Government Pays Out Over $800 Million for State Pension Underpayments

The Department for Work and Pensions (DWP) has paid out more than £800 million in state pension arrears to approximately 130,000 individuals due to errors in pension assessments. This correction program, which concluded in early 2025 after a four-year period, aimed to rectify systemic issues that had led to underpayments affecting specific groups of retirees.

The DWP identified three primary categories of underpayment. The largest group involved married women with a modest National Insurance record (under 60%) who were entitled to an uplift to the 60% rate when their husband retired, starting from March 17, 2008. A significant number of widows and some widowers also experienced underpayments when their state pension was not reassessed upon the death of their spouse. Additionally, individuals over the age of 80 with a low National Insurance record should have automatically switched to the higher 'Category D' rate, but this reassessment failed to occur for many.

As of March 2025, the figures show:

• Married women: 47,004 underpayments, with an average arrears payment of £5,553, totaling £253 million.
• Widowed people: 50,261 underpayments, with an average arrears payment of £11,725, totaling £483 million.
• Over-80s: 33,683 underpayments, with an average arrears payment of £2,203, totaling £69 million.

Widows and widowers generally experienced the most substantial financial impact, with some receiving arrears exceeding £100,000.

In a separate development, an ongoing review has identified further underpayments related to 'Home Responsibilities Protection' (HRP). HRP was designed to boost the National Insurance record of individuals who were not paying National Insurance contributions due to caring responsibilities for a child under 16. A process is underway to identify and compensate affected individuals, with HMRC contacting those believed to be eligible. As of March 2025, this exercise had resulted in approximately 12,000 further arrears payments, amounting to £104 million.

While the DWP's main correction exercise is complete, individuals who suspect they or a family member may have been underpaid and have not yet received a notification or review outcome are encouraged to investigate further. Information on HRP eligibility and application can be found on the government's website, and individuals can also seek assistance from MoneyHelper, a government-backed organization providing free pension guidance.