Thousands of older women are being underpaid their pensions. Pensions commentator and former pensions minister Steve Webb explains why this has happened, who is affected, and which of these groups will not be contacted but will have to make an active demand to get what they are due - including one group of about 5,000 women who are only getting about £1 a week. Thanks to Mumsnet user Viques for suggesting we launch a campaign to help find the 5000. To get involved, click here.
When I published a research paper a year ago entitled “Are thousands of older women being short-changed on their state pension?”, little did I realise that the answer would be that nearly 200,000 women have been underpaid around £3 billion. Amazingly, the simple calculator that we created to help people understand the issue has had over half a million views since then.
The good news is that Department of Work and Pensions (DWP) has said that it will now check hundreds of thousands of records and will contact people where it finds errors. The groups it is actively looking for are:
- Married women on the ‘old’ state pension who should have been automatically upgraded to a 60% basic pension when their husband turned 65 but where this did not happen; broadly speaking, these are cases where the husband turned 65 on or after 17th March 2008, when the automatic uplift was introduced.
- Widows on the old system whose state pension should have been reassessed when their husband died but where this did not happen.
- People aged 80 or over not receiving the £82.45 per week ‘Category D’ pension rate which depends purely on a simple residence test and is not based on National Insurance contributions.
However, it would be a mistake to think women on a state pension can simply wait for a cheque to drop through their letter box. There are several groups of women who could improve their state pension but only if they take action.
The first is married women not getting a 60% basic pension (currently £82.45 per week where the husband is on a full basic pension) and whose husband turned 65 before 17th March 2008. Before that date, women only got the married woman’s rate if they put in a claim. DWP are not looking to contact these women as the Government’s position is that the onus is on the woman to claim. If you are in that position, you need to put in a claim. Although it will only be backdated 12 months, the sooner you claim, the sooner your pension will be increased. (We are however complaining to the Parliamentary Ombudsman about this whole system as many women were clearly unaware of the need for this ‘second’ state pension claim).
The second group who should get on the phone is women on the old state pension who divorced after starting to draw their state pension. Such women can potentially get a substantially increased state pension by using their ex husband’s National Insurance record. But DWP will only do this calculation once they are notified of the divorce. If you don’t tell them about your divorce, nothing changes.
The third group is a small group of women who have zero entitlement to basic state pension, and who may just be getting a pound or two a week in total. This usually comes from the old ‘Graduated Retirement Benefit’ scheme which ran in the 1960s and early 1970s. These women are in a special position because even if their husband turned 65 before March 2008 they can still make a claim which will be backdated all the way to their husband’s 65th birthday.
We think that there are probably around 5,000 women in this last group in Great Britain and the backdated amounts they can receive can be huge. I have recently helped three such women who got lump sums of between £30,000 and £60,000 as well as a big increase in their weekly state pension.
For the three groups I suggested should contact the DWP, I appreciate that contacting the Department can be very difficult. The best number to call seems to be 0800 731 0469. You should ignore the message that encourages you to ring off or go to a website. You then choose an option from the menu that best fits what you are ringing about, and you need to be prepared to hold on, but you should eventually get through.
Finally, all of the discussion so far has been about the old state pension system, for those who reached pension age before 6th April 2016. But growing numbers of people reached state pension age after this date. The new state pension is very different and the provisions for women to derive pensions from a late husband are much more limited. But there is some provision for widows (and widowers) and I am starting to hear reports that this is not always working in practice. We have created a new website to help you check which is at www.lcp.uk.com/newstatepension
Steve will be coming back on the thread on Friday 30th April at 3pm to answer questions - so get posting below if you have any.
Steve Webb is a former pensions Minister and is now a pensions commentator and partner at consultants LCP.