The Department for Work & Pensions (DWP) estimates it has underpaid 134,000 pensioners, mostly women, over £1 billion of their State Pension entitlement, with some of the errors dating as far back as 1985.

In January 2021, DWP started an official exercise to correct the errors, the ninth such exercise since 2018. The errors – which mostly affect widows, divorcees and women who rely on their husband’s pension contributions for some of their pension entitlement – happened because of the Department’s use of outdated systems and heavily manual processing.

Small errors that were not recognised each time added up over years to significant sums of money.

DWP will only contact pensioners when it finds through these exercises that they have been underpaid, and admits that many more are not receiving their due – these “risk missing out on significant sums”, with “little guidance for those currently claiming State Pension who are concerned that they have been underpaid” and people left “in the dark over their entitlement”.

There is currently no formal plan for contacting the next of kin where a pensioner who was underpaid is now deceased.

DWP is only paying those it has identified as having a legal entitlement to arrears, in some cases many years after the event, and has been inconsistent in paying interest. It has shown little interest in understanding the further knock-on consequences, including on social care provision, for those it underpaid.

Fixing DWP’s mistakes itself comes at great cost to the taxpayer – expected to cost £24.3 million in staff costs alone by the end of 2023. Experienced, specialised staff have been moved away from business-as-usual and as a result
DWP is already experiencing backlogs in processing new applications.

The risk remains that the errors that led to underpayments in the first place will be repeated in the correction exercise, if not also in new claims.

Dame Meg Hillier MP, Chair of the Public Accounts Committee said: “For decades DWP has relied on a State Pension payment system that is clunky and required staff to check many databases – and now some pensioners and the taxpayer are paying in spades.

“Departments that make errors through maladministration have a duty to put those it wronged back in the position they should have been, without the error. In reality DWP can never make up what people have actually lost, over decades, and in many cases it’s not even trying. An unknown number of pensioners died without ever getting their due and there is no current plan to pay back their estates.

“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 DWP to set out the step changes it will make to ensure it is among their last.”

A department spokesperson has said in light of the Committee’s findings: “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 Public Accounts Committee’s report and will respond formally in due course.”