The Department for Work and Pensions (DWP) has issued an update on the status of the State Pension Underpayments Legal Entitlements and Administrative Practice (LEAP) initiative.
State Pension Underpayment Update: Progress and Challenges
According to the most recent numbers, 97,016 people over the State Pension age, largely women, were granted back payments averaging £2,192, £5,713, or £12,486, based on their pension category.
According to the new data, 705,688 State Pension cases were evaluated for suspected irregularities between January 11, 2021 and February 29, 2024, with an overall amount of £571.6 million in underpayments owed.
This LEAP exercise update is critical for four groups of older adults: married women (category BL), those in civil partnerships, widows, and those over 80 (category D). These case reviews were scheduled to be finished before the end of 2023, and they were allegedly "on track" to be remedied by the end of this year.
Helen Morrissey, Hargreaves Lansdown's head of retirement analysis, commented on the update, saying: "Progress is being made to rectify the large-scale issue of state pension underpayments, but it is very slow. Just over £571m has been returned so far but with estimates suggesting the scale of underpayments could be around £1.5bn there’s still a very long way to go.
"People have the expectation that the state pension they receive is correct but a series of errors in an already overly complicated system means that for many thousands of people this expectation has been incorrect. Some who queried the issue with DWP over the years were told there was no problem, and many have suffered real financial hardship as a result. These people have been let down and need resolution as soon as possible.”
Reasons Behind State Pension Underpayments
In 2020, the DWP became mindful of a number of people whose State Pensions had not been automatically increased as required by law. This spurred the Department to take action and investigate the scope of the issue.
State Pension underpayments fall into three broad categories:
- The State Pension Underpayments (LEAP) exercise applies to cases involving
- Home Responsibilities Protection (HRP) that have not been appropriately reported on National Insurance records.
- Cases in which National Insurance credits for Universal Credit recipients must be modified.
State Pension Underpayments LEAP Exercise
The State Pension LEAP is the DWP's greatest underpayment rectification effort currently underway. It was established to identify where State Pension underpayments may have happened in relation to the following groups of people:
- Category BL (Cat BL) - People who are married or in a civil partnership and reached State Pension age before April 6, 2016 should be eligible for a Category BL increase depending on their partner's National Insurance contributions.
- Missed conversions - People who have been widowed and their State Pension has not been enhanced to include any inheritance rights from their late husband, wife, or civil partner.
- Category D (Cat D) - People who reach the age of 80 and receive some Basic State Pension but less than £85.00 (in 2022-23) may be eligible for the Cat D State Pension of £101.55 per week, subject to meeting the applicable residency conditions.
State Pension Underpayment Progress - February 2024
The total number of cases reviewed, arrears detected, and payments provided from January 2021 to February 2024 are provided here.
Married (Cat BL)
- Cases reviewed: 317,955.
- Underpayments identified: 43,367
- Average arrears are £5,713.
- Total amount repaid: £243.8 million.
Widowed (Cat B)
- Cases reviewed: 298.099.
- There were 21,175 underpayments identified, with an average arrears of £12,486.
- Total amount repaid: £262.3 million.
Over 80 (Category D)
- Number of cases reviewed: 89,634.
- Underpayments: 32,474
- Average arrears are £2,192.
- Total amount repaid: £65.5 million.
State Pension underpayments - Home Responsibilities Protection (HRP).
The DWP estimates that it underpaid the State Pension by £300 million to £1.5 billion due to HRP recording problems.
HM Revenue and Customs (HMRC) began writing to thousands of elderly people in September 2023 who may have been underpaid for their State Pension due to inaccurate information on their National Insurance (NI) record. The problem primarily affects women in their 60s and 70s, who may have HRP omitted from their NI record.
HRP was a plan aimed to safeguard parents' and caregivers' entitlements to the State Pension, and it was replaced by NI credits on April 6, 2010. HMRC is utilizing NI information to identify as many persons as possible who may have been eligible for HRP between 1978 and 2010, but do not have it on their NI record.
After May 2000, it became essential to include an NI number on claims, thus those claiming after that date will not have been affected. It is estimated that tens of thousands of people are owed an average of £5,000 in outstanding payments.
Personal representatives can make claims on behalf of deceased consumers. For further information on eligibility and how to claim, go to the dedicated HRP page on GOV.UK.