State pension correction exercise should be expanded, says former minister

The scope of a correction exercise putting right state pension underpayments should be expanded, a former pensions minister has said.

Sir Steve Webb, a former Liberal Democrat pensions minister who is now a partner at LCP (Lane Clark & Peacock), said several underpayments to divorcees had emerged, including some amounting to up to £60,000.

Sir Steve has written to Peter Schofield, Permanent Secretary at the Department for Work and Pensions (DWP).

The letter says: “In your departmental report and accounts for 2020/21 you set aside around £1 billion for repayments to over 100,000 people in respect of state pension underpayments.”

The group already being looked at includes married women and some married men, some people whose spouse had died and and some people aged 80 or over whose pension was not “upgraded”.

The letter continues: “The purpose of this letter is to ask you to expand the scope of this exercise to include two further groups where I believe there is evidence of administrative error. These are:

“Women (and some men) who were divorced at pension age but whose pension was not assessed on the basis of their ex-spouse’s contributions;

“Women (and some men) who divorced post pension age and notified DWP of this fact but where their pension was not reassessed on the basis of their ex-spouse’s contributions.”

Problems with underpayments came to light when Sir Steve, along with This is Money, brought individual cases to the DWP’s attention – and Sir Steve said he believed the “systemic” problems originally found may also exist for some divorced women.

The letter says: “If the Department accepts that a failure to act on a change in circumstances can cause widows and others to be underpaid, why not accept that divorced women could be missing out for exactly the same reason?”

Sir Steve said growing examples have emerged of divorced women who had previously been underpaid due to errors, including:

– A woman who was divorced when she reached pension age was not assessed on the basis of her ex-husband’s contributions. She was underpaid for 13 years and was recently awarded a back-payment of over £36,000;

– Another woman who was divorced when she retired and was told she had no state pension entitlement. When she recently made a claim, it was accepted she was entitled to over £140 per week and she (was) made a back-payment of over £60,000;

– A woman notified DWP of her post-retirement divorce in 2015 but no action was taken. As recently as 2021, she was told her pension was correct. She has now had an increase in her pension of over £50 per week plus arrears of £16,000;

– And another retiree who divorced post-retirement who has received arrears of £20,000 plus a large pension increase, Sir Steve said.

He said: “A series of individual cases has highlighted blunders which have led to divorced women being underpaid by tens of thousands of pounds, in some cases for a decade or more.

“The Department has dismissed concerns around this group far too lightly and should take another look to assess the scale of the problem and then take action to put things right.”

Sir Steve said copies of the letter had also been sent to the chairs of the Work and Pensions Committee and the Public Accounts Committee, as well as to the head of the National Audit Office.

A DWP spokesperson said: “We encourage people to contact us if they get divorced or their civil partnership is dissolved and every year we remind people about doing so alongside the uprating notifications we send out.

“We want everyone to claim the benefits to which they may be entitled and we urge anyone of state pension age – or their family and friends – to check if they are missing out on financial support.

“We apologise for the errors in the cases identified and have corrected our records and paid the arrears owed.”