A total of 134,000 people were underpaid by DWP, with complex rules and a widespread need for manual reviews pegged by auditors as a main cause

Credit: PA

Ageing IT and a lack of automated process were a key factor in the Department for Work and Pensions underpaying 134,000 people a cumulative total of more than £1bn in state pension entitlement, according to a report by the National Audit Office.

In a review of the problems, which first came to light in April 2020, auditors said human errors were “almost inevitable given the complex rules and high degree of manual review necessary when assessing claims” for the state pension.

The report, published today, said the errors have affected 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.

Problems were first highlighted by individuals and experts before the department started exploring the issue last year. It was confirmed that there was a “significant” problem in August 2020, and DWP has been reviewing cases all this year to find who has been underpaid. It is estimated that the average underpayment is around £8,900 per pensioner affected, with the NAO finding those that most of those who lost out are likely to be women.

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The NAO concluded that the errors occurred because state pension rules are complex and IT systems are outdated and unautomated, requiring a high degree of manual review and understanding by case workers.

Although the auditor’s review said such a system means that some level of error is almost inevitable, it also said DWP had missed earlier opportunities to identify underpayments. This was due to the department’s lack of a systemic means to review complaints or errors to assess whether the errors have a systemic cause. Additionally, quality assurance processes focused on checking changes to case details, such as a change of address or the death of a spouse, rather than the overall accuracy of the payments.

Gareth Davies, the head of the NAO, said the impact of the underpayments on those affected was “significant”.

He added: “It is vital that the Department for Work and Pensions corrects past underpayments and implements changes to prevent similar problems in future.”

DWP’s review of cases that might be at risk of underpayment is expected to last until 2023, and incur an estimated £24.3m in staff costs.

There are a number of challenges in the programme, including the difficulty of correcting underpayments of pensioners who have died. According to the NAO, DWP does not know how many pensioners who have died have been underpaid as, for data protection reasons, it does not usually keep records for more than four years after a pensioner’s death, or if married, their spouse’s death. As of last month, the department had not approved a formal plan to trace the estates of deceased pensioners.

A DWP spokesperson said: “We are fully committed to ensuring the historical errors that have been made by successive governments are corrected, and as this report acknowledges, we are dedicating significant resource to doing so. Anyone impacted will be contacted by us to ensure they receive all that they are owed. Since we became aware of this issue, we have introduced new quality control processes and improved training to help ensure this does not happen again.”