Women Owed ‘Hundreds of Millions’ in Underpaid Pensions

A leading pensions adviser has urged more women to come forwards to have their state pensions checked for underpayments, saying they could be owed 'tens of millions' by the government.

The problem was first brought to light in May by pensions consultant Lane Clark & Peacock (LCP) which reported that 'tens of thousands' of women may have been short-changed by the Department of Work & Pensions (DWP).

A new report from the consultancy confirms that this is indeed the case and that since May, the DWP has refunded 'several hundred millions' to women, with the average refund coming in at just over £9000.

It is good news that DWP is checking its records to find married women who have been underpaid. I have no doubt that in addition to the millions which have already been refunded, this process will result in tens of millions of pounds being paid over.

said LCP partner and former pensions secretary Secretary Steve Webb.

The problem stems from a clause in the old pensions system, which allowed a married women to claim a pension 'uplift', worth 60% of her husband's state pension when he turned 65.

The uplift was intended to act as a retirement income lifeline for married women who had not spent enough years in paid work to qualify for a full state pension.

However, it has come to light that thousands of women never know they were entitled to the uplift because they were not told about it or the forms were sent to their husbands instead.

LCP reported last week that a growing number of women who were never told they needed to make a claim are planning to lodge a complaint of 'maladminstration' to the Financial Ombudsman, against the DWP.

As things stand, many groups of women, including widows, divorced women and the over 80s will not get a call from the DWP, so they will have to ring up and ask for their state pension to be checked if they think they are being underpaid. It would be far more efficient for DWP to do a comprehensive record check, including alerting women who still need to make a claim for an uplift. Without this, this issue will rumble on and on, and women will continue to miss out on the pension that is rightfully theirs.

said Mr Webb

The consultancy urged a much wider group of people than first thought could be affected, including widows, divorcees who never remarried, and the children or benefactors of a Will of a woman who should have received the uplift.

In response to the findings, the DWP said it was 'undertaking a check of its records', but the pensions consultancy advised that this was a 'major and time-consuming' exercise which may not cover all women affected.

For this reason, anyone in doubt about whether they could be owed money on their pension should contact the Pensions Service themselves.

Since new pensions regulations came into effect in March 2008, the uplift has been applied automatically to the pensions of women who qualify.