The National Audit Office has just revealed the extent of administration errors at the Department of Work and Pensions (DWP) in their administration of the state pension. It seems that over a long period of time (which the NAO didn’t specify) the DWP has underpaid pensioners by a staggering £1 billion. An incredible figure.
The error in payments seems to be blamed on administrative errors over time where correct payments have not been calculated from the outset, meaning that the figures input into the systems have been wrong from the beginning. This is thought to be a failure of training without enough senior administrators who understood the calculation system. The complicated system being a big part of the problem.
A lot of people have been affected by the mistakes.
44,000 pensioners who should have been entitled to higher payments after the death of heir spouse. Estimated to be owed £568 million.
53,000 pensioners who should have benefited from their spouses National Insurance calculations. Estimated to be owed £339 million.
37,000 pensioners who should have received higher payments after their 80th birthdays. Estimated to be owed £146 million.
That’s over 130,000 pensioners who have been underpaid.
The average underpayment has been calculated at almost £9,000. But the highest was almost £130,000. A staggering amount.
The DWP said that it is working through the backlog and prioritising the over 80’s.
There are issues with people having passed away (an estimated 40,000) and in tracing many recipients, many of whom are in care (an estimated 15,000).
They have employed over 500 extra staff to deal with the issue.
What a mess.
Unfortunately professional Pension Advisers like us can’t help with this issue its down to the DWP to rectify.
In further news along similar lines. HMRC has just admitted that in the last three months from July to September this year they repaid almost £45 million in overpaid taxes to pensioners who had made withdrawals from their personal pensions under the revised drawdown rules. That takes the total since pension freedoms were introduced in 2015 to a staggering £794 million.
The reason according to HMRC is that they automatically apply an emergency tax code when someone first starts to take withdrawals from their pensions. Its then up to the individual to reclaim the overpaid tax within the first 30 days by completing a series of reclaim forms, or they need to wait until the tax year end for an adjustment to be made.
Doesn’t seem fair does it?
In total there are over 13,000 individuals caught by these tax errors, at an average of £3,300 which is a big number.
The government claims that HMRC is undergoing a programme of digitisation. Quite when that will prevent these overpayments is not certain.
The clear message is to check your tax return or ask your local Pension Adviser to check it for you.