The long-term underpayment of state pensioners, an unknown number of whom will have died without receiving what was owed to them, is a “shameful mess”, according to a public spending watchdog.
The Department for Work and Pensions (DWP) estimates it has underpaid 134,000 mostly female pensioners over £1billion of their state pension entitlements, with some errors dating back to 1985.
In January 2021, the DWP launched an exercise to correct errors – the ninth such exercise since 2018, the Public Accounts Committee (PAC) said.
The errors mainly affect widows, divorcees and women who depend on their husband’s pension contributions for part of their pension.
Complex pension rules and reliance on highly manual systems have led to thousands of pensioners being underpaid.
The committee of MPs said the underlying computer system used to manage millions of pensioner records dates back to 1988.
Quality checks failed to identify systematic underpayments and small errors that accumulated over the years for large sums of money.
PAC said the ministry should consider whether there are cost-effective ways to upgrade its IT systems “as a matter of urgency”.
There is currently no formal plan to contact next of kin when an underpaid pensioner has died, the committee said.
The DWP only pays those it has identified as having a legal right to arrears, in some cases several years after the event, and has not paid interest, he added.
He also showed little interest in understanding the additional consequences, including on the provision of social care, for those he was underpaying, MPs said.
Correcting the DWP’s errors is costly for the taxpayer and is expected to cost £24.3m in staff costs by the end of 2023, the PAC added.
Experienced staff have been moved away from the status quo and the department is experiencing backlogs in processing new applications.
The risk remains that the mistakes that led to underpayments in the first place will be repeated in the remediation exercise, if not also in new claims.
Dame Meg Hillier, Chair of PAC, said: “Ministries that make mistakes through bad administration have a duty to put those they have wronged back to the position they should have been in, but for the mistake.
“In reality, DWP can never make up for what people have actually lost, over the decades, and in many cases it doesn’t even try. An unknown number of retirees have died without ever receiving their due and it there is currently no plan to pay off their estate.
“The DWP is now in its ninth attempt to correct these errors since 2018, with specialist staff diverted to fix this mess costing the taxpayer tens of millions more and predictable consequences in terms of delays in new pension claims.
“And there is no guarantee that the errors that led to these underpayments in the first place will not be repeated during the correction exercise.
“It’s a shameful mess.”
Quality checks failed to identify the systematic underpayment of thousands of retirees.
The PAC said the lack of regular reporting on state pension investigations raises concerns that senior management ‘isn’t focused on designing a data strategy that detects errors more systematically’ .
He also said the department should treat underpayments of state pensions as seriously as overpayments.
And the DWP hasn’t given people who fear they’ve been underpaid enough information to know what to do, the committee said.
Her communication strategy is to contact only those she believes have been underpaid.
And its priority has been to focus on living pensioners rather than the dead, even though some of their relatives may be financially vulnerable, the committee added.
He said the DWP had not been sufficiently transparent to Parliament on underpayments and should provide periodic updates.
MPs added: ‘Despite a campaign by former Pensions Minister Sir Steve Webb and ThisisMoney.co.uk, from January 2020 the department did not consider underpayments to be a significant issue until in August 2020, which means he missed opportunities to identify and fix the problem earlier.
Paying pensioners late lump sums can also affect benefit entitlements – but the department has shown ‘little interest in accounting for the financial consequences’, the committee said.
He said the DWP should establish the full impact of receiving a lump sum and ensure people are not treated in a detrimental way compared to if they had received the money when it was supposed to. to be paid.
There must also be a risk that similar unidentified errors exist elsewhere in the system, the PAC said.
He added: “Sir Steve Webb told us he thought the scope of the remedial exercise was too narrow.”
Sir Steve, who is now a partner at consultants LCP (Lane Clark & Peacock), said: “The committee is right to be very critical of DWP in the face of this whole debacle.
“It is shocking that regular DWP checks have found the level of error on state pensions to be too low to merit investigation when in reality many thousands of people have missed sums of money that could change their lives.”
Sir Steve added: ‘There are still far too many people who are not getting the state pension to which they are entitled and the DWP must find them all urgently.’
A DWP spokesperson said: ‘Resolving the historic underpayments of state pensions that have been made by successive governments is a priority for the department and we are committed to doing so as quickly as possible.
“We have established a dedicated team and devoted significant resources to handling outstanding cases, and have introduced new quality control processes and improved training to prevent this from happening again. We will contact those affected to ensure that they receive all that is due to them.
“We are carefully reviewing the contents of the Public Accounts Committee report and will respond formally in due course.”
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