The Department for Work and Pensions (DWP) has disclosed that it underpaid an estimated 134,000 pensioners, following a public outcry.
Tens of thousands of married women, widows and the over 80s have been underpaid, with arrears in some cases exceeding £100,000, according to the former pensions minister Sir Steve Webb.
Most of those affected are likely to be women; providing further evidence that women get a raw deal whenever the state malfunctions.
An estimated £339 million will now go to pensioners who should have benefited from their spouse’s or civil partner’s national insurance (NI) record; £568 million to widows and widowers who should have inherited more state pension entitlement from their deceased partner; and £146 million to pensioners who should have had an increase in their pension at their 80th birthday.
Meg Hillier, chair of the Committee of Public Accounts, said that many pensioners have been short-changed by thousands of pounds which they are still to receive many years later.
She added: “Although it is positive that DWP is now working to put this right, this is not the first widespread error we have seen in DWP in recent years. Correcting these errors comes at great cost to the taxpayer.
“DWP must provide urgent redress to those affected and take real action to prevent similar errors in future.”
The errors affect pensioners who first claimed state pension before April 2016, do not have a full NI record, and should have received increases in their basic state pension.
These howling errors only came to light because pensioners complained to the DWP and a number of campaigning journalists and industry experts refused to let the matter drop.
These mistakes occurred due to the complexity of state pension rules, outdated IT systems and the fact that the administration of claims requires a “high degree” of manual review and understanding by case workers, according to the National Audit Office (NAO).
“This makes some level of error in the processing of state pension claims almost inevitable,” it added.
Caseworkers often failed to set and later action manual IT system prompts on pensioners’ files to review payments at a later date, such as for when people reached state pension age or their 80th birthday.
Frontline staff found instructions difficult to use and lacked training on complex cases, according to the findings.
Alarmingly, the department does not have a means of reviewing individual complaints or errors, such as how many people are complaining about the same issues, to assess whether the errors have a systemic cause, the NAO said.
Sir Steve Webb said that pensioners querying their state pension underpayments had been wrongly told “all was well” on too many occasions.
Sir Steve said: “Even more worrying is that the new NAO report shows that even when it comes to correcting past errors DWP are still making mistakes.
“It is absolutely vital that the highest standards of quality control are now applied both to the correction of past mistakes and to the information that is given out to people who get in touch.”
The DWP said it has introduced new quality control processes and improved training to help ensure this appalling catalogue of errors never happens again.
Thousands of honest, hard-working people have been let down by the state due to mistakes which should never have been made.
To restore public trust, it is vital that there is full transparency from DWP about the correction process. There also needs to be a plan to support families where the person who was underpaid died several years ago.
The Government should order an independent review of the causes and consequences of this scandal. Creaking IT processes and human errors should not be allowed to place our collective retirement plans in jeopardy.