State Pension: millions owed to mothers in new pension scandal

DWP admits mothers in their 60s and 70s may be receiving smaller State Pensions than they are entitled to.

As much as £100 million is owed to mothers who have been underpaid on their State Pension.

The Department for Work & Pensions (DWP) has admitted that a host of people, generally mothers, have not received the National Insurance credits they should have.

These credits are available to people for a range of reasons, including taking time out of the workforce in order to raise children.

The credits should be paid automatically when receiving Child Benefit, but the DWP has discovered that a host of people have slipped through the net.

And missing out on those credits can have a big impact on the size of the pension these people are entitled to.

Why mothers may be underpaid their pension

The DWP has published new details around this particular pension underpayment issue.

According to the department, people who claimed Child Benefit before May 2000 and did not provide their National Insurance number at the time may now have an inaccurate National Insurance record. 

The reason that date is significant is that, from May 2000, it became mandatory to provide a National Insurance number when making a Child Benefit claim.

According to the DWP, it’s women in their 60s and 70s who are most likely to be affected.

Why credits count 

The State Pension system is built around our National Insurance records.

The amount you get in State Pension is determined by how many years of qualifying National Insurance contributions you have. 

Under the new State Pension you need 35 years of qualifying payments in order to get the maximum, but under the old State Pension ‒ which would tend to apply to those impacted by this latest issue ‒ you would need at least 30 years of contributions.

That’s why getting these credits ‒ or ‘Home Responsibilities Protection’ as they were known before 2010 ‒ is so important.

Each year of HRP could make a substantial difference to your income, and therefore level of comfort, in retirement.

What is happening now?

The DWP says that it doesn’t have records for people receiving HRP since Child Benefit records are deleted five years after the claim ends.

As a result, the department is going through National Insurance records to pinpoint people who are might have been entitled to the payments, but have no HRP on their record.

It is then going to write to these people to establish if they are eligible to claim the missing payments, which they will be able to do online.

It will then recalculate the State Pension entitlement for those over pension age.

This process will start in the autumn and happen in stages ‒ the DWP has said that there is no need to actively contact the department or the taxman in the meantime.

Clearly, if you receive a letter about potentially having been underpaid, it’s crucial that you respond swiftly.

Another State Pension scandal

It’s worth reflecting on the fact that this particular State Pension underpayment issue is separate from the previous issue we have reported on at loveMONEY around wives.

Thousands of married women, divorced women and widows have been found to be receiving smaller State Pensions than they should.

They should have had their pensions topped up, as they were entitled to have their pension based on the National Insurance record of their partner, rather than their own.

However, it has emerged that significant numbers of women have not received that top up, dating back decades. As a result, huge sums have been underpaid, running into the hundreds of millions of pounds.

While these sums are now being repaid, there is still an awful lot of work to be done to put things right where possible. After all, there will be plenty of cases where the person has died.

Getting the maximum State Pension

The State Pension is a crucial element of pension planning for most of us.

While the State Pension alone is not going to be sufficient for a retirement filled with luxury, it’s nonetheless a not-inconsiderable sum.

As a result, it makes sense to want to ensure you receive the maximum amount possible.

If there are missing years in your record therefore, you may want to consider making voluntary contributions.

The Government has extended the scheme currently in place which allows savers to make contributions to fill in greater numbers of missing years.

Check out our guide to topping up your State Pension.