk of systemic underpayments to divorced women and explain how it will review other detected underpayments, to assess whether there is a systemic cause and take steps to extend the correction exercise.
Webb said: “The committee are right to be highly critical of the DWP over this whole debacle. It is shocking that the DWP’s regular checks regarded the level of error on state pensions as too small to be worth investigating when in reality many thousands of people have missed out on potentially life-changing amounts of money.
“The DWP’s defensive reaction to questions and scrutiny over this issue suggest that lessons have still not been learnt. There are still far too many people missing out on the state pension to which they are entitled and the DWP needs to track them all down as a matter of urgency.”
‘Years of human errors’ led to £1bn state pension underpayments
The Department for Work and Pensions has underpaid 134,000 pensioners — 90 per cent of which are understood to be women — by more than £1bn, according to a report from the National Audit Office.
A DWP spokesperson said: “Resolving the historical state pension underpayments that have been made by successive governments is a priority for the department, and we are committed to doing so as quickly as possible.
“We have set up a dedicated team and devoted significant resources to processing outstanding cases, and have introduced new quality control processes and improved training to help ensure this does not happen again. Those affected will be contacted by us to ensure they receive all that they are owed.
“We are carefully considering the content of the PAC’s report and will respond formally in due course.”
This article originally appeared on FTAdviser.com
