Saturday, 17 April 2021

State pension error that caused widows to lose £100k-plus happens again to a newly-bereaved woman - AFTER we exposed DWP scandal

  • Christina Hood, 80, lost her husband last August and his state pension stopped
  • She failed to receive a rise from £87 to £209 a week for half a year 
  • Her son raised the alarm with the DWP in December, but nothing happened 
  • This is Money intervened and she received a £3,800 backpayment in March 
  • This could have hit £130,000 if the DWP's mistake remained undiscovered for 20 years - like the two other widows' cases we highlighted
  • The DWP is correcting 200k women's pensions in £3bn scandal: Read its statement below A bereaved 80-year-old has fallen foul of a fresh Government state pension blunder we exposed last spring, and was denied an increase from £87 to £209 a week for half a year.

    Christina Hood lost her husband William last August, but though his state pension stopped immediately her low payments continued as before.

    Her son Peter realised she could be losing a substantial sum after reading our stories about underpayments to women, and contacted the DWP in late December. 

    But despite a staff member promising his mother's increase and a letter would be forthcoming, nothing happened.

    A frustrated Mr Hood eventually contacted This is Money, and when we intervened on his mother's behalf in March, she received a £3,800 backpayment and a huge boost to her weekly payments.An estimated 200,000 women have been underpaid state pension in a £3billion scandal uncovered by former Pensions Minister Steve Webb and This is Money a year ago.

    >>>Are YOU being underpaid state pension? Find out hereThe Department for Work and Pensions now has more than 150 staff working on a huge trawl of its records to manually correct errors, and recently began proactively contacting the women affected. You can read its statement on this below.

    We previously covered the stories of two widows, who received £115,000 and £117,000 after they were underpaid for two decades.

    In one of the cases, a 96-year-old woman's son was fobbed off three times by DWP staff when he tried to alert them to her suspiciously low payments. 

    He made a fourth call thinking 'I will give it one more try', before he finally 'got through to a helpful person'.

    Both widows tragically suffer from dementia and were unaware of their huge payouts, which we reported in May and July last year. 

    The DWP has blamed junior civil servants not manually updating records properly over several decades for its shortchanging of elderly women by billion of pounds. 

    Steve Webb, who is now a partner at pension consultant LCP, says it is very worrying that the time taken to process cases is so erratic, while Labour's Shadow Pensions Minister warns the failure to pay out pensions people have worked hard for can have devastating consequences.

    Former Pensions Minister Ros Altmann says it seems the 'mind-numbing complexity' of state pension rules is still standing in the way of women receiving the right amount, and it is not clear how the DWP is currently addressing the problems.

    She explains what the DWP should do to tackle the issue below. 

    Why did a new widow lose out AFTER we highlighted massive errors? 

    Why are some women being underpaid state pension? 

    Married women who retired on small state pensions before April 2016 should get an uplift to 60 per cent of their husband's basic state pension payments once he reaches retirement age too.

    Since 2008, the increases are supposed to be automatic, but before that women had to apply to get the full sum they were due.

    Some widows are also affected by the blunder, which the Government has blamed on junior civil servants not manually updating records properly over several decades.

    Meanwhile, MPs have demanded the Government reveals how it plans to make contact with heirs of those who have died without knowing they were underpaid state pension.

    This is Money has been inundated by emails from the adult children of deceased parents they believe were shortchanged.

    Find out how to check if you are underpaid and what to do about it here, including the information the DWP might require to look into the records of deceased people. 

    Christina Hood's experience reveals the error involving widow's pensions, which caused her to miss out on a significant sum after she was bereaved, had not been fixed last summer despite our high profile revelations.

    The mistake was not subsequently picked up on by DWP staff, who also didn't respond after her son tried to raise the alarm in December.

    His call was made just weeks before the DWP launched a large scale correction exercise for women's pensions in January, and after it had already ramped up the number of staff amending pensions to more than 100. 

    Mrs Hood, a mother of four and a retired factory worker from Derbyshire, whose late husband was a former coalminer and butcher, racked up a loss of several thousand pounds within just seven months.

    The backpayment could have reached a staggering £130,000 - not including future annual increases - had the DWP's mistake remained undiscovered for 20 years like the previous two widows' cases we covered. At this point, Mrs Hood would have been 100.

    Her son Peter, aged 55, an aerospace process worker, who also lives in Derbyshire, says his mother has 'scrimped and saved' during her life.

    She therefore had some money to fall back on after her husband's state pension stopped and hers remained low last summer, explains Mr Hood. But the backpayment is still 'a great boon'.

    'Because of her age and losing my dad, the family has rallied round,' he says. 'She has savings, and she hasn't had to use too much of them.'

    He says of his experience dealing with the DWP: 'It's frustrating. I did it all correctly, was even told by the DWP it was resolved a few months ago. That was very strange.

