Underpaid state pension values estimated at £3 billion

03 March 2021

Within the Office for Budget Responsibility’s (OBR) Economic and Fiscal outlook report for March 2021, there is confirmation that the Department for Work and Pensions (DWP) anticipates that it will cost £3 billion over the course of the next six years to resolve a problem relating to underpayments of the state pension made to certain women.

The issue was initially identified back in March 2020, and was due to an administrative error, meaning that a small population of people within the ‘category BL’ element of the state pension had been underpaid. This underpayment had impacts on married women with husbands who reached pensionable age prior to 2008, and who were eligible for an ‘enhanced pension’. This would have increased their state pension payments by anything up to 60%, but these women did not know that they were entitled to the higher amount.

The DWP conducted several investigations between May and December 2020, revealing the issue with the underpayments, which meant that tens of thousands of married, divorced and widowed individuals had potentially been underpaid, dating back to as far as 2008.

The repayment programme commenced on 11 January 2021, but the true extent of the issue is not yet known and there is a level of uncertainty surrounding the true cost of the error.

Within the document, it states:

“Our forecast reflects an initial estimate that it will cost around £3 billion over the six years to 2025-26 to address these underpayments, with costs peaking at £0.7 billion in 2021-22.”

 


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