The DWP today announced they will begin to repay the people affected by state pension payment errors that were reported last year.
Their annual report and accounts revealed that 187,000 people are missing out on money they are entitled to during retirement due to errors in their National Insurance record.
Deleted data on Child Benefit means that some woman have been getting less state pension than they are entitled to as their National Insurance record is incomplete.
These people are mostly mothers who are now in their 60s and 70s who should have had National Insurance credits for the time they spent bringing up children.
The DWP estimates that just over £1billion is owed to those affected. Due to data protection rules, the government have deleted the relevant Child Benefit information after five years so now do not know which women are affected.
If someone was claiming Child Benefit for 15 years and not working, they could be entitled to an additional 15 years of National Insurance contributions.
These 15 years of lost NI credits are potentially worth £4,543 additional state pension per year, or £96,914 over 20 years (not including inflation).
Where errors are found, their National Insurance records will be corrected and the DWP will then recalculate state pensions and pay arrears where appropriate.
Sir Steve Webb, LCP said: “It is good news that the Government is finally taking action to deal with yet more errors in people’s state pension records.
“Missing out on protection for time at home with children could make a huge difference to a mother’s pension entitlement, and lump sum payments of arrears could run into many thousands of pounds for those who are affected.
“I hope that this correction process will be completed as quickly as possible, as far too many people have been underpaid for far too long”.
In its annual report last year, the DWP were unable to estimate the scale of the problem, however subsequent DWP ‘fraud and error’ meant the errors could amount to around £100million per year.
However, today, the Government has announced that in Autumn 2023 it will begin a large-scale write-out to parents – mainly women in their 60s and 70s – who made a claim for Child Benefit before May 2000.
If the claims were made without a National Insurance number, their credits may not have been transferred to their National Insurance account from the Child Benefit computer.
These credits were previously known as ‘Home Responsibilities Protection’ or HRP.
HMRC says they will be writing to people who have no HRP on their record and who have gaps in their NI record between 1978 (when HRP was created) and 2010 (when HRP turned into NI credits).
Alice Guy, head of pensions and savings at interactive investor said: “It’s a tragedy that many women are living in unnecessary poverty due to this latest problem with the state pension. Someone caring for their kids as a stay-at-home Mum for 16 years could receive a depressing £4,500 less state pension each year, by missing out on crucial National Insurance credits due to this mistake. These are life-changing amounts and will make a huge impact on someone’s wellbeing in retirement.
“As a society we’ve decided to support women who take time out to care for their family by counting these years towards their state pension. It’s therefore it’s very sad that these women have been let down by the system and are now more likely to be facing poverty in old age.
“It’s vitally important that the government work hard to contact everyone affected as soon as possible to sort out this mistake. Sadly, many women affected could have died in poverty due to this mistake, with a much lower income than they were entitled to.”
Lane Clark and Peacock (LCP) has previously campaigned to raise awareness of this issue and launched its own ‘mothers missing millions’ campaign and website – Mothers Missing Millions – to help people work out if they might be affected.
A Government spokesperson said: “We have identified and are correcting an issue related to the historical recording of Home Responsibilities Protection on the National Insurance records for people who first claimed Child Benefit before May 2000.
“Most people’s records will be unaffected, and we will shortly be launching a new online tool to help people check whether they need to claim. HMRC will also begin writing to those likely to be affected from the Autumn.
“Our priority is ensuring everyone receives the financial support to which they are entitled, and State Pension underpayment rates due to Official Error remain low at 0.5 percent of expenditure. Where errors do occur, we are committed to fixing them as quickly as possible.”
