A Member of Parliament has drawn attention to a problem involving a substantial number of divorced individuals who may have been overlooked in the DWP's State Pension benefit calculation, potentially losing thousands of pounds.
Labour MP Stephen Timms, Chair of the Work and Pensions Committee, has expressed his concern to the Department for Work and Pensions (DWP) in a recent letter.
The letter follows a series of underpayment errors, which led the DWP to undertake large-scale remedial efforts worth an estimated £3 billion.
DWP State Pension Underpayment Series
Several underpayment errors have been exposed over the past few months, involving married women, widows and elderly pensioners.
Now the spotlight is on divorced women pensioners, with Mr Timms suggesting that many may not have had their state pension revalued after divorce, which has had a detrimental effect on their entitlement.
DWP has come under scrutiny for its handling of state pensions, with thousands of people receiving less than they are entitled to.
Although the DWP insisted there was no 'evidence of systemic error due to failure to act on divorce notifications', Timms' call for a review of this decision has led to further pressure on the department.
A Closer Look at the Divorce Pension Issue
Under the previous public pension system, divorced people, predominantly women, were able to benefit from their ex-spouse's contributions in two ways:
- If they remained unmarried until retirement, they could include their ex-spouse's contributions up to the point of their divorce (given that their National Insurance record was superior).
- If they divorced post-retirement and informed the DWP, their state pension was supposed to be reassessed, including their ex-spouse's contributions until their retirement.
This reassessment could lead to a full basic pension entitlement of £169.50 per week. Nevertheless, it seems that this measure has not been applied consistently.
According to information provided to the Public Accounts Committee, around 40,000 women receive less than 60% of the total pension. This would suggest a possible systemic oversight in the updating of pension entitlements after divorce.
Given the massive scale of errors on state pensions for married women, widows and the over 80s, it is stretching belief to think that divorced people’s pensions have all been worked out perfectly.
For those concerned, the financial losses could be considerable, with a shortfall of around £67.80 a week on average, or £3,525.60 a year. This is expected to affect mainly divorced women who reached State Pension age before 2016.
However, Mr Timms also expressed concern that some men could be affected. Generally, most men receive a full basic pension, but there may be occasions when a man needs to use his ex-wife's contributions and this is not done correctly.
The DWP has until 1 May to respond to the concerns raised by Timms. Should the DWP determine that there are widespread errors, it will contact those affected.
Any potential errors in the state pension system highlight the importance of correct calculations and the need for individuals to understand their entitlements.