A warning has been issued as State Pension claimants could be waiting until the end of 2024 for their payments to be corrected.
This comes as the Department of Work and Pensions (DWP) estimates that 237,000 older people have been underpaid a total of £1.46 billion in State Pension, with underpayments going back as far as 1985.
However, a new report from the Public Accounts Committee (PAC) suggests that fraud and error levels in benefits spending at the Department for Work and Pensions (DWP) is "unacceptably high". It emphasised that more must be done to get a grip on the billions of pounds being lost every year.
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As the Daily Record reports, the watchdog found that DWP overpaid an “eye-watering” £8.6 billion across benefits in 2021-22, with £6.5 billion of that figure due to fraud. They also warned that efforts to correct the systemic underpayment of the State Pension are too slow.
The report warned it might be "too little, too late" for many affected pensioners. This comes as the DWP launched an exercise to review around 400,000 cases "at risk" of underpayment to confirm the extent of the issue and reimburse affected pensioners, as the report states.
The most significant new group of pensioners identified as being affected by underpayments related to Home Responsibilities Protection (HRP), and are most likely women. This was a scheme put in place to help protect parents’ and carers’ State Pension credits while they stayed home to look after children until it was replaced by National Insurance credits in 2010.
However, these were not recorded accurately on National Insurance records and thousands are expected to be entitled to backdated payments..
Earlier this year the DWP wrote to PAC in May 2022 to explain that it was on track to conclude the review of the original 400,000 cases by the end of 2023. The organisation noted in its recent Annual Report and Accounts that it was planning on the basis that it would be likely finalised and complete by the end of 2024 because of the potentially affected pensioners newly identified during 2021-22.
DWP is working with HM Revenue and Customs (HMRC) to understand more about the scale, potential causes and options to correct these cases. Between January 2021 and March 2022, the DWP reviewed an average of 4,000 cases per month, but it will need to review around 19,000 cases per month going forward to achieve its target deadline.
PAC said that it is not convinced the DWP has done enough to ensure its communications to potentially affected pensioners are sufficiently clear. The committee said it remains unconvinced that DWP’s systems are adequate to detect further underpayments before they build up into major issues in future.
With this, the committee suggested a number of aims that the DWP should consider. They suggested that DWP should set out a credible plan to deliver the exercise to correct State Pension underpayments on schedule and explain how it will update its communications to reassure pensioners that they will be meaningfully compensated.
The DWP should have a plan and timetable for introducing a measure to report the total value of arrears payments arising due to underpayments by the time the next annual report is published. PAC also suggested the DWP should explain how it will review individual arrears payments to assess whether they indicate wider underpayment issues.
Along with that, the committee also suggested that the DWP should set out forecasts and targets for future levels of fraud and error in benefits, including its assessment of the factors driving these trends, by the publication of its next annual report and accounts.
The PAC said the DWP maintains that current fraud levels are due to Covid-19 but it is unable to say when levels of fraud and error will fall.
The committee said it has repeatedly claimed there is an increasing propensity for fraud in society in general since the pandemic, but is unable to point to convincing evidence why this should lead to increasing losses to the taxpayer.
PAC chairwoman Dame Meg Hillier said: “DWP is blaming everything from the pandemic to ills in wider society for unprecedented and wholly unacceptable levels of fraud in the benefits system.
“But the truth is losses to the taxpayer to fraud and mistakes have been at record levels and rising for years.
“DWP didn’t have a plan to get a grip on the billions it was losing every year before the pandemic, and it doesn’t have one now.”
The PAC also said that, by the end of January 2023, it expects the DWP to write to it with a clear plan of how it intends to increase the number of claimants responding to its fraud and error sampling exercises.
In doing so, the DWP should consider reviewing the tone and content of its communications with claimants, to both encourage compliance and catch fraudsters, it said.
A DWP spokesperson said: “We are disappointed the committee did not recognise that we are already delivering on the bold and ambitious Fraud Plan, published in May this year, that sets out our next steps, including recruiting trained specialists and seeking new powers to help us tackle fraud.
“This builds on the existing work DWP has done to address fraud and error, with savings from correction and prevention of fraud and error totalling £2 billion last year.”
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