State pension scandal: Staggering £3bn DWP bill for shortchanging women now revealed
Elderly women will be potentially handed back £3billion in underpaid state pensions in a scandal discovered by former Pensions Minister Steve Webb and This is Money.
Here, he gives his take on last week’s Government announcement, and explains where women who could have missed out on thousands of pounds stand now.
When Brian and Audrey Watson contacted This is Money a year ago to query the low rate of state pension she was receiving, little did I realise where it would lead.
A year later, the Government has just accepted that around 200,000 married women, widows and the over 80s are on the wrong rate of pension and says that it expects to spend around £3billion putting it right.
But there are still plenty of matters to resolve, so I thought in this week’s column I would summarise where we are up to and areas which still need attention.
To start by being fair to the government, it is good that they are putting considerable resources into tackling this problem, given that people have clearly been underpaid in some cases for decades.
I am, however, concerned that they are talking about the whole process potentially taking five years. Given how long people have been underpaid, it is vital that things are put right as a matter of urgency.
We know that some women who were underpaid have sadly already died and there is no time to be wasted in getting people the money they are due.
One aspect of this exercise which leaves a nasty taste in the mouth is the decision to stop paying interest on these repayments.
The interest rate paid was never very much, but it was at least a recognition that people have had to manage without the right money for years.
Steve Webb: Find out how to ask the former Pensions Minister a question about your retirement savings in the box below
It seems mean-minded and arbitrary not to pay interest as part of this process and the government should think again on that point.
For many married women, widows and the over 80s, they should hopefully now simply be able to sit back and wait for a letter to tell them how much money they are going to get.
But there are two key groups who cannot afford to sit and wait.
The first is the couples where, as with Mr & Mrs Watson, the husband turned 65 before the crucial date of 17th March 2008.
In most of these cases, an uplift to a 60 per cent basic pension was only awarded if the wife made a claim for it. If she did not do so, she could still be on a lower rate of pension.
DWP are quite clear that nothing in their recent announcement affects this group, so a claim is still needed and will only be backdated for 12 months.
I am told that there are all sorts of messages when you phone up discouraging you from continuing, but if you are a ‘pre 2008’ woman you should ignore them, because every week of delay is another week of lost pension.
I remain of the view that the 12 month backdating limit for this group is unfair. So many women have told me that if they had known about the need to make a claim they would – of course – have claimed.
STEVE WEBB ANSWERS YOUR PENSION QUESTIONS
The DWP ran a system that was so complex and obscure that many people did not get the money that was rightfully theirs. I hope that the complaints of ‘maladministration’ that are currently with the Parliamentary Ombudsman will be upheld and that compensation will be awarded.
A second group who cannot afford to wait is divorced women. I am particularly concerned about those who divorce post retirement.
Such women (as long as they reached pension age before 6 April 2016) should ring the DWP to notify them of their divorce.
Their state pension will then be reassessed. But this only happens if you ring up. I have heard from too many women who could have had a higher pension for years since their divorce but did not know they needed to tell DWP.
Those who divorce under pension age and who have not remarried when they retire are also not covered by the DWP’s review.
In theory, when they claimed their pension full account should have been taken of their ex husband’s National Insurance record. But it would not be surprising if mistakes were made.
So, if you reached pension age as a divorced woman and are now on a very low pension, it might be worth checking if your ex husband’s contributions have been used, especially if you were married for a long time.
Without this column and the support of This is Money, we would never have unearthed these errors. But the work to help people understand their pensions and get things sorted when they have gone wrong carries on.
Ask Steve Webb a pension question
Former Pensions Minister Steve Webb is This Is Money’s Agony Uncle.
He is ready to answer your questions, whether you are still saving, in the process of stopping work, or juggling your finances in retirement.
Steve left the Department of Work and Pensions after the May 2015 election. He is now a partner at actuary and consulting firm Lane Clark & Peacock.
If you would like to ask Steve a question about pensions, please email him at [email protected].
Steve will do his best to reply to your message in a forthcoming column, but he won’t be able to answer everyone or correspond privately with readers. Nothing in his replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons.
Please include a daytime contact number with your message – this will be kept confidential and not used for marketing purposes.
If Steve is unable to answer your question, you can also contact The Pensions Advisory Service, a Government-backed organisation which gives free help to the public. TPAS can be found here and its number is 0800 011 3797.
Steve receives many questions about state pension forecasts and COPE – the Contracted Out Pension Equivalent. If you are writing to Steve on this topic, he responds to a typical reader question here. It includes links to Steve’s several earlier columns about state pension forecasts and contracting out, which might be helpful.
TOP SIPPS FOR DIY PENSION INVESTORS
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