Victory for couple who fought council swoop on state pension lump sum

Stand-off with council: Elderly couple battled for 18 months against raid on state pension arrears

An elderly couple have thwarted a council raid on a £13,800 lump sum intended to redress a 12-year state pension blunder.

They battled for nearly 18 months with Wokingham Borough Council, which attempted to revoke a £1,200 council tax reduction when the couple reported the belated payout from the Department for Work and Pensions.

Tens of thousands of women were unwittingly underpaid state pension in a £1billion scandal uncovered by This is Money and our columnist Steve Webb in early 2020.

Ann and George Brown (not their real names) qualified for a council tax cut between 2016 and 2021, and believe that Wokingham was ‘opportunistic’ after learning of her ‘windfall’, and then refused to budge.

‘They have taken an arbitrary decision on it,’ Mr Brown told us. ‘Had the pension been paid correctly on a monthly basis it would almost certainly have been expended over the time.

‘I have a concern for others who may be facing the same problem and perhaps this is a secondary scandal that requires investigating.’

Wokingham Borough Council and the Browns were due to thrash out their dispute at a Valuation Tribunal next month, but the local authority backed down after This is Money got in touch, saying it would use discretion to waive the council tax payment – read its full statement below. 

Webb has previously replied in his This is Money column to a woman whose mother lost her housing and council tax benefit after receiving arrears from the DWP. 

She questioned how many women like her mother would be victimised twice over money they were entitled to and not paid over many years, only for their payments to be taken back by local councils.

Why are some women being underpaid state pension? 

An estimated 134,000 women have been underpaid state pension in a £1billion scandal uncovered by Steve Webb and This is Money more than a year ago.

The huge bill results from a failure to increase some women’s payments when their husbands reached state pension age or died, or when they themselves reached the age of 80.

We have reported many stories of women receiving payouts of tens of thousands of pounds – and in a couple of cases more than £100,000 – after being deprived of the correct state pension due to DWP errors. 

Have you been underpaid? Find out what to do here.  

MPs on the public accounts committee raised the alarm too in a recent probe, accusing the DWP of showing ‘little interest’ in helping women suddenly receiving large backpayments with the knock-on effects.

They urged the DWP to establish the full impact on pensioners, and seek assurances from local authorities they will not treat women ‘prejudicially’ because they didn’t receive their money at the right time. 

As things stand, the fallout from the DWP’s state pension debacle may mean poorer women, many of whom lost out on tens of thousands of pounds over decades, now face a struggle with councils over housing benefit, council tax and care bills due to suddenly receiving large backpayments.

They will potentially have to deal with HMRC too over tax, depending on how much they receive in arrears and their other income.

Better off women, who were equally deserving but less in need of the extra state pension, will escape the wrangles over benefits but may face higher tax bills for some of the years they were underpaid. 

>>>Have you been underpaid state pension? Find out what to do here

>>>Find out how HMRC is taxing arrears and a guide to sorting it out here

>>>What about care bills? An expert explains the possible consequences here 

A specialist lawyer we consulted about the Browns’ case, Spencer Gardner, a senior associate at law firm Coffin Mew, said Wokingham Borough Council had the power to treat a state pension arrears payment as both income and capital, which has a ‘double whammy’ effect on women like Mrs Brown.

But he said Wokingham was legally required to exercise discretion, and to act ‘reasonably’.

‘One would hope the fact that this group of women have had to wait so long for reimbursement in the first place, and have already been treated shabbily by the state before even arriving at this point, would be carefully factored in by councils.’

What does Wokingham Borough Council say? 

A spokesman told This is Money it was going to use its discretion to waive the council tax payment and credit the Browns back.

‘This service has to operate within guidance and legislation and it was within its legal rights to make this charge,’ he said.

‘However we always aim to be fair in our treatment of council taxpayers and, now that we know the full situation, we will review the case and provide any credit necessary.

‘We are very sorry to have caused the resident concerned upset and will be contacting them to apologise in person.’

‘If any other of our residents are caught in this situation, we would urge them to appeal directly to us, setting out the details, so we can consider using our discretion to waive charges.’

Mr Brown, 78, and Mrs Brown, 74, responded: ‘We are pleased that WBC has agreed to repay the imposed increase in council tax charged to us following the DWP having corrected pension underpayments over a period of 12 years.

