How to tell if you’re one of 500,000 being UNDERPAID on state pension

More than half a million people receiving the state pension are being underpaid, Money Mail can reveal.

One in 20 pensioners is shortchanged during their retirement, our bombshell analysis has found.

These errors mean that pensioners could be missing out on tens of thousands of pounds over the course of a 20-year retirement. Unless those affected spot the errors themselves, the underpayments might never be fixed.

In an emergency intervention, Sir Steve Webb, a former pensions minister, today raises the alarm about the scale of the chaos in Britain’s state pension payments system.

Sir Steve, the architect of the current state pension system, has teamed up with Money Mail to expose the extent of the blunder and help pensioners detect underpayments.

Sir Steve, now a partner at pension consultancy LCP, says: ‘We have almost reached the stage where people should start from the assumption that their pension may be wrong and make sure they check thoroughly that everything is in order.

‘It is incredible that even after four years of checking hundreds of thousands of cases for errors, Department for Work and Pensions (DWP) still reports that five in 100 state pension claims are incorrect.

Department for Work and Pensions errors mean that pensioners could be missing out on tens of thousands of pounds over the course of a 20-year retirement

In 2021, the Government admitted it had made systematic errors in state pension calculations and that an estimated 200,000 elderly women could have been underpaid

‘The numbers involved may be small for a giant bureaucracy, but they can be life-changing amounts for those affected.’

So, why are so many people being underpaid the state pension and how can you tell if you are one of them?

Here’s everything you need to know to check and correct any mistakes.

Why is this happening?

A catalogue of state pension errors has been exposed in recent years, revealing deep-rooted issues in the payments system at the DWP. In 2021, the Government admitted it had made systematic errors in state pension calculations and that an estimated 200,000 elderly women could have been underpaid.

At the time, estimates suggested they were owed nearly £3billion in underpaid state pension, though this was subsequently revised downward and the estimated bill currently stands at around £800million.

The scandal was brought to light by our sister website This is Money and Sir Steve Webb.

Three main groups of women were affected. The first was widows whose pension payout did not change when their husband died, even though they were entitled to inherit some of their spouse’s state pension under rules in place since 2016.

The second group was married women whose own state pension entitlement should have been increased by their husband’s contribution record.

And the final group was anyone over the age of 80 who receives less than a set amount, currently £110.75 a week, regardless of their National Insurance (NI) record. Their pensions should have been reviewed when they turned 80 and boosted at that time.

The Government set out on a major scheme to correct and reimburse those affected. But it has now emerged that many mistakes are still being made.

In a separate blunder, many parents have also been affected by calculation errors. Parents, but predominantly mothers, have lost out on large sums in state pension due to incorrect gaps in their National Insurance records.

This is because credits for time spent at home looking after children were not accounted for on their NI records. Between 1978 and 2010, parents who took time out of work to care for their children had years subtracted from the 39 years then needed for a basic state pension, in a system that was called ‘Home Responsibilities Protection’ (HRP).

It meant someone who took 19 years out to bring up children should have needed only 20 years of NI payments to qualify for the full basic state pension.

The system was abolished in 2010 and replaced by annual NI credits, but should still apply for those who built up entitlement while it was running. Failure to properly note years when parents were not working due to childcare commitments accounts for £6 in every £10 being underpaid due to NI errors.

Each year, the DWP runs an annual ‘fraud and error in the benefit system’ report, checking a small sample of state pensions for mistakes and correcting them.

In the latest report, published last week and analysed by Sir Steve, it emerged that five in every 100 state pension claims are incorrect.

This means there are still vast numbers of pensioners who are being underpaid.

Sir Steve says the Government has attempted to track down those impacted by HRP errors in recent years, but with limited effect. It has so far paid £104million in arrears to some 12,400 parents, who received average payouts worth £8,400.

But he says: ‘Given that issues around missing HRP have been common knowledge for years, it is particularly remarkable that DWP has not reviewed the claims process and added questions about children to the state pension claim form. This information could be compared with HRP records and could prompt more detailed checks if HRP is missing for people who have been at home raising children.’

