state pensions for women

Tucked away in the various Budget documents last week was the news that around 200,000 women are in line for compensation payments due to their underpaid state pensions.

The payments will average £13,500 and cover a period of up to 20 years when several groups of women were paid less than they should have been from their state pensions.

In a move expected to cost the taxpayer £2.7 billion, the Department for Work and Pensions (DWP) is now starting to calculate how much is owed to women who should have previously received a state pension based on their husband’s National Insurance contributions record.

The underpayments are the result of a system which required married women, widows and over-80s to manually apply for a higher state pension, when their own contribution record was insufficient to produce a sufficient pension income.

It applies to women who qualified for the ‘old’ state pension system, reaching state pension age before 6th April 2016. This old state pension had special provisions for married women, who could claim 60% of the basic state pension based on their husband’s contribution record.

Because not all of these women received the full amount, due to system errors, the DWP will now correct the historical underpayments, providing a top-up payment averaging £13,500.

A spokesperson for the DWP was quoted as saying:

“The action we are taking now will correct the historical underpayments that have been made by successive governments, and anyone impacted will be contacted by us to ensure they receive all that they are owed.”

While this is good news for women who were underpaid their state pension, the review and subsequent payment of compensation is expected to take a long time. The DWP now has a special team of 100 civil servants working on the project.

The historical underpayments were first identified last year by former pensions minister Steve Webb, while writing a pensions column for a national newspaper. Webb commented:

“The scale of these underpayments is truly shocking. Whilst it is good that the government is now planning to address this issue, the plan to do so over five years is simply not fast enough.”

“It is also quite shocking that the DWP plans to stop paying interest on these underpayments. If the government is going to fix these problems it needs to do so swiftly and fairly.”

In a written statement to the House of Commons this week, pensions minister Guy Opperman explained that the DWP took immediate action to investigate the issue when it became aware of the underpayments last year, adding: “This is an issue that dates back many years across successive Governments.”

Those due top-up payments broadly fall into one of four categories.

There are people who are married or in a civil partnership who reached their state pension age before 6th April 2016 and were entitled to a Category BL uplift as a result of their partner’s National Insurance contributions.

The second group are those whose spouse became entitled to a state pension after a change to the law in 2008. Some people in this category had their basic state pension entitlement automatically reviewed and increased, but underpayments also occurred where this automatic process did not happen.

The third category includes people who have been widowed, with a state pension which was not uplifted to include the amounts they should have inherited from their late husband, wife or civil partner.

Finally, there are people who have not been paid a Category D state pension uplift, as they should have been from age 80.

While it may take some time for the DWP to conclude their investigations and calculate the top-up payments required, it is positive news that those underpaid on a state pension are now in line for additional payments.