    Labour's Shadow Pensions Minister Matt Rodda:  It should not take campaigners raising individual cases to resolve pension underpayments

    Labour's Shadow Pensions Minister Matt Rodda:  It should not take campaigners raising individual cases to resolve pension underpayments

    'If my mum didn't have a family and was isolated there is no way she could have got this money. She needed my help, and a journalist, and Steve Webb.

    'People are getting ignored. We needed your help to kick this door down. It's appalling on the DWP's behalf. So many people have missed out. Three billion pounds, it's a massive amount of money.'

    Meanwhile, Mrs Hood has not been paid interest on her arrears because the error in her pension was corrected in under a year.

    But the DWP has now axed all interest payments to women who have contacted it since 11 January, when it officially launched its correction exercise to amend state pension records, although neither development was publicly announced until the day of the Budget on 3 March. 

    A DWP spokesperson says: 'When Mrs Hood was widowed, this was not actioned within the expected timescales.

    'Her state pension has increased from £86.55 per week to £209.49 and arrears of £3,811.14 have been issued covering the period 10/08/2020 to 14/03/2021.'

    Obscure loophole boosts married woman's payout from £1k to £6k

    In a separate case, a retired teacher whose husband deferred his state pension has ended up with much bigger arrears following a long battle with the DWP.

    Amanda Jones (not her real name) was initially told she would only receive a one-year backpayment, but due to an obscure loophole it was increased from around £980 to almost £6,000.

    This was because her husband had put off taking his state pension from late 2005 until 2011, which was after a key cut-off date in March 2008 and a further rule change in April 2010.

    Mrs Jones, who was receiving £67 a week in basic state pension, rang and wrote to the DWP last August to ask for a review.

    The 78-year-old, who lives in the south of England, says she was fobbed off in several calls to DWP staff last autumn, on one occasion being told her case was 'on a manager's desk'.

    She told us: 'I appreciate that all departments are having problems due to the coronavirus but it does seem as though the DWP is being extremely slow in dealing with its paperwork.'

    Following an intervention by Steve Webb, who asked the DWP to investigate whether a husband's deferment of his state pension made a difference, Mrs Jones received a much bigger payout in March.

    She also received £157 in interest on her lump sum because she contacted the DWP last summer, well before the DWP axed such payments on January 11.

    Mrs Jones received a personal call from a DWP staff member apologising for the delay in resolving her case.

    A DWP spokesperson says: 'When Mrs [Jones's] husband claimed his state pension in 2011, we should have reviewed her state pension claim, to take into account her husband’s National Insurance contributions.

    'Her state pension for the current 2020/21 period has increased from £82.84 per week to £96.15 and total arrears of £5,997.80 were issued covering the period 11/04/2011 to 07/02/2021.'

    Why do some women only get a one-year backpayment?

    Lady Altmann:  Many women may desperately need the extra money, having lived for years on far less than they were entitled to

    Lady Altmann:  Many women may desperately need the extra money, having lived for years on far less than they were entitled to

    Since early 2008, increases in women's state pension to 60 per cent of their husband's basic rate are supposed to be automatic, and these women should eventually be contacted and given full arrears by the DWP under the plans it recently announced.

    However, before that cut-off retirement date for husbands, women had to apply to get the full sum they were due. The key date of birth for husbands is 17 March 1943.

    These women, if they discover they have been underpaid, still have to come forward and apply now.

    They also only receive a one-year backpayment and an increased state pension going forward.

    Besides state pension deferment as in Mrs Jones's case, there are three other 'loopholes' that we know of where women with pre-March 2008 cases might receive a bigger payout.

    1. Graduated state pension: Around 5,159 women in the UK receive ‘graduated retirement benefit’, earned between 1961 and 1975, and translating to an average £1.24 a week in state pension today.

    This could lead to huge payouts now, and it is very important that women on these very small pensions make contact with the DWP as soon as possible because many will not be contacted proactively, says Steve Webb. Read more here. 

    2. Date of birth: Getting more than a one-year backpayment depends on whether you reach state pension age before or after your husband, as well as his date of birth.

    If your husband reached state pension age before 17 March 2008, and you did so after him - even if your state pension age also fell before that key date - you still get full arrears

    This is because the DWP should have taken account of your husband's state pension status, and automatically increased your state pension in line with it when you started receiving your payments too.

    3. Complaint: Many women raised the issue of their low state pension with the DWP over the years. If it has a record of this, or you can prove it somehow, your payout could be backdated to this point.

    Meanwhile, many elderly women who have only received a one-year backpayment are fighting the Government for full arrears. If you want to join them, the complaints process is explained here. 

    What do pension experts say?

    'Whilst it is true that DWP have been inundated by cases to deal with, it is very worrying that the time taken to process cases is so erratic,' says Steve Webb, who has personally helped many women get pension increases since uncovering the scandal.

    'Some people get their money within a few weeks whilst others wait months and their cases seem to be simply stuck in the system.

