In its Annual Report and Accounts for the financial year 2023–24, the Department for Work and Pensions (DWP) recently revealed a major mistake in the way state pensions were paid. This news brings to light a big problem: thousands of pensioners have not been paid their full amounts, and each person has lost an average of £7,293.
At the heart of this problem are several groups of pensioners who have not gotten their full benefits, mostly because of mistakes made when figuring out the amounts based on different eligibility criteria. The DWP is currently doing a large-scale project called “LEAP” to find and fix these problems with state pension underpayment.
Why This Happened?
The problem with underpayment is caused by a number of things, but mostly by mistakes and lack of oversight in the way state benefits are calculated and given out. These mistakes happened while processing pension payouts for different groups of pensioners, which caused big shortfalls.
One big reason for this problem was that the Category BL uplift for married or civil partners who hit state pension age before April 6, 2016, was not applied correctly. This increase is based on the partner’s National Insurance payments and should have been taken into account when figuring out their pensions. However, many people did not get this extra money because of mistakes made by the administration.
Another reason was the missed conversions for people who had lost a spouse. If someone has lost a spouse or civil partner, their state pension should be changed to include any money they are entitled to receive from them. A lot of the time, this change was not made, which led to underpayments.
Also, people aged 80 and up who were getting less than £101.55 a week in state pension should have been able to get a Category D state pension of £101.55 a week. More underpayments happened because these people’s payments were not found and changed for them. The big underpayments found in the DWP’s review were caused by these administrative mistakes and oversights in figuring out and applying the right pension benefits.
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Nature of the Underpayment
The DWP’s ‘LEAP’ exercise targets three main groups of pensioners who have been underpaid:
| Group | Description | Criteria |
|---|---|---|
| Married or Civil Partners (Pre-2016) | Entitled to Category BL uplift based on partner’s National Insurance contributions. | Reached state pension age before April 6, 2016 |
| Missed Conversions | Widowed individuals who do not receive inherited pension amounts. | Widowed and entitled to increased state pension |
| Individuals Aged 80 and Above | Receiving less than £101.55 per week may be eligible for a Category D state pension of £101.55 weekly. | Born before 1944 |
Scope of the Issue
There were 99,558 underpayments found by the DWP between January 11, 2021, and the end of March 2024, worth a total of £594 million. 133,000 pensioners are due a total of £970 million in back pay. A reserve of £369 million has been made by the DWP for the amounts that still need to be paid back. An estimate from last year said that 170,000 pensioners were owed £1.17 billion more than they were paid. Once the practice is over, the exact number of underpayments will be known.
| Period | Number of Underpayments | Total Underpaid Amount | Estimated Total Arrears | Provision for Outstanding Amounts | Previous Year’s Estimate |
|---|---|---|---|---|---|
| January 11, 2021 – March 2024 | 99,558 | £594 million | £970 million | £369 million | £1.17 billion to 170,000 pensioners |
Financial Implications
At the moment, each pensioner is due an average of £7,293. This number comes from dividing the total underpayment of £970 million by the 133,000 seniors who were affected. This number could go up after the DWP’s review. The DWP has set aside £369 million to pay back the debts that still need to be paid. The final amount of the underpayments will be known after the “LEAP” process is finished, which could be higher than what is currently thought.
| Aspect | Amount | Notes |
|---|---|---|
| Average Underpayment per Person | £7,293 | Based on £970 million total underpayment divided by 133,000 pensioners |
| Provision for Repayments | £369 million | Allocated for outstanding amounts yet to be repaid |
| Total Estimated Arrears | £970 million | Expected total arrears to be confirmed upon completion of the exercise |
The DWP’s mistake in underpaying state pensioners has had a big effect on thousands of seniors and caused big financial problems. The ongoing “LEAP” exercise makes sure that everyone who is touched gets the money they are owed. The final decision will spell out the full cost and make sure that the pensioners who were underpaid get fair treatment.