1.3 million pensioners were underpaid a staggering £530m last year

Pensioners were underpaid a staggering £530 million last year because of mistakes by government officials, new analysis reveals.

Processing errors meant just over 10 percent of all State Pension cases had underpayments, impacting around 1.3 million pensioners.

The average amount underpaid was more than £400 per person and came at a time when many people were struggling with the cost of living crisis.

The colossal underpayments were discovered because the government is now actively carrying out checks rather than using estimates.

This suggests underpayments could have been much higher in previous years.

Ex-pensions minister Sir Steve Webb, said £530 million is an ”extraordinary” amount of money.

Sir Steve, a partner at pension consultants LCP, said: “It’s an extraordinary amount of money to miss out, especially during a cost of living crisis.

“It is all the more shocking that proper checks have not been done for more than 15 years.

“These figures are the first year that checks have been done properly – they’ve actually been phoning people up – and unsurprisingly the underpayments are very high.”

Details of the underpayments were unearthed in official government documents about fraud and error in the benefits system.

According to analysis by the Labour Party around one in 10 pensioners left short last year.

Overall, the data reveals that mistakes made by government officials cost benefits and state pension claimants £1.1 billion in the 2021-22 financial year.

Nearly one half (£530) were state pension underpayments. The figures show that 10.7 percent of all state pension cases had an underpayment due to official error, impacting around 1.3 million pensioners.

They also reveal how £140 million was underpaid to Universal Credit claimants in the same period while those on Employment and Support Allowance were left £130,000 short.

Some 1.8 million people were affected by underpayments overall.

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Labour’s Shadow Work and Pensions Secretary, Jonathan Ashworth MP, said: “When so many families and pensioners are struggling, these levels of incompetence are staggering.

“It’s time blundering Tory ministers got a grip.

“Labour would crack down on these failures and take action to get living standards up and tackle the growing poverty crisis facing the country”

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, also hit out at the mistakes.

“When people claim benefits there is an expectation they will be paid the correct amount. “Even though underpayments due to official error looks low in percentage terms the reality is that it amounts to a huge amount of money that is not being sent to people who sorely need it.

“The issue of state pension underpayments has been reported widely in the press with the National Audit Office estimating well over 100,000 people, primarily women, not receiving what they are due. The government is in the midst of identifying and repaying those affected but the reality is this is going to take some time and many people have struggled financially as a result. The benefits system is hugely complex and difficult to navigate. It is to be hoped government learns lessons from the State Pension issue to ensure underpayments throughout the benefits system are identified and remedied more quickly.”

A Department for Work and Pensions spokesperson said: “State Pension underpayment rates remain low at 0.5 percent of expenditure.

“In 2021/22 we spent over £104 billion and in 2022/23 we were forecast to spend over £110 billion on the State Pension, supporting over 12.5 million pensioners.

“Our priority is ensuring everyone receives the financial support to which they are entitled and, where errors do occur, we are committed to fixing them as quickly as possible.”

It comes after separate DWP figures last month revealed that tens of thousands of state pensioners have received a total of £300 million after being underpaid.

Of the 173, 538 accounts checked between January 11, 2021 and February 28, 2023, exactly 46,716 underpayments were identified.

That’s the equivalent to about £6,424 per case.

It included 22,276 married pensioners who received an average of £6,630 each.

More than 14,500 over 80s got an average of £2,710 each.

And a total of 9,928 widowed retirees were paid out an average of £11,521 per case.

Shockingly, some of the underpayments go as far back as 1985.

Those affected by the error are pensioners who first claimed the state pension before April 2016.

These retirees were unlikely to have a full National Insurance record.

They should have received increases to the basic state pension but didn’t due to an error that the National Audit Office has blamed on complex rules and outdated IT systems that require claims to be made manually instead of being automated.

But some have since passed away and their families may never get what they are owed.

The DWP has been contacting those affected by the errors, mostly women who are widowed, divorced or who have some of their entitlement based on their husband’s pension contributions.

But many people could still be missing out on significant sums because there is little guidance for those concerned they are being underpaid their state pension.

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