Low-income individuals paying into private pensions have seen their Universal Credit payments wrongly reduced, with some losing thousands of pounds due to errors by Department for Work and Pensions (DWP) staff. An investigation by The Mail on Sunday and This is Money found instances where government workers failed to deduct pension contributions from claimants' income when calculating benefit entitlements, a process designed to potentially increase their overall financial support.
Under a specific rule for Universal Credit, pension contributions are meant to be deducted from a claimant's income, which can make them eligible for higher benefit payments. This mechanism is intended to encourage low-income earners to save for retirement. However, some frontline DWP staff have incorrectly refused to acknowledge these private pension contributions, resulting in significant financial shortfalls for claimants.
One case involved a 55-year-old nursery worker in London who had been underpaid approximately £4,500 over five years. She continued making personal pension contributions after starting Universal Credit in late 2021. When she inquired about her contributions being considered, staff initially stated they were not relevant and failed to follow up after she persisted. After seeking assistance, she eventually received the arrears.
Another instance highlighted an autistic 27-year-old train station assistant whose mother attempted to declare his private pension contributions. Despite earning around £1,800 a month, he still qualified for Universal Credit. His mother reported that DWP staff initially denied that his contributions could be deducted from his Universal Credit calculation. The error was only acknowledged and corrected after the case was taken up by former Pensions Minister Steve Webb, resulting in a back payment of £2,600.
A 65-year-old hotel housekeeper in Birmingham, who has dyslexia and health issues, also faced repeated rejections when requesting her pension contributions be factored into her Universal Credit. Her work coach reportedly blocked her from uploading proof of contributions to her online journal. Following intervention, her entitlement was recalculated, and she received £670 in arrears.
In response to these findings, the DWP issued apologies and corrected payments. A spokesperson stated that while these cases represent a small fraction of total claims, the impact of the errors is recognized. The department confirmed it is reviewing the information and has reissued guidance to staff. They advised anyone who believes their Universal Credit award may not accurately reflect their personal pension contributions to raise a query through their journal.
Steve Webb, who participated in the investigation, expressed frustration, noting that despite previous assurances of improved training, DWP staff continue to provide incorrect information. He suggested that the issue requires a more thorough investigation rather than being dismissed as isolated incidents. Sarah Coles, head of personal finance at AJ Bell, pointed out the financial benefit of pension contributions, stating that for every £100 paid into a pension, a claimant could receive an additional £55 in Universal Credit, in addition to any tax relief.