Retirees could see state pensions slashed after partners die due to ‘bizarre’ loophole

THOUSANDS of pensioners could see their state pension slashed after their partner's death due to a "bizarre" loophole.

Some women have been told they are no longer entitled to higher state pension payments following the death of their husband.

The blunder has been affecting pensioners who reached state pension age before 2016 - meaning they came under the old state pension system - and had large pensions from state earnings-related pension scheme (SERPS).

This was a top-up to the old basic state pension and has been known as State Second Pension since 2002.

The idea behind these pensions was to top up the basic state pension.

But some people instead opted to "contract out" in order to lower their national insurance contributions, or to pay these contributions into a private pension instead.

"Contracting out" was introduced in the 1970s and millions of people took the option to use it until it ended in 2016.

But while it may mean you have private pensions worth some cash, you'll usually have a lower state pension as this is based on how many year's worth of national insurance contributions you have.

Pensions expert Steve Webb said the problem has been caused by a old rule which imposed a maximum amount of SERPS you can get.

He said: "The rules can bite in a slightly unexpected way, capping out the widow's state pension, resulting in a fall in her overall pension."

But Mr Webb, a former pensions minister, said most women will still see an increase in their overall income.

Most women will be entitled to a widow's pension from the late husband's company pension, which is paid instead of his part of the state pension.

Mr Webb added that these cases are "rare" and usually happen with both partners have large pensions from the SERPS.

It's not clear exactly how many people are affected by the issues, but Mr Webb says he's aware of a handful of people.

Last year, State Pension errors meant retirees were underpaid by more than £1billion in total - with each missing out on £8,900 on average.

In July, it was revealed that thousands of women who paid the married woman's stamp - a reduced rate of national insurance - are not receiving the cash they were owed under the rules for the new pension system.

Experts have warned that affected women could stand to miss out on thousands over the course of their retirement.

How to seek a review if you think there's an error with your state pension

If you think might have been underpaid call The Pension Service (0800 731 7898) and ask for your state pension calculation to be reviewed.