State pension warning as up to 10 million risk underpayment due to DWP error

Up to 10 million people who claimed Universal Credit could have shortfalls in their state pension due to an “unacceptable DWP long term failure”, research showed.

Of the 10 million people, 137,000 are said to have already claimed their state pension, however, the Government does not yet know how many have been underpaid or the level of underpayment.

The system errors uncovered showed that some people may have wasted money buying National Insurance top-ups or have potentially been underpaid their state pension in retirement.

Before 2017, the Department for Work and Pensions (DWP) were automatically adding National Insurance credits to claimants’ records, however, from 2017 to 2023, they were done manually causing some credits to “fall through the net”.

HMRC began correcting records in February 2023 and expects this work to be completed by the end of March 2024.

Matt Rodda MP, Labour’s Shadow Pensions Minister, says: “It is simply unacceptable that the DWP’s long-term failures to properly calculate people’s state pension entitlements have still not been resolved.

“The Government has promised to fix the issue time after time and yet thousands of pensioners are being let down.”

The report encouraged those who may have been affected to check their state pension tool, as they will see an inaccurate valuation of their state pension.

Wendy Chamberlain MP, of the Liberal Democrats said: “It is absolutely atrocious that it was only in March this year that the Government started trying to fix its systems, and that this won’t be finished for another year.

“Thousands of people have already been impacted, either finding themselves short of their full state pension or mistakenly buying unnecessary credits to top up.

“It is clear these delays could led to thousands more pounds being kept by the Government when it should be in pensioners’ pockets.”

In its report, the National Audit Office NAO explained that around 10 million people made a claim to Universal Credit during the affected six-year period.

Unless these people have a National Insurance credit for some other reason, then their National Insurance record will be incorrect.

The report said: “There is therefore a risk that some people may have unnecessarily purchased voluntary Class 3 National Insurance contributions to top-up their state pension.

“DWP has not informed potentially affected claimants about these issues.”

The “system issues” were fixed in February 2023, the NAO said. This was the same month the issues were uncovered by an investigation by This is Money.

If anyone purchased unnecessary National Insurance top-ups, they will be issued a refund.

Guy Opperman, minister of state at the DWP, said: “The Department has been working with HMRC to resolve this issue.

“We expect NI records will be fully updated by HMRC over the course of 2023/24, any State Pension entitlement will be reassessed, and any underpayment addressed accordingly.”