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: Progress and Challenges Ahead
According to the most recent numbers, 97,016 people over the State Pension age, largely women, have received back payments averaging £2,192, £5,713, or £12,486, depending 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 a total 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 aged 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, head of retirement analysis at Hargreaves Lansdown, stated: "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 for State Pension Underpayments
In 2020, the DWP became aware 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:
- Cases covered by the State Pension Underpayments (LEAP) exercise.
- Home Responsibilities Protection (HRP) situations in which HRP was not correctly registered 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 who are receiving 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 number of cases reviewed, arrears detected, and payments paid from January 2021 to February 2024 are provided here:
Married (Cat BL)
- Cases reviewed: 317,955.
- Underpayments identified: 43,367
- Average arrears: £5,713.
- Total amount repaid: £243.8 million.
Widowed (Cat B).
- Cases reviewed: 298.099.
- Underpayments identified: 21,175
- Average arrears: £12,486.
- Total amount repaid: £262.3 million.
Over 80 (Category D).
- Number of cases reviewed: 89,634.
- Underpayments identified: 32,474.
- Average arrears: £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 missing 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 back 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.
State Pension National Insurance Credits
Some people who received Universal Credit may not have had their National Insurance Credits accurately assigned to their National Insurance record kept by HMRC, which could impair their State Pension entitlement.
HMRC keeps National Insurance records based on information from employers via PAYE, self-assessment tax returns from the self-employed, and information provided by the DWP on benefit receipts that result in a National Insurance credit.
Between 2017-18 and 2022-23, the National Insurance Recording System could not process information about Universal Credit entitlements. National Insurance credits can reduce the value of a State Pension award, therefore there was a chance that some persons who claimed Universal Credit and later reached State Pension age were underpaid.
During this time, the DWP implemented a manual mechanism with HMRC to amend an individual's National Insurance record if they believed they qualified for National Insurance credits based on their time on Universal Credit.
With the difficulties between the DWP and HMRC systems rectified, HMRC can now successfully process claims data for the affected years. When these records are updated, information is provided to the DWP, who then corrects any affected State Pension awards.
How to Determine if You are Affected or File a Claim
Nearly 12.7 million individuals in Great Britain receive the State Pension, including more than one million in Scotland. Of that total, 9.7 million receive the Basic State Pension, while 2.9 million receive the New State Pension.
The basic state pension is worth up to £169.50 per week, whereas the new state pension is worth up to £221.20.
A phone contact to the pension department is the simplest way to determine whether you have been underpaid for your State Pension. The best number to call is 0800 731 0469, although full contact information is available on the Gov.uk website.