The Department for Work and Pensions (DWP) recently released updates regarding the State Pension underpayment exercises, namely the Legal Entitlements and Administrative Practice (LEAP) exercise and the Home Responsibilities Protection (HRP) corrections exercise. These efforts aim to rectify underpayments affecting tens of thousands of pensioners, many of whom may be entitled to substantial back payments.
Additionally, former pensions minister Sir Steve Webb has revealed evidence that suggests a new group of individuals might also have been underpaid on their State Pension, potentially resulting in underpayments of around £2,000 annually. In this article, we will cover:
- Newly identified pension underpayment group
- Progress on the State Pension underpayment exercises (LEAP and HRP)
- A detailed breakdown of arrears payments
- How to check if you have been underpaid and make a claim
Contents
- Potential New Group Affected by Pension Underpayments
- Background
- Who Might Be Affected?
- Factors Impacting Inherited State Pension
- Progress on State Pension Underpayment Exercises
- LEAP Exercise
- HRP Corrections
- Arrears Payments Breakdown (March 2024)
- LEAP Exercise Arrears
- HRP Underpayments
- How to Check If You Are Affected or Make a Claim
- Key Steps to Check and Claim:
- Conclusion and Next Steps
Potential New Group Affected by Pension Underpayments
Background
Sir Steve Webb, now a partner at Lane Clark and Peacock (LCP), has uncovered that widows or widowers who were already in that status when they claimed their New State Pension may have been underpaid. This issue relates to inherited State Pension benefits that the Department for Work and Pensions (DWP) failed to include in pension calculations for certain individuals.
Sir Steve stated, “We have found worrying evidence that DWP has not been including inherited State Pension in some new claims for widows and widowers. This could be the tip of an iceberg.”
Who Might Be Affected?
The newly identified group includes:
- Widows or widowers who were already in that status when they claimed their New State Pension.
- The spouse who passed away either reached pension age before April 6, 2016 or passed away before that date.
Factors Impacting Inherited State Pension
- The exact amount of inherited pension depends on whether the deceased spouse was employed or self-employed.
- The widowed spouse’s potential entitlement may also be reduced if they are receiving a company widow’s pension, as this could replace some of the inherited State Pension.
Progress on State Pension Underpayment Exercises
The DWP has made significant progress in addressing underpayments through two key initiatives: LEAP and HRP corrections. These programs aim to identify pensioners who have been underpaid due to administrative errors.
LEAP Exercise
The LEAP exercise is the largest of the DWP’s underpayment correction initiatives. It focuses on underpayments in three primary categories:
- Category BL (Married/ Civil Partnerships): People who were married or in a civil partnership and should have received an uplift based on their partner’s National Insurance contributions.
- Missed Conversions (Widows): Widows and widowers who may not have received their entitled share of their late spouse’s State Pension.
- Category D (Over 80): Pensioners over the age of 80 receiving less than the full State Pension.
HRP Corrections
The Home Responsibilities Protection (HRP) system was designed to protect the State Pension entitlements of individuals who took time off to care for children or other dependents between 1978 and 2010. Errors in recording HRP credits have led to underpayments, primarily affecting women.
Arrears Payments Breakdown (March 2024)
Below is a detailed breakdown of the arrears payments made as part of the LEAP and HRP correction exercises.
LEAP Exercise Arrears
Category |
Cases Reviewed |
Underpayments Identified |
Average Arrears Payment |
Total Amount Repaid |
|---|---|---|---|---|
Category BL (Married/Civil Partnerships) |
318,693 |
43,825 |
£5,693 |
£245,535,772 |
Category B (Widowed) |
323,075 |
22,964 |
£12,423 |
£281,796,561 |
Category D (Over 80) |
89,949 |
32,769 |
£2,196 |
£66,693,817 |
As of March 2024, the DWP has made £1.12 billion in payments through the LEAP exercise, and the estimated total arrears owed are £970 million. The DWP is still in the process of reviewing cases and making additional payments.
HRP Underpayments
Cases Reviewed |
Total Underpayments Identified |
Total Amount Repaid |
|---|---|---|
419 out of 194,000 |
274 |
£2.2 million |
The DWP estimates it underpaid between £300 million and £1.5 billion due to errors in HRP recording. HMRC began contacting affected pensioners in September 2023. These individuals, mainly women in their 60s and 70s, could receive average back payments of around £5,000.
How to Check If You Are Affected or Make a Claim
With over 12.7 million people claiming State Pension across Great Britain, it’s important to determine if you may have been affected by underpayments. Of this number, 9.7 million receive the Basic State Pension, and 2.9 million are on the New State Pension.
Key Steps to Check and Claim:
- Call the Pension Service:
- The quickest way to check if you’ve been underpaid is to contact the Pension Service at 0800 731 0469. Lines are open from 8 am to 6 pm, Monday to Friday.
- Full contact details are available on the GOV.UK website.
- Review Your National Insurance Record:
- You can check your National Insurance (NI) record through HMRC’s online portal. This is especially important for individuals who may have missing HRP credits.
- Use LCP’s Online Tool:
- If you are unsure whether you are receiving the correct amount of State Pension, you can use LCP’s online tool designed to help individuals—especially widows and widowers—check for potential underpayments.
Conclusion and Next Steps
The DWP’s State Pension underpayment exercises represent a significant effort to rectify past mistakes that have left many pensioners, particularly women, underpaid. With over £1.12 billion already repaid, progress has been made, but there is still work to be done to correct outstanding issues.
If you believe you may be affected by these underpayments, take immediate action by contacting the Pension Service or reviewing your National Insurance record. Ensuring that you receive the full State Pension entitlement can make a substantial difference in your retirement income.
For more detailed information on how to claim or check if you are affected, visit the official GOV.UK website.
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