In August 2020, it was revealed that up to 130,000 married or widowed people who had reached State Pension age before 6 April 2016 had been underpaid State Pension due to DWP computer errors. Here's what that means.
In October 2020, the DWP announced they had started to identify and reimburse people affected by this and stated any arrears of benefit due would be paid. The Pensions Minister Guy Opperman provided a written statement to Parliament outlining three groups of State Pension claimants who may be affected:
- people who are married or in a civil partnership who reached State Pension age before 6 April 2016 and who may be entitled to a Category B uplift based on their partner’s National Insurance contributions
- people who have been widowed and their State Pension was not uplifted to include amounts they are entitled to inherit from their late husband, wife or civil partner
- people who have not been paid Category D State Pension (the non-contributory element of State Pension) uplift as they should have been from age 80.
The DWP started a formal correction exercise on 11 January 2021 and plans to recruit additional staff members with the aim of completing the correction exercise by the end of 2023. The current estimate is that arrears will total £2.7 billion and increased ongoing weekly entitlement will amount to an extra £90 million per year.
The DWP say claimants in the affected groups do not need to contact the DWP as they are ‘in the process of issuing letters to all those found to be underpaid in accordance with the law, explaining how much they will be receiving in arrears and the reasons for the change to their State Pension rate.’
Failure to make a claim
A separate issue has also come to light where married women whose husbands reached State Pension age after them were required to make a separate claim to apply for an increase to their own State Pension before 17 March 2008. Those that didn’t at the time but make a claim now for example, will only be able to backdate their entitlement by 12 months.
People who may be affected by either of the above issues who do not currently claim a State Pension, or had no entitlement on a previous claim should make a new claim so the DWP are aware of them. More information about State Pension is available in this factsheet.
Pension Credit (PC)
For PC claimants, any increase in weekly State Pension entitlement will be treated as income and should be reported to the Pension Service.
Before any State Pension arrears are paid, an amount will be deducted equal to the amount of PC the claimant would not have received if their State Pension had been paid at the correct time. The remaining arrears will then be paid and that amount will be treated as capital for PC. More information about how capital affects PC entitlement can be found here.
Housing Benefit (HB) and Council Tax Support (CTS)
Please note: any entitlement to PC Guarantee Credit passports you to maximum entitlement of HB and CTS. If you are entitled to PC Guarantee Credit, any increase or arrears of State Pension do not affect HB and CTS entitlement and does not need to be reported to the local authority. The following rules apply if you are not entitled to PC Guarantee Credit, or are only entitled to PC Savings Credit.
For HB and CTS claimants, any increase in weekly State Pension entitlement is treated as income and should be reported to the local authority.
Any arrears of State Pension entitlement are treated as capital and should be reported to the local authority. More information about how capital affects both HB and CTS entitlement can be found here.
Social care financial assessment
An increase in State Pension entitlement due to DWP error should be treated in the normal way. The local authority will review their financial assessment of your income to reflect the new amount from the date it is paid.
For arrears of State Pension entitlement paid as a lump sum, there is a 52-week capital disregard applying to ‘the balance of any arrears of or any compensation due to non-payment’ of certain benefits, but this does not include the State Pension.
Given a range of other benefits are included, however, you could ask the local authority to use its discretion to extend the 52-week disregard to State Pension arrears. However, it is important to be understand the local authority are not obliged to disregard the amount as capital. If the arrears exceed the £23,250 threshold, you may need to pay for any social care services you receive.