LCP’s Steve Webb: “Government urged to expand state pension correction exercise as new errors emerge”

Photo of Steve Webb.
Steve Webb, partner at LCP

Former pensions minister and LCP partner Steve Webb is calling on DWP to expand its current state pension correction exercise to include divorced women, following the discovery of underpayments to divorcees of up to £60,000 in some cases. Divorced women are currently excluded from the exercise as the DWP believes there is no ‘significant evidence’ of errors amongst this group.

Steve Webb has written to Peter Schofield, Permanent Secretary at the DWP, calling for a review of the decision to exclude divorced people. This is for three reasons:

  • DWP figures published in October 2021 (State Pension underpayments: progress on cases reviewed to 30 September 2021 – GOV.UK (www.gov.uk)) show that there are 720,000 divorced women receiving the old (pre 2016) state pension; DWP accepts that 40,000 of these are not even getting the standard rate for a married woman, currently £82.45 per week; in addition, a divorced woman can in some cases get up to a full basic pension (£137.60) using her ex husband’s contributions, suggesting that well over 100,000 cases may be worth checking; just a 1% error rate would imply tens of millions of pounds in underpayments;
  • The type of error that has caused problems for widows and others could equally be expected to arise in the case of divorced women; in the case of widows, DWP accepts that there are tens of thousands of cases where the Department was notified of the death of a spouse but no action was taken to reassess state pension entitlement;  yet when women have reported a divorce, DWP seems to believe that action has always been taken to reassess her state pension;
  • Growing numbers of individual case studies have been identified where divorced women have been underpaid because of DWP errors; these include:

– Mrs M, who was divorced when she reached pension age but never assessed on the basis of her ex husband’s contributions;  Mrs M was underpaid for 13 years and recently awarded a backpayment of over £36,000;

– Mrs H, who was divorced when she retired and was repeatedly told that she had zero state pension entitlement; when she recently made a claim, DWP accepted that she was entitled to over £140 per week and made a backpayment of over £60,000;

– Mrs C, who notified DWP of her post retirement divorce in 2015 but no action was taken; as recently as 2021, DWP wrote to her to tell her that her pension was correct; she has now had an increase in her pension of over £50 per week plus arrears of £16,000;

– Mrs H who divorced post retirement in 2010 and notified DWP but no action was taken; she has received arrears of £20,000 plus a large pension increase;

In his letter to the Department, Steve Webb points out that DWP initially dismissed complaints by widows, married women and others as isolated one-off cases, before eventually accepting a systematic problem. Given the complexity of the state pension rules for divorcees, the former Minister argues that there is actually more potential for error in these cases, yet DWP’s position remains that there is no need to review the position of divorcees as part of its current exercise.

Commenting, Steve Webb said:

“Given the large-scale errors on state pensions for widows, married women and the over 80s, it seems implausible that DWP has an unblemished record when it comes to the pensions of divorced women.  A series of individual cases has highlighted blunders which have led to divorced women being underpaid by tens of thousands of pounds, in some cases for a decade or more. The Department has dismissed concerns around this group far too lightly and should take another look to assess the scale of the problem and then take action to put things right”.

A copy of the letter has been sent to the chairs of the Work and Pensions Committee and the Public Accounts Committee as well as to the head of the National Audit Office.

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