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“Shocking” state pension errors left women who stayed at home to raise their families out of pocket by more than £1billion.
In the latest scandal engulfing the Department for Work and Pensions, it has emerged around 187,000 are entitled to payouts. Refunds are worth an average of £5,000 each…though this could be much higher, depending on people’s personal circumstances.
But tragically, some 43,000 of those owed the cash have died since the error was discovered. Last year, state pension errors hit a record high, leaving people £670million out of pocket. Civil servant mistakes account for £580million, or 87 percent, of total state pension underpayments, according to official figures.
Those affected by the latest blunder are likely to be women who are now in their 60s and 70s who made a claim for child benefit before May 2000.
If they did not include their National Insurance number, it is possible their credits – previously known as the home responsibilities protection – may not have been transferred to their NI account.
The mistake was discovered during an audit of NI records 15 years ago. That resulted in £85million being paid out. But further investigations have revealed thousands more have been affected and the amount owed much larger than initially thought.
Former pensions minister, Sir Steve Webb, now a partner at financial firm Lane Clark & Peacock, said: “The scale of these errors is huge. It is shocking that so many women have been underpaid so much money.” LCP has launched a “mothers missing millions” campaign and website (lcp.uk.com/mothersmissingmillions) to help people see if they are affected.
Tom Selby, of investment firm AJ Bell, said: “The most important thing now is that those who have been underpaid are identified as quickly as possible and put back in the position they should have been. Tragically, it is inevitable some will have died before they can receive the compensation they are owed.”
The scandal, revealed in the DWP’s annual report, shows a £1.043billion central estimate of owed money. But there is a huge margin of uncertainty. The final sum is thought to be between £300million and £1.5billion.
Ex-pensions minister and Tory peer Baroness Ros Altmann said: “Surely this shows political interference with state pensions over so many years has resulted in a complex mess of different entitlements so convoluted and difficult to work out that even those supposed to be implementing all the rules are unable to do this correctly.
“Ordinary citizens are left to trust in a system that has let them down and, for thousands, has not been corrected in time for them to benefit from the correct payments before they die. This whole sorry saga seems to confirm that the current state pension system is not fit for purpose.”
Pension expert Helen Morrissey, of Hargreaves Lansdown, said the scale of the underpayment was “truly staggering”.
She warned: “Given the experience of other groups, we know it’s going to be a long process and many people face significant waits before receiving what they are due.
“In this case, many records do not even exist any more and so the DWP faces a laborious process of going through National Insurance records to try and identify people. There’s every chance many could continue to be overlooked and not receive what they are entitled to.”
A Government spokesman said: “We have identified and are correcting an issue related to the historical recording of home responsibilities protection on the National Insurance records for people who first claimed child benefit before May 2000.
“Most records will be unaffected and we will shortly be launching a new online tool to help people check whether they need to claim. HMRC will also begin writing to those likely to be affected from the autumn.”
