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Underpaid pensioners get £209m out of £1.46bn owed due to government mistake

pension EMBARGOED TO 0001 FRIDAY JANUARY 21 File photo dated 03/04/16 of an elderly woman counting loose change. The Department for Work and Pensions (DWP) estimates it has underpaid 134,000 pensioners, mostly women, over �1 billion of their state pension entitlement, with some errors dating as far back as 1985. Issue date: Friday January 21, 2022.
The DWP estimated as many as 237,000 pensioners had been underpaid around £1.46bn. Photo: PA

The government has returned £209.3m in underpaid state pensions as the latest estimates shows that many as 237,000 pensioners had been underpaid around £1.46bn.

The Department for Work and Pensions (DWP) identified 31,817 state pension underpayments between January 2021 and last October, making it possible to hand back £209.3m.

However, in its progress on reviewing cases of state pension underpayment, it said that as many as 237,000 pensioners had been underpaid around £1.46bn.

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DWP has admitted that there are systematic errors in state pension calculations for three main groups.

Married women, who should have received an upgrade to a 60% basic state pension when their husband retired. The DWP said the average payment arrears in this group amounted to £6,929. It repaid £91.1m.

The second group are widowers who should have inherited an enhanced state pension when their spouse died. The government found 7,876 underpayments under this category and repaid £84m.

The last group are over 80s already in receipt of a state pension when they turned 80, who should have been automatically upgraded to a 60% basic state pension. In this case, the DWP found 10,784 cases and handed back £34.2m.

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“The DWP has let pensioners down on a massive scale – particularly women who tend to retire on lower incomes anyway,” Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said.

“Today’s data shows the DWP has so far handed back more than £209m to people affected by state pension underpayments. This is progress but a drop in the ocean when compared to the almost £1.5bn estimated to have been underpaid overall. In some cases, these underpayments have stretched back decades and even though DWP has pledged to hire more people to speed up the process, it is clear many could be waiting for some time still before they are reunited with their money,” she added.

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The DWP has launched a project to fix errors in state pension payments but the task still well behind schedule. As a result, many older people will continue to be paid at the wrong rate for years to come.

“The DWP has a gigantic task ahead of it to resolve these issues and it must pull out all the stops to make sure it happens as soon as possible,” Morrissey added.

Watch: Is a UK state pension enough to survive on in retirement?