DWP reveals £670m of state pension underpaid in 2022-23

Around £670m in state pensions was underpaid in the 2022-2023 financial year, the Department for Work and Pensions has revealed in its annual report into fraud and error in the benefit system¹. The same report put overpayments at £100m, down from £130m the previous financial year¹. The underpayment figure is up from £540m in the previous year, and the state pension underpayment rate reached 0.6%, described as the highest on record¹.

Official error was the main cause of state pension underpayments, accounting for £580m, while underpayments due to claimant error accounted for £90m¹. The proportion of claims that were underpaid remained at six in 100 across both 2021-22 and 2022-23, a figure the DWP told Which? includes historic errors¹. The DWP said state pension underpayment rates due to official error remain low at 0.5% of expenditure¹.

The errors relate to specific groups. The DWP's failure to act on changes to marital status or age-related trigger points remained the main source of official error underpayments¹. These include people who are married or in a civil partnership who reached state pension age before 6 April 2016 and may be automatically entitled, following a 2008 legislative change, to a Category BL State Pension uplift based on their husband, wife or civil partner's National Insurance contributions, and people who have been widowed whose state pension was not uplifted to include amounts they are entitled to inherit from their late husband, wife or civil partner¹. Incorrect recording of National Insurance contributions was the second-largest source, mainly involving historic recording of Home Responsibilities Protection (HRP)¹. For those who reached state pension age before 6 April 2010, HRP reduced the number of years needed to qualify for a basic state pension where someone stayed at home and cared for children for whom they received child benefit, or cared for a person who was sick or disabled; for people reaching state pension age on or after 6 April 2010, previously recorded periods of HRP were converted into National Insurance credits¹.

"Our priority is ensuring pensioners receive the financial support to which they are entitled, and state pension underpayment rates due to official error remain low at 0.5% of expenditure."

Department for Work and Pensions, source¹

Former pensions minister Steve Webb, who brought the underpayment scandal to light with pensions consultancy Lane, Clark and Peacock in 2020, said the continued scale of underpayments was "truly shocking" and that "urgent action is needed to drive up standards of administration so that pensioners can have confidence that the pension they are being paid is correct"¹.

Why it matters for households

The underpayments affect people already receiving the basic State Pension or the new State Pension, and the amounts involved are not small: the DWP estimates that as many as 237,000 pensioners have been underpaid, with underpayments totalling £1.46bn¹. The DWP's correction exercise, known as the Legal Entitlements and Administrative Practices (LEAP) process, began in January 2021 and is due to be completed by the end of this year¹. The DWP told Which? it reviewed an average of 15,000 cases per month between November 2022 and February 2023, compared with an average of just 5,000 cases per month over the first 22 months of the exercise¹.

Where underpayments are identified during the correction process, the DWP will contact people to inform them of changes to their state pension, but not all groups will be automatically compensated¹. The DWP is currently investigating the scale of the HRP recording issue with HMRC, which administers National Insurance records; it said that in most cases people in receipt of child benefit between 1978 and 2010 will have had HRP applied automatically, but early analysis indicates this did not happen for some people who first claimed child benefit before May 2000¹. Checking a State Pension forecast and a National Insurance record is how the relevant credits can be verified¹. For the 2023-24 tax year, the full level of the new State Pension is £203.85 a week, or £10,600, while the basic State Pension is £156.20 a week, or £8,122.40 a year¹.