A DWP spokesman says: ‘These figures reflect historical recording issues with Home Responsibilities Protection, not widespread errors in recent claims.

‘Underpayments for state pension remain relatively low and we are actively correcting past underpayments while our digital service improves the accuracy of new claims from the outset.’

Poorer retirements

Pension industry experts have criticised the DWP for failing to pay retirees the state pension they are due, at a time when so many are struggling to make ends meet.

Research published yesterday by the Pensions Commission revealed that at least 15 million people are not saving enough for a decent retirement. Receiving the full state pension is therefore crucial for millions.

The scandal was brought to light by our sister website This is Money and Sir Steve Webb

Morgan Vine, of Independent Age, a charity for older people in financial hardship, says: ‘Budgets are being stretched to breaking point, forcing many older people living on low incomes to make drastic cutbacks on essentials such as food and water.

‘Around one in eight pensioners rely on the state pension and social security entitlements for the entirety of their income.’

Baroness Altmann, a former pensions minister who now sits in the House of Lords, says: ‘Underpaying one in 20 older women means hundreds of thousands of them have less money to live on than they should. It really is most important to identify errors and remedy them as soon as possible.

‘I welcome the DWP properly checking women’s pension records, but this is taking a very long time, particularly due to the complexity of the UK state pension system and the problems of historic records being left inaccurate.’

How to spot an error

There are simple steps you can take to check that your state pension is correct.

If you have not yet reached state pension age, which is currently in the process of rising from 66 to 67, you should start by checking your pension forecast at gov.uk/check-state-pension.

If it says you already qualify for a full state pension – £241.30 a week at the current rate – without any further contributions, then you don’t need to do anything.

If you are set to receive less than this and took time out of work to care for your children, you should investigate. Home Responsibilities Protection applied from April 1978, so years spent looking after children before that do not boost your NI record.

If you looked after at least one child under 16 for a year between 1978 and 2010, HRP should reduce the target numbers of years you need for a full state pension. But in a quirk of the system, these HRP years will not be specifically marked on your NI record. To find out if they have been added to your file, you can contact the HMRC NI helpline on 0300 200 3500 and ask if HRP is on your record.

Credits earned after 2010 under the new system should appear. From 2010, the upper age limit for children where you could claim a credit was dropped to 12 years old. Check your record at gov.uk/check-national-insurance-record.

If you reached – or will reach – pension age after 2010 and suspect there has been an error with HRP, Sir Steve suggests carrying out the following checks.

• Make a list of any year from 1978 onwards during which you received child benefit in your own name for a child under 16 (or under 12 from 2010 onwards) for a full year, but you weren’t paying or eligible to pay the married woman’s reduced stamp.
• Compare that list with your NI record. If there is any year on your first list which does not appear as a full qualifying year on your NI record, apply for HRP.
• Claim missing HRP here: gov.uk/guidance/apply-for-home- responsibilities-protection.

If you make a claim, you will be asked to provide the names of your children, their dates of birth and details of their other parent. If your partner claimed the child benefit but you were the one at home with the children, you can use the website link above to get NI credits transferred to you.

Sir Steve says: ‘For those who have yet to claim their state pension, it is relatively easy to check if HRP is missing from their National Insurance record.

‘Any year of HRP should show up on your NI record as a full qualifying year towards your state pension. So if you check your record and find gaps for time at home with children since the HRP system was introduced in 1978/79 you should follow this up by putting in a claim.’

You can also check for other errors in your state pension calculation. The most common problem relates to NI records being incorrect, so go through it year by year to see if it all lines up.

Sir Steve says there could be, for example, gaps in your record when you were on Universal Credit (UC) or other benefits but credits were not awarded. He says: ‘If there are any gaps that you don’t understand, follow it up. Contact DWP if it’s missing credits for a time on benefit.’

Get in touch with the relevant department first for UC and other benefits. For future state pension inquiries, visit: gov.uk/future-pension-centre.

If you are drawing a state pension check here: gov.uk/contact-pension-service.