    'This is especially worrying if we are talking about a widow who is having to get by on a much reduced income and has to wait months for her pension to be reassessed.

    'It is also unhelpful that people are sometimes given promises about how long they will have to wait which are totally unrealistic.

    'Most people would understand if they had to wait a little while provided they knew what to expect, but the apparent arbitrariness of the processing of claims is a real worry.'

    Webb has previously said the decision to stop paying interest on arrears owed to women 'leaves a nasty in the mouth'. 

    The interest rate paid was never very much, but it was at least a recognition that people have had to manage without the right money for years 
    Steve Webb, TiM pension columnist 

    'The interest rate paid was never very much, but it was at least a recognition that people have had to manage without the right money for years.

    'It seems mean-minded and arbitrary not to pay interest as part of this process and the government should think again on that point.'

    Matt Rodda, Labour’s Shadow Pensions Minister, says: 'It is very worrying that there continue to be numerous cases found where pensioners are being underpaid their state pensions.

    'Severe delays and failure to pay out the pensions that people have worked hard for will have devastating consequences.

    'It should not take campaigners raising individual cases to resolve pension underpayments.

    'The Government must act urgently to make sure pensioners are paid what’s owed as soon as possible, apologise to all those who have been affected and look at the system to make sure such an error can never happen again.'

    Ros Altmann, who succeeded Webb as Pensions Minister, says: 'It seems that the mind-numbing complexity of the UK state pension rules is continuing to stand in the way of women receiving the correct amount of state pension, as officials have not yet managed to ensure their systems are working correctly.

    'It is not clear how the department is currently addressing the problems of historic underpayments to women.

    'Currently, they are saying people will be contacted, but many of these women may well desperately need the extra money, having lived for years on far less than they were entitled to, so could a special hotline be set up for women to call in to?

    'And a secure email address for those who can use it, where they can ask someone to look into their records?'

    Have you received a backpayment from the DWP? 

    We have reported on many cases of women who are normally on too low an income to pay tax, but whose huge backpayments will push them into a higher income tax bracket in the tax year they receive it. 

    After the Labour Party asked the Treasury about this, it clarified that women will only be taxed as they would have been if paid state pension correctly at the right time, and only then in the current tax year and for the previous four years. 

    If you receive a large sum and are uncertain how to report it to HMRC, it is worth considering asking a tax accountant to help sort out your return for that year to ensure it is dealt with correctly.

    Steve Webb explains more about tax, and how backpayments might affect your benefits and means tests for care fees here.

    'The complexity of the state Pension and age of older computer systems makes this all a daunting task and of course the DWP has been coping with so much over the pandemic, with millions of universal credit claims suddenly being required to be processed.

    'It is so unfortunate that these major problems have come to light at the very same time, but that does not mean they can be left longer. Restoring pensions is urgent for elderly people who will not be helped if they have to wait too long for redress.'

    >>>How should the DWP fix the problem? Read Ros Altmann's blueprint below

    What does the DWP say?

    A DWP spokesperson says: '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.'

    Married women who are legally required to make a claim for an uplift in state pension because their husband started receiving his state pension before 17 March 2008 will not be covered in the 'correction exercise' and still need to make a claim.

    Those whose husbands became entitled to their state pension on or after this date will be identified in the process, and this will include those who are receiving graduated retirement benefit only.

    It is understood that in processing cases, the DWP is prioritising errors that are the longest standing and recipients who are older to reduce the time these women have to wait.

    Meanwhile, those who contact the DWP themselves to query their state pensions will continue to have them reviewed.

    The DWP has confirmed that deceased women who were underpaid will have arrears paid to their estate, so it will go to their beneficiaries.

    Read the DWP's full statement on underpaid state pension here.  

    What should the DWP do to correct women's pensions? 

    There are a number of issues that need to be explained to restore confidence in the state Pension payments going to millions of people every month, writes Ros Altmann.

    This is an enormous exercise which will take several workstreams and a large number of officials to carry out.

    - It is vital to identify why systems that were supposed to automatically increase women’s state pension after 2008 have failed to work as promised for thousands of people

    - Identify all those over age 80 who are receiving less than the Cateogry D pension of £80.45 a week as they should receive at least that amount - see what has gone wrong and increase payments

    - Ensure the system changes are made so that the women entitled to increased amounts in future are not left out

    - Publish an urgent report on the groups of women impacted to demonstrate that there is an understanding of who has not been paid correctly

    - Ensure all the women receive the backpayments they are due and any interest owed

    - Examine what has happened to those women before 2008 who were supposed to claim their increased state pension when their husband reached his state pension age, but did not do so – were they adequately informed and given a fair chance to know they needed to claim?

    If not, then consider reimbursing them for the lost payments over all the years, not just for 12 months.

    - Conduct an over-arching review of women’s pension provision in the UK with a view to recommending ways of reducing the gender pensions gap.or that caused widows to lose £100k-plus happens again

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