Tens of thousands of women underpaid their State Pension risk losing benefits or being hit with social care fees when they finally get the cash they are owed, Parliament has been told.
The UK Government has been urged to take action so the historical arrears are excluded from financial assessments for welfare support.
The long-term underpayment of State Pensioners was last month branded a "shameful shambles", by Westminster's Public Accounts Committee (PAC). The Department for Work and Pensions (DWP) estimates it has underpaid 134,000 pensioners, mostly women, over £1 billion of their state pension entitlement, with some errors dating as far back as 1985.
Complex pension rules and a reliance on highly manual systems led to the underpayment of thousands of older people across the country.
The errors mostly affect widows, divorcees and women who rely on their husband's pension contributions for some of their retirement payments.
Tackled in the Lords over the issue, work and pensions minister Baroness Stedman-Scott said in the first nine months of last year, 38,507 cases were reviewed and 9,491 underpayments identified with arrears of £60.7 million made.
The Tory frontbencher also told peers steps had been taken to prevent future error.
Pressing the minister, Conservative former pensions minister Baroness Altmann said: "I understand that the poorest women are at risk of losing benefits or social care funding when an arrears lump sum exceeds, for example, the £23,250 social care capital disregard.
"Most of these pensioners probably needed higher pensions and would also almost certainly have spent the money in past years but now risk the arrears being taken back in care fees straight after finally receiving the money.
"Will the [UK] Government consider introducing regulations requiring local authorities to disregard these specific State Pension back payments, not future higher pensions, from financial assessments for social care funding or means testing?"
Responding, Lady Stedman-Scott said: "Local authorities may take most of the benefits people receive into account unless it is specifically required to be disregarded by regulations.
"The responsibility for interpreting and applying the regulations and guidance tests rests with local authorities."
But Labour leader in the Lords Baroness Smith of Basildon said: "These people, particularly women, were in very straitened circumstances and suffered and paid a high price for not receiving the pension to which they were entitled."
She added: "This is a case where the [UK] Government got it wrong. Surely some special action should be taken to properly correct the errors that were made."
Lady Stedman-Scott said: "All I can say at the moment is that the [UK] Government does not have any plans to change. However, I will take the point back to the department, because it is a very fair one."
Tory former Cabinet minister Lord Forsyth of Drumlean said: "Is this not an example of the [UK] Government hiding behind the skirts of local government? The Government provide guidance to local authorities. Why can they not provide guidance saying that they should disregard these payments?"
The minister repeated her commitment to take the issue back to her department.
Back payments breakdown so far
The following underpayments have been identified between January 11, 2021 and September 30, 2021.
Married (category BL)
- Number of cases reviewed: 25,990
- Underpayments identified: 2,681
- Average amount of back payment: £7,772
- Total amount repaid: £20.8m
Widowed
- Number of cases reviewed: 6,467
- Underpayments identified: 2,381
- Average amount of back payment: £8,628
- Total amount repaid: £20.2m
Oer 80 (Cat D)
- Number of cases reviewed: 6,050
- Underpayments identified: 4,429
- Average amount of back payment: £4,455
- Total amount repaid: £19.7m
What you need to know
The DWP correction activity will identify cases where individuals have been underpaid in accordance with the law.
These cases can be categorised into the following groups:
- People who are married or in a civil partnership who reach State Pension age before April 6, 2016 and may be entitled to a Category BL uplift, without the need to make a separate claim, based on their husband, wife or civil partner’s National Insurance contributions. This may be the case if their husband, wife or civil partner became entitled to their State Pension on/after 17 March 2008, or had already reached State Pension age prior to the customer claiming their State Pension
- People who have been widowed and their State Pension was not uplifted to include amounts they are entitled to inherit from their late husband, wife or civil partner
- People who have not been paid Category D State Pension uplift as they should have been from age 8
How to make a claim for a State Pension underpayment
While the DWP has said it will contact everyone affected, there is no time scale for this.
If you think you may have been underpaid you should contact DWP. Women on less than £82 per week who are or were married to men who have a full NI record and started receiving their State Pension before March 2008 should get in touch with the Pension Service.
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.
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