The Pension Service has a long way to go to win back the public’s trust after its handling of a £1 billion underpayments fiasco, it is warned today.
Writing in Money Mail, Dame Meg Hillier, chairman of Parliament’s public accounts committee, says the repeated blunders have undermined confidence in state pension payments.
The Department for Work and Pensions has been subject to a torrent of criticisms. Over decades, 134,000 women were unable to access the benefits.
It was shortchanged. The Department for Work and Pensions received a lot criticism for the underpayments scandal that resulted in 134,000 mostly female workers missing out for many decades.
Last week, the public accounts committee released a damning report that said that the department was complacent and reluctant to disclose the extent of the scandal. They also stated that they had shown little interest in correcting the situation.
Money Mail looks at the report today and offers some answers that the DWP is unable to give.
Wives who’ve missed out
Most of the victims were women, who had to have their pensions increased by the DWP automatically without asking. Those affected reached state pension age before April 2016.
They include wives entitled to a pension worth 60 per cent of their husband’s basic rate, and also divorcees and widows who could claim as much as 100 per cent.
Other pensioners affected include those who, after reaching 80, should have received at least 60 percent of the basic state retirement pension.
The DWP stated that it would contact any pensioner who didn’t have their pensions automatically upgraded.
This means that anyone with a right to a higher pension, but who has not claimed it yet, will still be at risk.
These include wives whose husbands were at state pension age prior to March 2008.
According to the DWP, many pensioners will be over-claiming. They should contact the department. However, MPs stated that it is difficult for individuals to figure out what to do.
The report warns: ‘These pensioners need clearer information to act, or risk missing out on significant sums.’
Sir Steve Webb was the former minister of pensions who exposed the scandal. He has spoken with thousands upon thousands of worried pensioners.
He says: ‘One consistent theme is the lack of easy-to-understand official information on how the system works. More needs to be done to make sure everyone gets their full entitlement.’
Family reunions
Over 10,000 pensioners lost their retirement funds. MPs criticized the DWP’s inability to reach relatives.
The report says the department’s priority was living pensioners rather than the deceased, despite the fact their next of kin could be financially vulnerable.
MPs said the department needed to improve ‘the clarity and availability of information’ on underpayments, including details useful to relatives of pensioners who had since died.
It’s so disgusting and sad that my mum has passed away.
June Boyle (pictured here with Keith) died before she received any backdated payments.
Rebecca Wilkinson fights for her mother’s money after the DWP sent claims forms to an address where she hadn’t lived in 30 years.
June Boyle was 80 years old in 2020 when the DWP wrote to her to inform that she should have received a better pension, and she had the right to one year of retroactive payments.
Although she died before receiving any of it, her great-grandmother was still getting less than half of the state-standard pension that she received since 2000 when she retired.
Rebecca Wilkinson is fighting for the money her late mother missed out on
Yet after her husband’s retirement in 2006 she was entitled to 60 per cent of his basic-rate pension.
Following the discovery that claim forms had been sent from the department to an outdated address, 1975, the family is now suing the DWP before a tribunal.
Retired engineer husband Keith, 80, said in his appeal: ‘I am meticulous about such matters and if there was an indication as to an availability we would have made a claim.’
Their daughter Rebecca, 50, says: ‘That money would have made a big difference.
They were thrifty and very cautious. They would not have to worry so much.
‘I am disgusted. I don’t think anybody should have to fight for something that is their right. Mother is the reason I’m angry and upset. You put your trust in these Government bodies to do right by you.’
Lost Interest
Pensioners who missed out have been handed lump-sum back payments of up to £128,000. The average is close to £9,000.
The government has established guidelines that departments should correct their mistakes and take all steps to make sure those who are not eligible for benefits are compensated.
This means those who are owed money are usually paid interest on the amount — to reflect what they could have had if it had been saved or invested.
Up to January 2013, the DWP charged interest at 0.5% on back payments, but it has refused to pay that amount for other people.
The department claims that it took the decision in compliance with prior correction exercises.
But Sir Steve, now a partner at pension consultancy LCP, says this was ‘impossible to justify’.
He says: ‘I’ve spoken to people whose retirement has been blighted by a reduced pension, and making back payments now doesn’t put things right.’
Inflation
According to MPs the DWP has given large amounts of cash without thinking about how that will affect people who rely upon support.
A windfall of more than £16,000 can mean pensioners no longer qualify for housing benefit or council tax deductions.
And the elderly are no longer entitled to help with care funding if they have more than £23,250 in the bank.
Yet the committee report says: ‘The department has demonstrated little interest in accounting for financial consequence of a lump sum… and considers it to be the pensioner’s responsibility to advise the authorities.’
Sir Steve said he spoke to one pensioner who had lost council tax assistance after receiving their back payment. Others worry that they may lose their care funding.
Short-changed Money Mail readers also say they have had no information about tax due on their back payments — with even tax advisers struggling to get answers. Sir Steve says tax will be due, but only on the past four years’ worth of back payments.
The money, he says, will be subject to tax as though it were weekly income from a pension.
Many are stuck in the dark.
Building trust with Dame Meg Hillier
By DAME MEG HILLIERChairman, Public Accounts Committee
Many pensioners were left behind. It has happened for 30+ years.
Most of the pensioners in this group were women who had to live with less money than their income. No lump-sum payment will be able to compensate for the hardships of those most affected. Our trust in the system is being undermined by this whole scandal.
Few of us question our pension rate and it seems the DWP also didn’t check its maths, despite knowing how complicated the system had become.
The errors, which mostly affect widows and women who rely on their husbands’ pension contributions, were as a result of outdated systems and manual processing.
Over time, small errors not recognized each time added up to make significant amounts of money.
This system is so complicated that it’s impossible for the DWP to create an online tool which will allow people to see if any money owed.
It is not clear how to reach the next of kin for pensioners who have died since then. People are often unaware of their current situation.
There is a serious problem with the trust that has been lost in the pension system. In trust of the Government spending it wisely, we pay our taxes.
It is the guaranteed, lifelong pension that you get. When we retire, our pension is paid in.
The DWP is home to several creaking IT systems. It’s no wonder these pensions could only be calculated by a small number of staff. The risk of making mistakes should have raised alarm bells.
Pensioners are being left in the dark as to whether they’ve been affected and what they can do. Many women believed they were not underpaid. However, the DWP found out that they owed money.
Although the DWP needs to make sure that pensioners are not left out in the cold, the DWP also has to rebuild trust.
What to do?
The basic-rate state pension currently pays £137.60 a week, so someone on a 60 per cent rate should receive around £82.45 a week.
The 60 percent rate is available to wives from the time their husband reaches state pension age.
However, the DWP was required to immediately pay the higher pension due to a March 2008 rule change.
Wives that reached the state pension age earlier than then were required to take out an additional amount. Those who were unaware can upgrade, but can’t claim all the missed money.
According to the DWP, those whose spouses became eligible for their state pension after March 17th 2008 do not have to act and will be contacted.
Sir Steve has also called on the department to ensure divorcees are included in the £23 million correction. Figures show there are 40,000 divorcees on the old state pension receiving less than £82.45 a week.
The DWP says fixing the scandal is a ‘priority’. A spokesman says: ‘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 ensure this doesn’t happen again.’
- You can use this online calculator to find out if you’ve been short-changed: pension underpaid.lcp.uk.com. You can call 0800 731 0469 to report missing payments or send an email to The Pension Service at Post Handling Site A Wolverhampton WV981AF.
b.wilkinson@dailymail.co.uk
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