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£670m of state pension underpayments recorded in financial year ending 2023

Pension experts have made calls to drive up admin standards after it emerged that around £670 million in state pensions was underpaid in the financial year ending in 2023.

This was an increase from £540 million in 2022, according to government figures.

Last year’s underpayments total was more than six times the £100 million that was overpaid in state pensions in the financial year ending 2023.

Overpayments were down from £130 million the previous year.

The Department for Work and Pensions (DWP) document said that official error was the main cause of state pension underpayments, accounting for £580 million in the financial year ending in 2023. Underpayments due to claimant error accounted for £90 million.

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Failure by the department to take action on changes to marital status or at age-related trigger points remained the main source of official error underpayments, the document said.

Issues included the incorrect recording of national insurance contributions and pensions not being uplifted for people who had been widowed and were entitled to amounts inherited from a partner.

The proportion of claims that were underpaid remained at six in 100 in both the financial years ending in 2023 and 2022.

This proportion relates to the DWP’s caseload, including historic errors.

The share of claims that were overpaid stayed at two in 100 claims in both the financial years ending in 2023 and 2022.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown said: “State pension underpayments hit a high with an eye-watering £670 million underpaid in the financial year end of 2023.

“This perhaps comes as no surprise given the huge exercise the DWP is undergoing to correct historical errors that meant many people, did not receive uplifts to which they were entitled.”

Sir Steve Webb, a former pensions minister who is now a partner at consultants LCP (Lane Clark & Peacock) said: “Urgent action is needed to drive up standards of administration so that pensioners can have confidence that the pension they are being paid is correct.”

Spending on state pensions increased from £104.5 billion in the financial year ending 2022 to £109.7 billion in the financial year ending 2023.

The state pension is the benefit with the highest expenditure and accounts for nearly half of total benefit spending, the DWP document said.

A DWP spokesman said: “Our priority is ensuring pensioners receive the financial support to which they are entitled, and state pension underpayment rates due to official error remain low at 0.5% of expenditure.

“Where errors do occur, we are committed to fixing them as quickly as possible.”

The Government is taking action to correct historical underpayments made by successive governments.

It has said it reviewed an average of more than 15,000 cases per month between November 2022 and February 2023.