Warning some women could be owed thousands from State Pension | Personal Finance | Finance

Independent Age has rolled out a crucial new State Pension factsheet, offering vital insights for those already receiving the contributory benefit worth up to £221.20 weekly or individuals approaching retirement age. This comprehensive guide delves into the fine details of the payments, clarifying aspects such as the distinction between New and Basic State Pensions, the claiming process, options for deferral, calculation methods, and potential tax obligations.

The factsheet also addresses the issue of historical underpayments, prompting recipients on the Basic State Pension who might have missed out on National Insurance ‘top-ups’ to get in touch with the Pension Service for a possible recalculation of their State Pension if inaccuracies are suspected.

A recent Independent Age survey highlighted that 41 per cent of over-50s harbour concerns about their financial situation post-retirement, with nearly half admitting to a lack of understanding regarding their financial prospects, including State Pension entitlements, upon retiring.

The guidance from Independent Age clearly advises: “If you qualify for basic State Pension and can claim State Pension ‘top-ups’, these are usually calculated for you. But some people – particularly women who paid reduced NI rates – may have had their State Pension miscalculated and underpaid.

“If you think this affects you, contact the Pension Service to ask them to recalculate your State Pension. You can do this whether you’re claiming or delaying your State Pension. You can also contact our helpline to arrange to speak to an adviser,” reports the Daily Record.

The full State Pension help guide can be found on the Independent Age website here. You can also call them directly on 0800 319 6789.

Reasons for State Pension underpayments

In 2020, the DWP became aware of a number of individuals who had not had their State Pension increased, in accordance with the law, automatically when this should have occurred. This prompted the Department to take action to investigate the extent of the problem.

The latest figures show that 97,016 people over State Pension age – mostly women – have received back payments averaging £2,192, £5,713 and £12,486, depending on their pension category.

A total of 705,688 State Pension cases have been checked for possible errors between January 11, 2021 and February 29, 2024, with a total of £571.6 million owed in underpayments.

This LEAP exercise update provides crucial information for four groups of older people – married women (category BL), people in a civil partnership, widows and those over 80 (category D). These case reviews were due to be completed before the end of 2023 and were reportedly “on track” to be corrected by the end of this year.

There are three broad categories of State Pension underpayments:

• cases covered by the State Pension Underpayments (LEAP) exercise
• Home Responsibilities Protection (HRP) cases where HRP has not been recorded accurately on National Insurance records
• Cases where National Insurance credits need to be updated for people who were claiming Universal Credit.

State Pension Underpayments LEAP exercise

The State Pension LEAP is currently the largest underpayment correction exercise being undertaken by the DWP. This initiative aims to identify potential State Pension underpayments for several groups of people.

• Category BL (Cat BL) – People who are married or in a civil partnership who reached State Pension age before April 6, 2016 and should be entitled to a Category BL uplift based on their partner’s National Insurance contributions.
• Missed conversions – People who have been widowed and their State Pension was not increased to include any amounts they are entitled to inherit from their late husband, wife or civil partner.
• Category D (Cat D) – People who reach age 80 and who are getting some Basic State Pension but less than the £85.00 (in 2022-23) and may therefore, subject to satisfying the appropriate residency conditions, be entitled to Cat D State Pension of £101.55 a week.

State Pension underpayment progress

As of February 2024, the progress on State Pension underpayment corrections includes the number of cases reviewed, arrears identified and payments made from January 2021 to February 2024. These figures are broken down into categories:

Married (Cat BL)

• Cases reviewed: 317,955
• Underpayments identified: 43,367
• Average arrears: £5,713
• Total amount repaid: £243.8 million

Widowed (Cat B)

• Cases reviewed: 298.099
• Underpayments identified: 21,175
• Average arrears: £12,486
• Total amount repaid: £262.3 million

Over 80 (Cat D)

• Cases reviewed: 89,634
• Underpayments identified: 32,474
• Average arrears: £2,192
• Total amount repaid: £65.5 million

State Pension underpayments – Home Responsibilities Protection (HRP)

In relation to Home Responsibilities Protection (HRP) underpayments, the DWP estimates that between £300 million and £1.5 billion of State Pension may have been underpaid due to errors in recording HRP.

From September 2023, HM Revenue and Customs (HMRC) began contacting thousands of older individuals who may have been underpaid their State Pension due to missing National Insurance (NI) record information. This issue predominantly affects women in their 60s and 70s who may lack HRP on their NI record.

The HRP scheme was designed to safeguard the State Pension entitlements of parents and carers. It was replaced by NI credits on April 6, 2010.

HMRC is utilising NI records to identify as many individuals as possible who may have been entitled to HRP between 1978 and 2010 and do not have HRP on their NI record.

After May 2000, it became compulsory to include a National Insurance (NI) number on claims, so those claiming after this point will not have been affected. It is estimated that tens of thousands of people are due an average of £5,000 in back payments.

Personal representatives can claim on behalf of deceased customers. For more information on eligibility and how to claim, visit the dedicated HRP page on GOV.UK here.

State Pension National Insurance Credits

Some individuals who received Universal Credit may not have had their National Insurance Credits correctly attributed to their National Insurance record held by HMRC, which could impact their State Pension.

HMRC maintains National Insurance records based on information from employers through PAYE, Self-Assessment tax returns from the self-employed, and information provided by DWP on benefit receipt where that creates a National Insurance credit.

Between 2017-18 and 2022-23, information about Universal Credit entitlements could not be processed by the National Insurance Recording System. National Insurance credits can affect the value of a State Pension award, so there was a risk some people who had claimed Universal Credit and subsequently reached State Pension age may have been underpaid.

During this period, the DWP implemented a manual system with HMRC to update an individual’s National Insurance record where they felt they qualified for National Insurance credits in respect of time on Universal Credit.

With the technical glitches between the DWP and HMRC systems now rectified, claims data for the affected years can be successfully processed by HMRC. Once these records are updated, the information will be forwarded to the DWP who will then adjust any impacted State Pension awards.

Here’s how to check if you’re affected or make a claim

Nearly 12.7 million people across Great Britain, including over one million in Scotland, are claiming State Pension. Of this total, 9.7 million are receiving the Basic State Pension and 2.9 million are on the New State Pension.

The Basic State Pension is valued at up to £169.50 per week, while the New State Pension can reach up to £221.20.

To quickly find out if your State Pension has been underpaid, give the Pension Service a ring. The best number to dial is 0800 731 0469, but full contact details can be found on the Gov.uk website here.