Consultants LCP have started a new campaign to assist thousands of mothers in securing millions of pounds in underpaid state pensions, as the Department of Work and Pensions (DWP) discloses a new category of mistake in its annual report.
Since 1978/79, the state pension system has incorporated safeguards intended to preserve the position of parents (in reality, primarily mothers) who may have gaps in their National Insurance record as a result of time spent caring for children while not working.
Previously known as Home Responsibilities Protection (HRP), the scheme is now known as National Insurance credits. Unfortunately, this system is not functioning properly.
In its Annual Report for July 2022, the Department of Work and Pensions (DWP) acknowledged that missing HRP is now the “second largest” source of error in state pensions (adding to the £1.5 billion in errors for certain married women, widows, and those over the age of 80, which are currently the subject of a major correction exercise).
The issue was not discovered until the Department for Work and Pensions (DWP) conducted its first comprehensive examination of State Pension fraud and error since 2005-06, which included calling seniors receiving low state pensions.
This helped to uncover instances in which parents should have received credits for time spent at home with their children, but this information was missing from their NI record.
According to the DWP annual report, the department is collaborating with HMRC to determine the scope of the problem, but the results will not be available until at least the fall.
However, a prior attempt by DWP to resolve this issue more than ten years ago resulted in lump sum payments of £83 million to 36,000 pensioners and an average pension rise of £10 per week (after opposition MP Steve Webb addressed the issue). The existing inaccuracies might potentially be of comparable or even higher magnitude.
Theoretically, if DWP and HMRC concur that there is a big error, they may start a large-scale corrective operation that may at some time identify these faults.
There is a possibility that these additional inaccuracies will not be rectified for several years, considering that the present effort to repair faults in state pensions is scheduled to extend until late 2024.
In the meanwhile, parents will continue to miss out on underpaid state pensions, thus addressing the issue themselves may be the best course of action.
Commenting, Steve Webb, partner at LCP, said: “The DWP has admitted that even more people are being underpaid state pension than previously thought, with a whole new category of errors coming to light.
“Yet again, this error overwhelmingly affects women, and undoubtedly means that many thousands have been underpaid for years.
“Rather than wait for the government to fix the problem, I would encourage anyone who has received child benefit since 1978/79 to check that the relevant credits are on their NI record.
“If not, this can be fixed by filling in a form, and the result could well be a higher pension and a worthwhile lump sum”.