PENSION TENSION
Major update after 100,000 state pensioners underpaid £10,000 each due to error
The Government could be forced to hand hundreds of millions of pounds
A MAJOR update has been issued after tens of thousands of married female retirees were underpaid the state pension due to a government error.
The Parliamentary Ombudsman confirmed this week that it will launch a full investigation into the issue.
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Failings in the old state pension system left potentially more than 100,000 married women without the payments they were due.
These women have been contacted and informed that a “detailed investigation” has begun into this group of complaints.
If successful, the Government could be forced to hand out hundreds of millions of pounds in state pension arrears to all of the women who missed out.
This could include thousands of women who died without ever being paid the correct pension.
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Former Pensions Minister Sir Steve Webb criticised the previous system, calling it “archaic and sexist”.
“This is a major milestone in a long-running campaign for justice for thousands of married women,” he said.
“The fact that they did not know this was needed indicates a system which let them down and has cost them in many cases thousands of pounds through no fault of their own.”
These women did not ignore official correspondence and would clearly have made a claim had they realised it was needed one their husband retired, he added.
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Sir Steve estimates that some of these women will have lost out by £10,000 or more in the period since their husband retired.
How did the error happen?
Prior to a rule change in March 2008 married women could claim the state pension at age 60.
What are the different types of pensions?
This was initially awarded purely based on their own National Insurance record, which showed how many years they had made contributions.
If they had spent time at home raising a family or had other gaps in their employment history then their state pension could be very low.
For many, this could be as little as 25% of the full basic pension.
But when their husband claimed his state pension married women could get an increase in the amount they would receive.
If their husband had made enough contributions then the amount of state pension they would receive could increase to as much as 60% of the full basic pension.
How does the state pension work?
AT the moment the current state pension is paid to both men and women from age 66 - but it's due to rise to 67 by 2028 and 68 by 2046.
The state pension is a recurring payment from the government most Brits start getting when they reach State Pension age.
But not everyone gets the same amount, and you are awarded depending on your National Insurance record.
For most pensioners, it forms only part of their retirement income, as they could have other pots from a workplace pension, earning and savings.
The new state pension is based on people's National Insurance records.
Workers must have 35 qualifying years of National Insurance to get the maximum amount of the new state pension.
You earn National Insurance qualifying years through work, or by getting credits, for instance when you are looking after children and claiming child benefit.
If you have gaps, you can top up your record by paying in voluntary National Insurance contributions.
To get the old, full basic state pension, you will need 30 years of contributions or credits.
You will need at least 10 years on your NI record to get any state pension.
But this uplift only happened if they made a further state pension application once their husband retired.
Tens of thousands of married women assumed that because they had already applied for the state pension they would be paid the correct amount.
Those who did not make a second claim would remain on the low pension indefinitely.
If they found out about the potential uplift later they could only backdate their claim by one year, leaving them thousands of pounds out of pocket.
In cases seen by Sir Steve Webb some women potentially missed out on more than a decade of increased pension payments.
More shockingly still, many women were only notified of what they needed to do to claim if their husband ticked a box on his state pension pack.
Doing so would mean that two state pension claims forms were sent to him, one of which was to be given to his wife.
Failure of the husband to tick the box or to pass on the form to his wife would mean that she missed out.
Meanwhile, she could also be unfairly penalised if the DWP only sent one form rather than two.
When did the rule change?
The system was changed in March 2008 so that married women received a state pension uplift automatically without needing to make a further claim.
But women who had made a claim before 2008 did not benefit from the rule change.
During the investigation, the Ombudsman will ask the Department for Work and Pensions for all of the information available to married women when the letters were sent.
It will then share its preliminary findings with the DWP and those making a claim before it reaches a final recommendation.
What can I do about it?
You can contact the DWP directly and query whether you have been affected.
Another option is to use an online tool or advice site to see whether they can help.
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An online tool launched by Sir Steve Webb on behalf of actuarial firm LCP can help married women check if they might be affected.
You can then contact the pension service to get your state pension entitlement reviewed.
What are state pension errors?
STEVE Webb, partner at LCP and former Pensions Minister, explains what state pension errors are and how they can occur:
The way state pensions are worked out is so complicated that many thousands of people have been paid the wrong amount for years without even realising it.
The amount of retirement pension you get usually depends on your National Insurance (NI) record.
One big source of errors has been cases where NI records have been incorrect, particularly for years spent at home with children.
This is a system known as ‘Home Responsibilities Protection’.
Alternatively, particularly for older pensioners, the amount you get can depend on the NI contributions made by your spouse.
Errors have arisen where the Government has failed to adjust the pensions of married women when their husbands retired or failed to increase pensions when someone was bereaved and lost a husband or wife.
Although the Government has spent years trying to fix these problems, there are still many thousands of people – many of them older women – on the wrong pension.
If you have always thought that your pension seems low, then it is worth contacting the Pensions Service to ask them to check, especially if you spent time at home raising children or if you were widowed and your pension didn’t change when your spouse died.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
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