Thousands of pensioners are owed £8,900 after being underpaid due to repeated human errors, complex rules and outdated IT systems, a spending watchdog has ruled.
The Department of Work and Pensions (DWP) estimates it underpaid 134,000 pensioners and that most of those are likely to have been women, the National Audit Office (NAO) said.
The extent of the underpayment is not likely to become clear until DWP has completed a further review of all the cases. But for those it can trace currently they will be paid on average £8,900, with the total being paid back topping £1billion.
Meg Hillier, chair of the Committee of Public Accounts said: “Many pensioners - most of whom are likely to be women - have been short-changed by thousands of pounds which they are still yet to receive many years later.
“Although it is positive that DWP is now working to put this right, this is not the first widespread error we have seen in DWP in recent years. Correcting these errors comes at great cost to the taxpayer.
“DWP must provide urgent redress to those affected and take real action to prevent similar errors in future.”
An estimated £339 million will go to pensioners who should have benefited from their spouse’s or civil partner’s national insurance (NI) record; £568 million to widows and widowers who should have inherited more state pension entitlement from their deceased partner; and £146 million to pensioners who should have had an increase in their pension at their 80th birthday.
The DWP started exploring the “potential for error” from April 2020 and confirmed that there was a significant issue in August 2020.
Errors happened because state pension rules are complex, IT systems are outdated and unautomated, and the administration of claims requires a high degree of manual review and understanding by case workers, the NAO said.
“This makes some level of error in the processing of state pension claims almost inevitable,” it added.
Caseworkers often failed to set and later action manual IT system prompts on pensioners’ files to review payments at a later date, such as for when people reached state pension age or their 80th birthday, it said.
Frontline staff found instructions difficult to use and lacked training on complex cases, according to the findings.
The Department does not have a means of reviewing individual complaints or errors, such as how many people are complaining about the same issues, to assess whether the errors have a systemic cause.
Gareth Davies, the head of the NAO, said: “The impact of the underpayment of state pension on those pensioners affected is significant.
“It is vital that the Department for Work and Pensions corrects past underpayments and implements changes to prevent similar problems in future.”
A DWP spokesperson said: “We are fully committed to ensuring the historical errors that have been made by successive governments are corrected, and as this report acknowledges, we’re dedicating significant resource to doing so. Anyone impacted will be contacted by us to ensure they receive all that they are owed.
“Since we became aware of this issue, we have introduced new quality control processes and improved training to help ensure this does not happen again.”
Additional reporting by PA
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