Comment from Jon Greer, head of retirement policy at Quilter: What’s more concerning is the sharp rise in official error. Overpayments due to administrative mistakes by the DWP tripled in value from £20 million last year to £110 million, a statistically significant increase driven by miscalculations on the additional components of the State Pension. These elements, which sit on top of the basic State Pension, are prone to error and highlight how even small administrative slips can snowball when dealing with such large sums.
On the flip side, underpayments remain a bigger issue than overpayments, with £450 million of State Pension payments not reaching the people entitled to them. That includes many women who were impacted by historical issues with Home Responsibilities Protection, a now-defunct mechanism designed to protect the pensions of those with caring responsibilities. These legacy issues continue to plague the system despite a correction programme being in place.
Meanwhile, the Pension Credit figures are more troubling still. Overpayments hit a record high of 10.3%, costing the taxpayer £610 million this year. Fraud accounted for nearly half of that, climbing to its highest level on record at £270 million. Given that Pension Credit is targeted at some of the most financially vulnerable pensioners, the system needs to strike a careful balance between accessibility and fraud prevention and it appears to be struggling on both fronts. A large share of overpayments stemmed from people failing to declare financial assets or staying overseas for longer than the rules permit, highlighting the difficulty of monitoring eligibility for a means-tested benefit with complex rules.
Underpayments of Pension Credit, while lower in proportion, still amounted to £70 million, and nearly £7 in every £10 underpaid was due to administrative failings. These errors mostly relate to additional amounts for severe disability, which are often the lifeline for those on the lowest incomes. These figures underscore the importance of proactive communication from the DWP and HMRC, particularly for people with complex entitlements. Given how vital these benefits are in old age, there’s little room for error.
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