The Department for Work and Pensions (DWP) is actively addressing State Pension underpayments through two main initiatives: the State Pension Underpayments Legal Entitlements and Administrative Practice (LEAP) exercise and the Home Responsibilities Protection (HRP) corrections exercise. These efforts aim to correct past mistakes and ensure individuals receive the correct pension amounts. This article explores recent updates, progress, and new groups affected by underpayments.
Contents
- List of Seniors Eligible for Up to £12,500
- New Group of Potential Underpayments
- Evidence of Underpayments
- Affected Individuals
- Progress of State Pension Underpayments
- LEAP Exercise Categories
- State Pension Underpayment Progress (March 2024)
- Home Responsibilities Protection (HRP) Underpayments
- HRP Underpayments (March 2024)
- National Insurance Credits and State Pension
- Detailed Breakdown of LEAP Exercise
- Detailed Breakdown of HRP Underpayments
- HRP Scheme
- HRP Underpayments (March 2024)
- National Insurance Credits and State Pension
- National Insurance Records
- Resolution
- Related posts:
List of Seniors Eligible for Up to £12,500
The DWP has recently updated the status of two major initiatives:
- LEAP Exercise: Focuses on correcting pension underpayments.
- HRP Corrections Exercise: Aims to rectify errors related to Home Responsibilities Protection.
New Group of Potential Underpayments
Former pensions minister Sir Steve Webb, now with LCP (Lane Clark and Peacock), has identified a new group at risk of underpayments, potentially resulting in annual shortfalls of about £2,000. This group includes people claiming the New State Pension who were widowed before retiring.
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Evidence of Underpayments
Sir Steve Webb has raised concerns that the DWP may not be correctly processing new claims, especially for widows and widowers. In some cases, inherited State Pension from a deceased partner has not been automatically added, which may be a more common issue than initially thought.
Affected Individuals
This new group of potentially affected individuals includes:
- Widows or widowers claiming the New State Pension.
- Those individuals whose partner attained the age of retirement or passed away prior to April 6, 2016.
The State Pension that is inherited can differ based on factors such as:
- Whether the late spouse was working or self-employed.
- Whether the widowed individual receives a widow’s pension from a company scheme.
Progress of State Pension Underpayments
As of March 31, 2024, the DWP has paid £1.12 billion in arrears through the LEAP exercise and £2.2 million through the HRP corrections exercise. Between January 11, 2021, and March 31, 2024, 99,558 people, mostly women, received back payments.
LEAP Exercise Categories
The LEAP exercise focuses on three main groups:
- Category BL (Cat BL): Married women and civil partners who reached State Pension age before April 6, 2016, and should receive a Category BL increase based on their partner’s National Insurance contributions.
- Missed Conversions: Widowed individuals whose pensions did not include inherited amounts from their late partners.
- Category D (Cat D): Individuals over 80 who receive less than the full Basic State Pension but may qualify for a Cat D State Pension of £101.55 a week (2024/25 rate) if they meet residency requirements.
State Pension Underpayment Progress (March 2024)
Category |
Cases Reviewed |
Underpayments Identified |
Average Arrears Payment |
Total Amount Repaid |
|---|---|---|---|---|
Married (Cat BL) |
318,693 |
43,825 |
£5,693 |
£245,535,772 |
Widowed (Cat B) |
323,075 |
22,964 |
£12,423 |
£281,796,561 |
Over 80 (Cat D) |
89,949 |
32,769 |
£2,196 |
£66,693,817 |
Home Responsibilities Protection (HRP) Underpayments
The DWP estimates that between £300 million and £1.5 billion in State Pension was underpaid due to HRP recording errors. Since September 2023, HMRC has been contacting thousands of older people to correct these errors, mainly affecting women in their 60s and 70s.
HRP Underpayments (March 2024)
Cases Reviewed |
Total Amount Repaid |
|---|---|
419 of 194,000 |
£2.2 million |
National Insurance Credits and State Pension
Some individuals who received Universal Credit may not have had their National Insurance Credits recorded correctly, affecting their State Pension. The DWP and HMRC have resolved these issues, allowing claims data to be processed accurately.
Detailed Breakdown of LEAP Exercise
The LEAP exercise is the DWP’s largest initiative to correct pension underpayments, focusing on:
- Category BL (Cat BL): Married or civil partners who reached State Pension age before April 6, 2016, should receive a Category BL increase based on their partner’s National Insurance contributions.
- Missed Conversions: Individuals who were widowed and whose pensions did not include inherited amounts from late partners.
- Category D (Cat D): Individuals over 80 receiving some Basic State Pension but less than £85.00 (in 2022-23), potentially qualifying for Cat D State Pension of £101.55 a week (2024/25 rate) if residency conditions are met.
Detailed Breakdown of HRP Underpayments
The DWP estimates errors in HRP recording led to underpayments of between £300 million and £1.5 billion in State Pension.
HRP Scheme
- Designed to protect parents’ and carers’ State Pension entitlements.
- Replaced by National Insurance credits from April 6, 2010.
- HMRC is reviewing records to find people who may have been entitled to HRP between 1978 and 2010 but lack HRP on their record.
HRP Underpayments (March 2024)
Cases Reviewed |
Total Amount Repaid |
|---|---|
419 of 194,000 |
£2.2 million |
National Insurance Credits and State Pension
Some people who received Universal Credit may not have had their National Insurance Credits accurately recorded by HMRC, potentially affecting their State Pension.
National Insurance Records
- Maintained by HMRC using employer information through PAYE, Self-Assessment tax returns, and details from the DWP on benefits that generate a National Insurance credit.
- The National Insurance Recording System was unable to process Universal Credit entitlements between 2017-18 and 2022-23.
- National Insurance credits impact the value of a State Pension award, posing a risk of underpayments for people who claimed Universal Credit and reached State Pension age.
Resolution
- The DWP implemented a manual system with HMRC to update an individual’s record when they qualify for credits while on Universal Credit.
- With the DWP and HMRC systems now resolved, claims HMRC can process data for affected years.
- Updated records will be sent to the DWP to correct any affected State Pension awards.
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