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’ and said that more must be done to get a grip on the billions of pounds being lost every year. The watchdog discovered that DWP overpaid an “eye-watering” £8.6 billion across benefits in 2021-22, with £6.5 billion of that figure due to fraud.
Meanwhile, problems with benefit underpayments can lead to severe hardship. The 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.
The PAC report said that efforts to correct the systemic underpayment of the State Pension are too slow to meaningfully put things right and will be “too little, too late” for many affected pensioners.
The report states that in January 2021 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.
The DWP wrote to PAC in May 2022 explaining that it was on track to conclude the review of the original 400,000 cases by the end of 2023.
However, it noted in its most recent Annual Report and Accounts that it was planning on the basis that completion would likely be delayed to the end of 2024 because of the potentially affected pensioners newly identified during 2021-22.
The most significant new group of pensioners identified as being affected by underpayments related to Home Responsibilities Protection (HRP).
HRP was a scheme to help protect parents’ and carers’ State Pension credits while they stayed home to look after children and was replaced by National Insurance credits in 2010. However, these were not recorded accurately on National Insurance records.
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.
It added 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.
PAC said that the 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.
By the publication of its next annual report and accounts, the DWP should have a plan and timetable for introducing a measure to report the total value of arrears payments arising due to underpayments, and how it will review individual arrears payments to assess whether they indicate wider underpayment issues, the committee added.
Who may be due back payments for State Pension?
There are certain groups of people among those who reached the State Pension age before April 2016 who are more likely to be affected by underpayment than others.
- Married people , or those with a civil partner, whose spouse or partner turned 65 before March 17, 2008 and whose State Pension is less than 60% of their partner’s basic State Pension. They could now be owed a boost, including some backdated payments, for which they will need to make a claim.
- People who got divorced or dissolved a civil partnership after they had retired and whose State Pension does not take into account their former partner’s National Insurance contributions. Potentially, these people could be owed a top-up on their pension, for which they would need to make a claim.
- People who are married or in a civil partnership and turned 65 before March 17, 2008 and are not receiving anything in basic State Pension but do receive a small amount from additional State Pension. Some people who fall into this group have been receiving as little as £1 a week and are eligible to claim 60% of the basic State Pension, backdated to when their spouse reached 65. They could potentially claim large amounts, and so people who think that they or their loved one are in this category should strongly consider making a claim.
- People who are 80 years old or over and are not currently receiving at least £85 a week from their State Pension. Pensioners in this group don’t need a full National Insurance contributions record, but they do have to satisfy a basic residency test. You should have been notified automatically by the DWP if you are in this group, but you may also want to check yourself.
- Widowed people whose State Pension did not rise when their spouse passed away. People in this situation may be entitled to an increase to the full State Pension, plus some of their additional State Pension, depending on their late spouse’s National Insurance Record. The DWP should automatically identify individuals in this group, but it is definitely worth double checking if you think it may apply to you.
- People who currently receive the correct level of State Pension but may have been underpaid (if they were getting less than 60% of the full basic State Pension) while their spouse was alive. Some widows whose spouses reached pension age after March 17, 2008 are in this position.
- The families of people whose State Pension was underpaid during their lifetime. Although some people in this category will be notified automatically, many may not be, because records for them no longer exist, and they have fallen through cracks in the system.
How much unpaid State Pension could I be owed?
The average amount owed in unpaid pensions was initially estimated at just under £9,000, however individual amounts paid out have varied widely.
This is partly due to different types of claims having different backdating rules and also because some people may be able to claim in more than one category.
How to Make a Claim
A phone call to the pension service is the quickest way to find out if you are eligible for a State Pension refund.
The best number to call is 0800 731 0469 but full contact details can be found on the Gov.uk website here.
What if the person who was underpaid has died?
If the person who was underpaid their State Pension has passed away, the best thing to do is go to the DWP’s recently launched website that is dedicated to this issue, which explains who may be affected - find out more here.
The PAC recommended that the DWP sets out forecasts 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. It should also set targets for fraud and error.
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 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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