The Department for Work and Pensions (DWP) has acknowledged a significant issue affecting state pension payments, with £800 million being paid back to state pensioners who have been underpaid due to a series of administrative errors. The mistake has impacted approximately 130,000 people, many of whom were underpaid for years, and in some cases, the errors date back as far as 1985.
Former Pensions Minister Steve Webb has highlighted that the majority of those affected were women, some of whom were underpaid for decades or died before receiving the full amount they were entitled to.
To help pensioners determine whether they have been affected by this underpayment, LCP, a financial consultancy, has created a free online tool that can help individuals find out if they were underpaid, and if so, how much they are owed. The tool also provides an estimate of how much state pension you will inherit from your spouse or civil partner when you reach state pension age or if you are widowed.
How to Use the Free Tool to Check for Underpayment
If you are a state pensioner or are approaching retirement, the tool created by LCP could help you identify if you are among those who have been underpaid. It’s a straightforward process:
- Visit the LCP website: You can access the tool for free online.
- Provide your details: Enter information about your state pension, including if you were married or in a civil partnership.
- Receive results: The tool will calculate whether you have been underpaid and, if applicable, how much you are owed. It will also estimate how much state pension you will inherit when you reach retirement age or if you are widowed.
Who Is Most Likely to Be Affected by the Underpayment?
According to the DWP, 130,000 individuals were underpaid due to various administrative errors. Most of those impacted are women, particularly those who were married or in a civil partnership and whose pensions were incorrectly calculated.
Steve Webb noted that many of the affected individuals were underpaid for decades, and some never received the full amount they were entitled to, having passed away without receiving what was owed. In particular, women who opted for the ‘married woman’s stamp’, which allowed them to pay a lower rate of National Insurance contributions, were among the most impacted.
The Special Rules for Women Who Paid the ‘Married Woman’s Stamp’
The ‘married woman’s stamp’ was a special scheme that allowed married women to pay a reduced rate of National Insurance contributions during their working years. The rules for receiving full state pension payments can be complicated, especially for those who were on this scheme.
LCP has clarified that special rules apply to women who:
- Opted to pay the ‘married woman’s stamp’ during their working years.
- Were still eligible to pay the stamp 35 years before reaching state pension age.
- Were born after April 5, 1953.
For those who meet these criteria, the LCP tool provides further guidance. If you’re unsure whether you qualify under these rules, the tool will direct you to specific advice based on your situation.
Key Points to Remember
- Married and Civil Partnerships: The tool assumes you are or were legally married or in a civil partnership. The same rules apply whether you were separated, and they do not apply to cohabiting couples.
- No Impact for Cohabiting Couples: The rules for state pension inheritance and underpayment do not apply to couples who live together outside of marriage or civil partnership, no matter how long they have been together.
Next Steps for Affected Pensioners
If the tool shows that you were underpaid, the DWP has committed to paying back the amounts owed to affected pensioners, with the £800 million being used to rectify these errors. However, the process of getting back payments may take some time. You will be contacted by the DWP if you are owed money.
For those who were incorrectly underpaid, the DWP will continue to review the cases and make adjustments as needed. It is important to keep your contact details updated with the DWP to ensure you receive the correct payments.
Act Now to Check Your State Pension
If you think you may have been underpaid on your state pension, don’t wait—use the free tool provided by LCP to check your entitlement. The DWP is working to correct these errors, and with the £800 million earmarked for repayments, it’s crucial for pensioners to find out whether they’re affected. Be sure to check whether you qualify under the special rules for women who paid the ‘married woman’s stamp’ or whether you need assistance with the next steps in securing the funds owed to you.
FAQs
How can I check if I’ve been underpaid on my state pension?
You can use the free tool provided by LCP on their website to check if you’ve been underpaid. The tool will also show how much you are owed and if you qualify for any inheritance from a spouse or civil partner.
Who is most likely to be affected by the state pension underpayment?
The majority of those affected are women, particularly those who were married or in a civil partnership. Many of these individuals had their pensions incorrectly calculated, especially those who used the ‘married woman’s stamp’ scheme.
What is the ‘married woman’s stamp’?
The ‘married woman’s stamp’ was a reduced rate of National Insurance contributions available to married women during their working years. Special rules apply to those who used this stamp, and the LCP tool provides guidance for these cases.
Will receiving the underpaid pension money affect other benefits?
No, receiving the back payments for state pension underpayment will not affect any other benefits you may already be receiving, such as Universal Credit or Jobseeker’s Allowance.
What should I do if the tool shows I’ve been underpaid?
If the LCP tool shows that you’ve been underpaid, you will be contacted by the DWP to arrange repayment. Ensure that your contact details with the DWP are up to date to receive any payments owed to you.
