The Department for Work and Pensions has admitted its correction exercises looking into underpayment of the UK state pension – which mainly affects women – is heading into the billions.

he DWP’s latest figures suggest the total amount from this big correction exercise (which started in 2021), the new correction exercise on Home Responsibilities Protection (which started in 2024) and an earlier correction exercise on HRP, takes the total size of underpaid pensions past the £900mn mark.

However, Steve Webb, partner at consultancy LCP, said: “Given we are due an update on the HRP correction exercise (where the figures only run to September 2024), I’m expecting the total amount underpaid – mainly to women – to crash through the £1bn mark this year.”

Earlier estimates have put the total underpayment figure at £1.15bn.

Webb called the scale and slow pace of the exercise “truly shocking”.

Speaking to FT Adviser, Webb added: “One of the notable features of these errors is that they didn’t only affect poor people.

“Widows (and widowers) who did not get an uplift when their spouse died were not necessarily poor, but still lost out, while missing national insurance credits can potentially affect any parent’s NI record if they got child benefit.”

While the state pensions system itself needs a significant rethink, according to thinktanks, Webb said this ‘live’ correction exercise of “mothers missing millions” showcased the failures in the system when it comes to HRP and NI credits not being on people’s records.

Advisers’ response
This could affect the wives and families of advised clients, as well as non-advised.

Webb added: “The best thing that people who had children before 2000 can do is check their NI record to see if they’ve got full credits for those years.

The fact there is less than £3m paid of the estimated £1.5bn owed shows there are a lot of families seriously out of pocket.

“Provided they reached or will reach pension age post 6th April 2010, full years at home with a child under 16 (until 2010, under 12 afterwards) should show as full years towards their state pension.”

He added that if they see a gap, people can apply for NI credits using form CF411a.

Adviser Tim Morris, of Russell & Co, told FT Adviser this could affect many older clients who are vulnerable and may not know about their need to claim.

He said: “Many are elderly and vulnerable, I would stress to any family the need to claim what they are entitled to.

“A barrier to this is lack of understanding. The figures are a real eye opener. We are talking a potential gap in NI credits of more than 30 years (from 1978-2010).
“The fact there is less than £3m paid of the estimated £1.15bn owed shows there are a lot of families seriously out of pocket.”

Rachel Vahey, head of public policy at AJ Bell, said it was “one of the biggest benefit scandals of modern times”.

She added: “Once all compensation has been paid, the government needs to undertake a comprehensive review of its processes to ensure these mistakes are never repeated.

“Trust in pensions is fragile at the best of times and failures such as this will not help. Sadly, it will probably take years, if not decades, to rebuild the confidence lost as a result of this scandal.”

Background
Back in 2024, FT Adviser reported on the then Annual Report from the DWP, which revealed the process of fixing errors on the state pension payments of nearly 200,000 mothers could continue until 2027/28.

The errors have been going on so long that a substantial number of those who missed out have now died and any payment would go to their estateIt said they were missing HRP on their NI record. This was designed to protect the pension record of those unable to work and pay NI contributions because of bringing up children.

A check of state pension payments – prompted by the previous discovery of separate errors affecting over 100,000 widows, married women and over 80s – revealed this fresh group of errors for mothers.

Many child benefit claim forms submitted before 2000 did not include a NI number, which meant the relevant HRP was not carried across from the Child Benefit computer to the National Insurance computer.

However, although HMRC started writing out to potential victims in 2023, by end March 2024 DWP had assessed just 419 cases out of a total number expected to be affected of 194,000.

Only £2.2mn in arrears had been paid out compared with an estimated final bill of £1.15 billion – a number that Webb said was growing more and more each year.

According to a 2022 Public Accounts Committee report investigating various errors and delays, one of the challenges was that HMRC had destroyed all its old Child Benefit records and therefore has to undertake a ‘fishing expedition’ writing out to women potentially affected and encouraging them to make a claim.

Webb said: “The errors have been going on so long that a substantial number of those who missed out have now died and any payment would go to their estate.”