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Serious doubts raised over State Pension as pensioners left billions out of pocket by Government

6 December 2023

  • PAC renews calls for action to reduce fraud and error levels as 18% of Universal Credit claims found to contain element of fraud

There are serious doubts over whether the State Pension is being paid accurately. Following huge successive underpayments going back decades leaving pensioners out of pocket by thousands of pounds, the Public Accounts Committee (PAC) today calls on the Department for Work and Pensions to provide reassurance over the integrity of Government records.

Two massive historic underpayments of State Pension have caused the PAC serious doubts about the Government’s ability to make accurate and complete payments. According to DWP estimates, some 210,000 people may have been underpaid a total of £1.3bn of State Pension, amounting to an average back payment due of £5,000 each. This was due to gaps in the National Insurance (NI) records of people historically entitled to the Home Responsibilities Protection benefit, and is in addition to the underpayment of £1.2bn affecting 165,000 pensioners due to DWP errors, an issue that the PAC highlighted in 2022.

As well as the risk that similar errors may occur with other benefits, and the lack of assurance that further historic underpayments may not occur in future, the PAC is also concerned that these issues were able to build up over many years before the DWP was alerted to them. The PAC’s inquiry found that it will be very difficult to identify people impacted by the latest underpayment, as the DWP no longer holds the relevant records.

The report also makes renewed calls for Government to act to substantially reduce the level of fraud and error in benefit spending. There has yet to have been a significant post-pandemic fall in benefit fraud and error, the majority of which is driven by Universal Credit (UC). UC was overpaid by a staggering £5.5 billion in 2022-23, and the report highlights that an estimated 18% of UC claims – relating to over 800,000 people – already contain an element of fraud.

Plans to reduce UC fraud and error also depend on DWP’s ability to review 8 million live claims by 2027-28, interviewing and chasing evidence from millions of people. While DWP says this is on track, around 40% of this work will be outsourced to private contractors, bringing further risks to effectiveness, quality and customer service in outsourced reviews.

The DWP should explain how it will track the impact of using machine learning algorithms to flag potentially fraudulent benefit claims. Given legitimate concerns over DWP’s transparency around the use of these tools and the potential impact on claimants who are vulnerable or from protected groups, the report calls for more information on whether or not these techniques lead to legitimate claims being delayed or reduced and if this is affecting specific groups of people.

Chair's comment

Dame Meg Hillier MP, Chair of the Public Accounts Committee, said:

“Many pensioners have been left significantly out of pocket by up to thousands, while DWP has been asleep at the switch. These are injustices that may never be corrected for some. We are now in a place where Parliament needs assurance that the State Pension is being paid accurately. We expect DWP to respond to our report in a timely fashion, but frankly, paying pension accurately is a basic that we expect from DWP and not recommendations that our Committee ought to be having to make.

While it is good to see benefit fraud and error fall slightly this year, we are yet to see any significant post-pandemic strides made in addressing it. The DWP’s future strategy relies on assessing many millions of claims over the next few years, and contracting out this work brings its own risks. We will be continuing to scrutinise this work closely, as it is essential for public confidence in the system that the Government fights fraud with unswerving determination, while ensuring legitimate claims remain undisrupted.”

Further information

Image: DWP