New government figures reveal that administrative errors and outdated mechanisms in the UK’s pension system resulted in £450 million in state pension underpayments during the last tax year, according to the Department for Work and Pensions (DWP).
These discrepancies, which affected thousands of retirees across the country, stem primarily from failures in accurately processing historical entitlements and incomplete national insurance records.
According to a report by the Manchester Evening News, many of the errors date back decades and disproportionately affect women who were entitled to protective credits. The figures underscore systemic weaknesses in the DWP’s handling of state pension data.
National Insurance Errors and Outdated Credits
The primary driver of underpayments was the omission of Home Responsibilities Protection (HRP) credits from National Insurance (NI) records.
HRP was in place from 1978 to 2010, designed to protect the pension rights of individuals—primarily women—with caring responsibilities. Thousands of eligible HRP years were not recorded, leading to lower entitlements.
While the DWP has initiated a correction programme to address this, the department acknowledged that many of the impacted individuals, especially women, have yet to receive the amounts owed.
Commenting on the issue, Jon Greer, head of retirement policy at Quilter, stated:
The latest figures shine a light on the sheer scale and complexity of the state pension system. While the overpayment rate for state pensions remains incredibly low at just 0.1 per cent, that still equates to a staggering £190 million of taxpayers’ money being paid incorrectly.
He continued:
This serves as a reminder of the difficulty of administering a benefit that supports over 12 million people and costs £142 billion a year.
Official Errors Surge Fivefold in One Year
Alongside the underpayments, the DWP also reported £190 million in overpayments for state pensions. These included:
- £110 million due to administrative mistakes by the department—up from £20 million the previous year, a fivefold increase described by Greer as “statistically significant”.
- £80 million stemming from claimant errors.
Greer added:
What’s more concerning is the sharp rise in official error. Overpayments due to administrative mistakes by the DWP tripled in value from £20 million last year to £110 million, a statistically significant increase driven by miscalculations on the additional components of the state pension.
These elements, which sit on top of the basic state pension, are prone to error and highlight how even small administrative slips can snowball when dealing with such large sums.
Pension Credit Fraud and Eligibility Challenges
The situation is further complicated in the Pension Credit scheme, where total overpayments have reached £610 million, with a record-high overpayment rate of 10.3%. A significant share—£270 million—was due to fraud, which has soared to an unprecedented level.
Many of these cases involve claimants failing to declare financial assets or remaining overseas beyond permitted durations, complicating efforts to verify eligibility for a benefit that is means-tested.
Greer commented:
Given that Pension Credit is targeted at some of the most financially vulnerable pensioners, the system needs to strike a careful balance between accessibility and fraud prevention, and it appears to be struggling on both fronts.
Severe Disability Additions and Administrative Gaps
On the underpayment side of Pension Credit, £70 million failed to reach recipients. Approximately 70% of this shortfall was caused by administrative errors related to additional entitlements for severe disability, which play a vital role for pensioners with low incomes.
Greer explained:
These errors mostly relate to additional amounts for severe disability, which are often the lifeline for those on the lowest incomes.
He added:
These figures underscore the importance of proactive communication from the DWP and HMRC, particularly for people with complex entitlements. Given how vital these benefits are in old age, there’s little room for error.
Broader Implications and System Complexity
Despite the DWP’s ongoing correction efforts, the persistence of HRP-linked issues and surging administrative mistakes raise questions about the structural resilience of the UK’s pension system.
Greer concluded:
Underpayments remain a bigger issue than overpayments, with £450 million of state pension payments not reaching the people entitled to them.
That includes many women who were impacted by historical issues with Home Responsibilities Protection, a now-defunct mechanism designed to protect the pensions of those with caring responsibilities. These legacy issues continue to plague the system, despite a correction programme being in place.
