The Department for Work and Pensions (DWP) now expects its Legal Entitlements and Administrative Practices (LEAP) exercise, which reviews cases where pensioners may have been underpaid State Pension, to take until the end of 20231. The DWP confirmed there was a significant issue in August 2020, and started the LEAP process in January 2021 to review all cases at possible risk of being underpaid1.
The DWP estimates it underpaid 134,000 pensioners their State Pension over many years, and estimates it needs to pay those affected £1,053 million in arrears1. Of these, 94,000 pensioners are estimated to be alive, which represents approximately 0.9% of those currently claiming the pre-2016 basic State Pension1. The DWP estimates that the approximately 118,000 pensioners it can trace could receive around £8,900 each by the time payments are made1. This excludes over 15,000 pensioners where the DWP underpaid the pensioner but does not believe it will be able to trace or pay the pensioner or their next of kin1. So far, the DWP has found underpayments of between £0.01 and £128,448.37, with the earliest dating back to 19851.
The underpayments fall into three groups, according to the DWP's estimates1:
| Group | Estimated number affected | Estimated amount to be paid |
|---|---|---|
| Pensioners who should have benefited from their spouse's or civil partner's National Insurance record | 53,000 | £339 million |
| Widows and widowers who should have inherited more State Pension entitlement from their deceased partner | 44,000 | £568 million |
| Pensioners who should have had an increase in their pension at their 80th birthday | 37,000 | £146 million |
State Pension rules changed on 6 April 2016 when the new State Pension was introduced1. Before that date, under certain circumstances, those without a full National Insurance record could get top-ups to their State Pension amount1. The DWP's estimate of the value of its liability was reduced by £1.6 billion to £1,034 million in its 2020-21 Annual Report and Accounts, published in July 20211. On 3 March 2021, the Office for Budget Responsibility reported that the DWP would have to pay £2.5 billion of arrears; on 4 March 2021 the DWP said its current estimate of the total costs of repaying the arrears was £2.7 billion, which included payment of arrears beyond 2025-261.
"In January 2021, it started a Legal Entitlements and Administrative Practices (LEAP) process to review all cases at possible risk of being underpaid"
The issue came to light after Sir Steve Webb, the former Pensions Minister, working with Tanya Jefferies of ThisIsMoney.co.uk, began referring cases to the DWP in January 2020 of women who had been underpaid1. On 26 May 2020 Sir Steve Webb published an estimate, using information from the DWP combined with public information from the Family Resource Survey, that at least 220,000 women had been underpaid1. The DWP's scan of married pensioners completed in mid-July 2020 and captured all married pensioners who currently receive less than the full category BL rate1. The DWP will complete a PSCS scan for widowed pensioners in November 20211. The DWP redesigned its LEAP exercise quality strategy in March 2021, which it piloted before its implementation in August 20211. 90% of those who claim the types of State Pension affected are women1.
Why it matters for households
The people affected are mainly women who reached State Pension age under the pre-2016 rules and who should have received a higher payment, for example through a spouse's or civil partner's National Insurance record, an inherited entitlement from a deceased partner, or an increase at age 801. The DWP estimates around 94,000 of those underpaid are still alive, about 0.9% of people currently claiming the pre-2016 basic State Pension1. Payments are arrears owed to the pensioner, and the DWP estimates those it can trace could receive around £8,900 each1. The DWP does not believe it will be able to trace or pay over 15,000 pensioners, or their next of kin1. The figures are estimates and the NAO states the true number of pensioners affected and value of underpayments will only become clear once the DWP has completed its review of all affected cases1.
What happens next
The DWP expects the LEAP correction exercise to take until the end of 20231. It will complete a PSCS scan for widowed pensioners in November 20211. The DWP's estimate of the total costs of repaying the arrears, made on 4 March 2021, was £2.7 billion, which included payment of arrears beyond 2025-261.
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