Steve Webb’s inside story of the £1.5bn state pension scandal

Steve Webb has answered his 300th question from This is Money readers this week and we are celebrating with a series on his landmark successes. 

Here, he gives an inside account of how he and This is Money uncovered a £1.5billion state pension scandal, which has seen many elderly women receive large sums to correct a government blunder over their payments…

Back in January 2020 I looked through my weekly list of questions for my This is Money column and one in particular caught my eye.

It was from a gentleman in his late seventies who was querying why his wife had received such a low state pension for so long.

His wife was getting just 39 per cent of the full basic pension, at that point only around £50 per week.

She had just found out that she could have been getting a 60 per cent pension of £77.45 per week, and could have been getting this amount for over a decade, but the DWP would only backdate the increase for one year.

We ran the column, explaining that wives could indeed get a 60 per cent pension based on their husband’s contributions but that if the husband reached pension age before a certain cut-off date (17 March 2008), the wife had to make a *second* state pension claim to get the uplift.

After that date, the uplift would be applied automatically.

As soon as we published, our inbox was inundated with stories.

They came in two groups:

– Other women still on pensions under the 60 per cent rate who knew nothing about the need for a second claim and were now going to put one in; this group is still waiting for justice, and we have a live complaint of ‘maladministration’ going through the system on their behalf;

– Women who should have come under the ‘automatic uplift’ rules but where this had apparently never happened.

Steve Webb: Find out how to ask the former Pensions Minister a question about your retirement savings in the box below

When we heard of cases where the supposedly automatic uplift had failed we raised them with the DWP and they dutifully fixed the problem, paying out arrears running into thousands of pounds in many cases.

But they continued to imply in their responses that these were just isolated cases and could be fixed one at a time.

We were not convinced and so my colleague, the tireless Tanya Jefferies, started collating more and more cases and submitting them to the DWP so that they would see there was something more systematic going wrong.

For my part I tabled a Freedom of Information request to the Department asking for figures on how many women were getting pensions under the 60 per cent rate.

Off the back of this I produced a report in May 2020. In it I cautiously argued that tens of thousands of married women may be missing out and raised the possibility that widows, divorced women and over 80s could also have issues.

We also created a ‘calculator’ on the LCP website to allow married women to check for themselves if they were being underpaid and that site has now had over 800,000 hits.

DWP continued to suggest publicly that these were just isolated cases, and in their annual report published in summer 2020 they made no provision for putting the problem right.

But behind the scenes the penny was starting to drop and in January 2021 they set up a special unit to start checking for errors.

The key errors seem to have been:

– A husband turned 65 post 2008 but the wife’s pension was not reassessed;

– A husband died, but the widow’s pension was not reassessed;

– Someone on a low pension turned 80 and their low pension was not automatically upgraded to the 60 per cent rate.

Those checks are likely to continue until late 2024 and will involve over a thousand civil servants checking nearly three quarters of a million state pension records to look for mistakes.

These errors were the subject of a highly critical report by MPs on the public accounts committee in 2022 who described it as a ‘shameful shambles’.

In July of this year DWP published its latest estimate of the scale of the problem.

Incredibly, they now accept that they owe pensioners nearly £1.5billion in backpayments, and expect to make payments to more than 200,000 pensioners or their beneficiaries.

Over the last couple of years, Tanya Jefferies and I have been in email and phone contact with literally hundreds of pensioners and we have heard some heartbreaking stories about the impact that these underpayments have had on people’s quality of life.

This includes tragic cases of women who died having never received the correct pension.

I am personally grateful to This is Money for their dogged persistence in pursuing this issue and the time taken to support many vulnerable individuals, often going the extra mile to help people get what is rightfully theirs.

I am also grateful to the readers of This is Money who send in their questions and stories every week, without which these errors might never have been uncovered. Please keep the questions coming!