Government announces “mind-numbing” £3 billion repayment to underpaid women on state pensions

Alongside today’s Budget, the OBR has published its “economic and fiscal outlook” which includes the following updates on under-paid state pensions going back nearly two decades:

“DWP has also identified underpayments of state pension relating to entitlements for certain married people, widows and over-80s back to 1992. Our forecast reflects an initial estimate that it will cost around £3 billion over the six years to 2025-26 to address these underpayments, with costs peaking at £0.7 billion in 2021-22” (p135)

And

“State pension underpayment correction: an administration error identified in March 2020 suggested that a small number of people had been underpaid in the ‘category BL’ element of the state pension. The underpayment affected married women whose husbands reached pensionable age before 2008 and who were unknowingly entitled to ‘enhanced pension’ that would have boosted their payments by up to 60 per cent. DWP investigations between May and December 2020 uncovered a systematic underpayment of state pensions, meaning tens of thousands of married, divorced and widowed people may have been underpaid since 2008. A repayment programme began on 11 January 2021, with the associated costs set out in Table A.3, some of which are expected to fall outside the forecast period. This costing is subject to a high degree of uncertainty as the true extent of the underpayment is not yet established”. (p193)

In February 2020, LCP partner Steve Webb tabled an FOI inquiry to DWP which revealed large numbers of women were getting state pensions below the expected rate, and subsequent campaigning revealed other groups of women including widows and the over 80s who may also have been affected. The DWP has set up a special unit employing more than 100 civil servants to look into this issue, but today is the first time that DWP has admitted the scale of the problem.

Commenting, Steve Webb said:

“This figure is truly mind-numbing. When I first looked into this issue a year ago I had no idea it would explode into such a huge issue. Repayments of £3 billion over the next five years could imply huge numbers of women have been shortchanged, potentially for a decade or more. The government needs to devote serious resources to getting these repayments out quickly as these women have waited long enough”.