The Department for Work and Pensions has rejected most of the recommendations on state pension underpayments made by the Public Accounts Committee, following a scandal which saw mainly women lose out because of systemic errors. The committee pressed the DWP on whether interest could be due on arrears, but the DWP rejected this idea. 

 

The Public Accounts Committee did not mince its words in its conclusions about the state pension debacle; it said the DWP had been complacent about the level of underpayments and had “not been sufficiently transparent” to parliament. It also found that DWP had not given enough information to people who were worried they had been underpaid – at the risk that many might still be missing out on what is rightfully theirs. 

 

The government agreed with all of the recommendations except one where PAC wanted the DWP to "establish the full extent of the impact on pensioners of receiving a lump sum of arrears of benefit, particularly for larger sums of arrears”, and to get assurance from local authorities that people are not treated prejudicially compared to how they would have been treated had they received the money over their proper period of entitlement. 

 

State pension is taken into account in the assessment of benefits, and the DWP noted that some pensioners had received pension credit instead of state pension – meaning their state pension arrears would be reduced to avoid duplication. For care costs, it said the regulations don’t allow state pension arrears to be ignored. 

 

 

The other difficult question that arose is on interest payments. The government was supportive of a recommendation that the DWP should explain how its decision not to pay interest on arrears was compatible with a requirement of restoring the pensioner to the situation they would have been in had the errors not occurred. 

 

The DWP argued that the rules of Managing Public Money state that remedies should not be offered routinely and that the impact on the organisation’s future business should be taken into account.  

 

“Given due regard to the above Managing Public Money considerations, the department made the decision not to apply blanket compensation or interest in previous Legal Entitlements and Administrative Practice (LEAP) exercises. To be consistent with what has been applied in previous cases, the department is following this precedent in the current State Pensions LEAP exercise,” the DWP said. 

 

To many of the other recommendations, such as upgrading the IT system, sample checks and recruiting specialist staff, it responded that these were either in train or had already been fixed. For example, in 2018, the DWP started upgrading its IT system through a new ‘Get your state pension’ or GySP service, which it said fully automates the processing of a benefit. In January 2022, 60% of online new claims were processed and paid in this way, “designing out clerical error”, according to the DWP. 

 

In terms of staff, the department has allocated both internal and external resource, to have over 1400 frontline delivery staff working on the correction exercise. “The department has deployed over 500 colleagues to the LEAP exercise, with additional internal moves, and external recruitment of 560 Full Time Equivalents currently in progress,” it noted. 

 

Even with this extra resource it is not clear if the DWP will reach its goal of finishing the exercise at the end of 2023. Last month, the department revealed it had only repaid £94.3m out of about £1bn in underpaid state pensions after more than a year of corrections. 

   

Should state pension arrears be paid with interest or without?

Malcolm McLean

Ian Neale