‘This has taken nearly 18 months to bring about a resolution and very likely would not have been successful without the help from Tanya Jefferies and Sir Steve Webb.’

They accused WBC of being disingenuous in saying ‘now that we know the full situation’, claiming the council has been aware of the facts from the very beginning.

The Browns have now moved from Berkshire to elsewhere in the south of England, and are no longer in a financial position where they need to claim a council tax reduction. 

However, he suspected that ‘cash-strapped councils will almost certainly maintain budgetary restraints must win the day’ and called on the Government to look into Mrs Brown and other women’s experiences to review this loophole.

‘That would save them having to fight once again, this time with local councils, to obtain what would seem to most people to be an equitable outcome following state failings which were no fault of their own.’

In the House of Lords this week, former Pensions Minister and campaigner Ros Altmann raised the issue of the poorest women being at risk of losing benefits or social care funding after receiving state pension arrears.

She asked the Government to consider introducing regulations, like those brought in after the Manchester bombing, requiring local authorities to disregard these specific state pension backpayments – though not future higher pensions – from financial assessments for social care funding or means testing. 

The Government spokesperson, Baroness Stedman-Scott, replied that she would take this point back to the DWP.

Lady Altmann told This is Money: ‘This is really such a shameful situation – and I believe the Government needs to prevent the arrears causing further anxiety and distress to the victims who have been living on far too little for far too long.’

She welcomed news the Browns’ case had been resolved, but added: ‘I do believe that there should be a clear direction to all local authorities or departments, enshrined in regulations if necessary, that these specific state pension arrears lump sums are disregarded in financial assessments for care funding or other means tested benefits.

‘These women receiving backdated payments were entitled to the money, the DWP was obliged to pay them, yet it failed to do so. That means they could not spend the money at the time it was actually due to them.’

She went on: ‘The women who will be potentially penalised here are typically the poorest pensioners. If they need social care and have no other savings, or if they need means-tested benefits because of their lack of other income, then their benefits should not be penalised by receiving the backpayments.

‘That would be doubly unfair. 

‘First, they would not have had a chance to spend the money when they may have really needed it some years ago. Second, they will have some of the money that is rightfully theirs taken back from them because they never had the chance to spend it!’

‘I would hope that there will be a challenge mounted by these women against money being clawed back from them so unfairly – and most particularly so as the Government seems not to be paying compensation or interest on the backpayments, even though the errors were not made by the women themselves, they were either official errors, or lack of information provided to help the women know what their entitlement truly was.’

The DWP were 100% responsible for the original blunders and they should accept 100% responsibility for the financial consequences

Peter Grant, Scottish National Party MP for Glenrothes

Former Pensions Minister Steve Webb, now a partner at consultant LCP, said: ‘I am delighted that Mr and Mrs Brown are no longer going to lose out as a result of receiving a backdated payment of state pension.

‘It would have added insult to injury to have been underpaid state pension for years and then for a correction to that error to have deprived them of another benefit.

‘What is really needed is a definitive ruling from central government that all of these payments should be ignored by councils when assessing help with council tax, rent or care costs.’

Peter Grant MP of the Scottish National Party, who sits on the public accounts committee, recently wrote about its investigation into the state pension ‘fiasco’ for This is Money. 

He said now of the Browns’ situation: ‘This case reflects one of several scenarios the PAC has expressed concern about, where in attempting to correct their initial failings the DWP might just create more problems for local authorities and other service providers, as well as the pensioners affected.

‘The retrospective recalculation of council tax or housing benefits, and the reassessment of care charges, were all such concerns.

Have YOU received a state pension backpayment? 

If your DWP lump sum is causing you trouble with benefits, council tax, care costs or tax, get in touch with us at: we will try to help. 

Please put DWP CLAIMS in the subject line.

‘In each of these scenarios the solution is clear. The DWP were 100 per cent responsible for the original blunders and they should accept 100 per cent responsibility for the financial consequences.

‘They shouldn’t be trying to palm off the responsibility onto struggling pensioners or hard pressed councils, neither of whom bear any responsibility for the DWP’s failings.’

A Government spokesperson said: ‘Resolving the historical state pension underpayments that have been made by successive governments is a priority for the Department and we are committed to doing so as quickly as possible.

‘We are carefully considering the content of the public accounts committee’s report and will respond formally in due course.’

The DWP added that council tax and council tax support are administered by councils, which have discretionary powers to provide additional discounts to payers.