New DWP state pension error could cost you £40,000 in retirement if not addressed now
Former pensions minister Sir Steve Webb has been contacted by four people who had not been awarded any inherited state pension when they retired when they should have been
Widows and widowers are being urged to check their state pension entitlement after a new Department for Work and Pensions (DWP) error was uncovered.
Former pensions minister Sir Steve Webb has been contacted by four people who had not been awarded any inherited state pension when they retired. These people were widows or widowers when they first claimed their state pension, and their late spouse had reached pension age before April 6, 2016, or their late spouse died before this date.
They should have been told they can potentially inherit at least 50% of any "additional state pension" which the late spouse built up, plus 50% of any "graduated retirement benefit" - but Sir Steve, who is now a partner at LCP, said in the four cases brought to his attention, all four people were incorrectly told in writing or over the phone by the DWP that they were not entitled to anything extra.
An increased amount of state pension was confirmed after Sir Steve intervened and arrears were paid out. In a couple of cases, the shortfall was over £2,000 per year, meaning over a twenty year retirement the retiree could have been short by over £40,000 if this mistake had not been fixed.
LCP has now launched a new online tool to help other people check if they may have been underpaid. The company’s previous tool to help married women check for underpayments had over one million visits. This new error is not included in the state pension underpayment correction exercise the DWP has been undertaking since 2021.
According to the latest figures published on March 31, 2024, over £280million had been paid in arrears to around 23,000 widows and widowers who had wrongly missed out on inherited state pension from a late husband, wife or civil partner. The DWP estimates that the total amount paid out could be more than double to around £650million to 50,000 widows and windowers by the time the correction exercise has finished, at around £650m to over 50,000 widows/widowers in total.
Sir Steve said: "Having had to spend years checking hundreds of thousands of historic state pension calculations for errors, you would hope that DWP would be making sure that new claims are handled correctly. But we have found worrying evidence that this is not the case.
"There seems to be a particular problem for people who are widows or widowers when they claim their state pension. In some cases DWP seems to have failed to automatically add any inherited state pension they were due from a late partner. These cases may well be the tip of an iceberg, with many thousands of people potentially underpaid. The Department needs to launch an urgent investigation into the scale of this problem. In the meantime I hope that our new online tool will help people to check what they are entitled to and to report any errors."
A DWP spokesperson said: "We want to ensure pensioners receive all the support to which they are entitled and have a tool to help them understand what state pension they can inherit. Delays can occur to a customer’s state pension award when not all the information we need is provided. In these cases, we will make a state pension award based on the customer’s own National Insurance record until we have the required information. Once we have the necessary documentation, we will then revise the customer’s claim as soon as possible."