About 200,000 women could be in line for pension back-payments averaging £13,500 after an investigation into the underpayment of state pensions over the last 20 years.
As Guardian Money reported last month, some of the affected women received pensions of as little as 86p a week, when they were in fact entitled to 60% of the basic state pension – about £80 a week.
Many Generation Xers in UK face financial hardship in retirementRead more
After a campaign by the former pensions minister Steve Webb, the Department for Work and Pensions (DWP) has agreed to fully investigate the problem and backdate the payments the women should have received.
One of those affected, Angela Jenner, 78, a former PA from Suffolk, was recently told she was owed £42,700. She had been underpaid for more than 12 years.
The problem is thought to affect 200,000 women who retired before 6 April 2016 and received the old state pension.
Based on their national insurance contributions, these women were only paid a poor pension but the rules meant they were entitled to a better payout based on their husband’s contributions, and this should have happened automatically.
The average backdated payment will be £13,500 and the DWP expects the final bill will be about £2.7bn.
“The action we are taking now will correct the historical underpayments that have been made by successive governments, and anyone impacted will be contacted by us to ensure they receive all that they are owed,” a DWP spokesperson said.
Webb, whose freedom of information request revealed the extent of the problem, said: “The scale of these underpayments is truly shocking. While it is good that the government is now planning to address this issue, the plan to do so over five years is simply not fast enough.
“It is also quite shocking that DWP plans to stop paying interest on these underpayments. If the government is going to fix these problems it needs to do so swiftly and fairly,” he said.
The DWP set up a special unit employing more than 100 civil servants to investigate the problem and has said it will proactively contact those affected. It is expected to include cases where the underpaid retiree has since died.