Millions of people ‘receive wrong pension amount for decades due to IT failures’

Millions of people have received the wrong pensions for decades because of government IT failures, it has been reported.

Reports earlier this year in January stated that over 134,000 pensions were affected by the errors, which is understood to have been known about since the 1990s, but that figure is actually in the millions, the BBC has reported.

A former pensions minister described the scale of the issue as “truly mind-blowing” and insisted that the Department for Work and Pensions (DWP) needs to track down those impacted “as a matter of urgency.”

The DWP says it is “investigating possible remedies”.

Official analysis published last month suggests 23 per cent of pensioners were underpaid, while 17 per cent were overpaid. The problem mainly affects widows, divorcees and women who rely on their husband’s pension contributions for some of their pension entitlement and is expected the cost the government £1.05 billion.

The problem arose from an ageing computer system introduced in the 1980s that MPs have described as “not fit for purpose.” The system, known as the Pension Strategy Computer, was unable to accurately uprate an element of the state pension called the Graduate Retirement Benefit. In 2002, it was decided by DWP officials that it would be too complicated to fix the problem, and a solution was not reached.

It was due to be shut down in 2020, but has been kept going on a temporary basis.

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In 2021, the National Audit Office found that problems with the system had separately led to 134,000 people who had claimed their state pension before April 2016 not receiving their full entitlement. The average underpayment was estimated at about £8,900.

Dame Meg Hillier, the chair of the public accounts committee, said: “Many pensioners – most of whom are likely to be women – have been short-changed by thousands of pounds, which they are still yet to receive many years later.”

The errors affect pensioners who first claimed state pension before April 2016, do not have a full National Insurance record, and should have received certain increases in their basic state pension.

Sir Steve Webb, who served as pensions minister between 2010 and 2015 and helped uncover the errors, said the lack of transparency around the issue is “huge.” He added that he’d never been alerted to the problem while in government.

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“The scale of these errors is truly mind-blowing,” he said, adding “Although the absolute size of the errors is typically small, the number of people potentially affected is huge. More worrying is the total lack of transparency.

“It beggars belief to hear that a government department could simply decide that it was acceptable to pay the wrong rate of pension for decades, but feel under no duty to tell Parliament or the public.

“If the DWP has sat on this secret for decades, it makes you wonder how many other things simply get brushed under the carpet.”

A DWP spokesperson said: “Our priority is ensuring every pensioner receives the financial support to which they are entitled and most Graduated Retirement Benefit awards are correct.

“Where they are not, the vast majority of over and underpayments are of 1p or 2p per week and we are looking at solutions to this issue which has occurred under successive governments.”