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11 Mar 2021

Women owed £3bn in underpaid state pension: are you eligible to claim?

The Department for Work and Pensions estimates it will take six years to make repayments

Tens of thousands of married, divorced and widowed women wrongly underpaid their state pension are due to receive payments totalling around £3bn from the Department for Work and Pensions (DWP) over the next six years.

This issue -first raised by pensions consultancy Lane, Clark & Peacock (LCP) last May - has been caused by a combination of complex rules about women's entitlement under the old state pension system and computer errors made by the DWP.

Here, Which? looks at what actions the government is taking to resolve the issue, why some women aren't receiving the right state pension income and how you can claim your money back if you're eligible.

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What's the government doing to address the underpayments?

Last May, it was thought that women were owed around £100m in state pension payments, based on findings at the time.

However, the Office for Budget Responsibility (OBR), which presented the latest estimate from the DWP in its recent economic and fiscal outlook, noted that repayment costs could total £700m in 2021-22 alone, meaning this issue is much larger than it first seemed.

It hasn't been specified how many women could be affected, but the DWP predicts it could be 'tens of thousands'.

The DWP has been reimbursing women since the issue came to light last year, by checking its own records and through women calling to check what they're owed. But according to the OBR, an official repayment programme began on 11 January 2021.

A special unit was set up by the government to process claims in November last year and is still ongoing. According to LCP, more than 100 civil servants are looking into the issue.

'These women have waited long enough'

Former pensions minister, now LCP partner, Sir Steve Webb, says: 'This figure is truly mind-numbing. When I first looked into this issue a year ago I had no idea it would explode into such a huge issue.

'Repayments of £3bn over the next six years could imply huge numbers of women have been shortchanged, potentially for a decade or more.

'The government needs to devote serious resources to getting these repayments out quickly as these women have waited long enough.'

Who could be eligible to claim missing state pensions?

The issue of the missing state pension benfits affects women who were married and reached state pension age (SPA) before April 2016, who can claim the basic state pension.

These women are entitled to 60% of the basic state pension their husband gets at SPA. The full basic state pension is currently £134.25 per week (rising to £137.60 from 6 April 2021). So the rate for married women claiming on this basis would be £80.45 per week (£82.56 in 2021-22).

Under this old system, each member of a couple could build up a pension in their own right. So, in principle, each member of a married couple could earn a full state pension. But many women had gaps in their National Insurance (NI) record or had paid the specially reduced 'married woman's stamp', and so reached pension age with very limited pension entitlement of their own.

The women affected will have been born before 6 April 1953 and are most likely to be widows, married or divorced women, and those aged over 80.

If you're a widow, you could also substitute your late husband's NI record for your own, so qualifying for 100% of the basic state pension if your late husband had a full record of contributions.

If you were divorced when you reached SPA, you could substitute your ex-husband's NI record for your own, up to the point of your legal split. If the divorce occurred relatively late in life, this could enable you to qualify for a full basic state pension.

Why have some women been underpaid?

There are two groups of married women who may have been underpaid state pension benefits.

Until March 2008, a married, divorced or widowed woman would have had to make a claim to receive an enhanced pension.

For women whose husbands reached SPA (which was then 65 for men) after March 2008, the DWP's computer systems should have boosted their state pension payments to the 60% sum.

But many women have said that it didn't and have complained to the DWP.

The second group of women who have been affected are those whose husbands reached 65 before March 2008.

According to LCP, the DWP claims it wrote to these women to alert them of this option, but many say they never received such a letter.

Six groups that should take action now

Six groups have been identified by LCP who may want to contact the DWP to get their state pension payments reviewed:

  • Married women whose husband turned 65 before 17 March 2008 If you never claimed an uplift to the 60% rate (currently £80.45 per week in basic pension), you could be missing out.
  • Widows whose pension was not increased when their husband died This group can potentially receive a 100% basic state pension of £134.25 per week, plus a percentage of their late husband's additional state pension.
  • Widows whose pension is now correct, but who think they may have been underpaid while their late husband was still aliveThis is especially important if your late husband reached 65 after 17 March 2008.
  • Over-80s Who are receiving a basic pension of less than £80.45, provided that they satisfied a basic residence test when they turned 80.
  • Widowers and heirs of married women Where the woman has now died, but who was underpaid state pension during her life, especially where her husband turned 65 after 17 March 2008.
  • Divorced women (particularly those who divorced post-retirement) You should check that you're benefiting from the contributions of your ex-husband.

How can I check if I'm eligible to claim?

LCP has created a calculator to help you identify if you may be affected.

You'll need to enter some details about you and your husband (or husband at the time), including when you were born, whether your husband is over the SPA, how much basic state pension you currently receive and how much your husband (or ex-husband) receives.

You'll then be given an indication of whether you're receiving less than you're entitled to. LCP says all data is given anonymously and it doesn't store any of the personal data you input.

If you have any concerns or questions about your pension you should contact the government's Pension Service.