TENS of thousands of divorcees may have unfairly missed out on thousands of pounds in state pension, an MP has warned.
The Work and Pensions Committee published a letter to the DWP today raising concerns over the significant number of divorced women receiving low state pension amounts.
The DWP is currently undergoing a mass correction exercise relating to a series of state pension errors that have resulted in retirees being underpaid, with latest estimates putting the cost of the exercise at around £3billion.
Several separate underpayment errors have come to light including for married women, widows and some elderly retirees.
The latest concern, raised by Labour MP Stephen Timms, chair of the Work and Pensions Committee, is that thousands of divorcees may not have had their state pensions reassessed after ending their marriages, which is affecting their entitlement.
Under the old state pension system, divorcees – historically mostly women – could receive benefits from their ex spouse’s contributions in two ways:
- If they did not re-marry before reaching retirement age, they could take account of their ex-spouse’s contributions up to the date of their divorce (where their National Insurance (NI) record was better)
- If they divorced after retirement and notified the DWP, the DWP was supposed to reassess their state pension, taking account of their ex-spouse’s contributions right up to their retirement
In the second case, the reassessment could entitle the divorcee to a full basic state pension now worth £169.50 a week.
Yet according to evidence provided by consultancy LCP to the Public Accounts Committee, a significant number of divorced women – and some divorced men – are receiving far lower state pensions than this.
The evidence showed some 40,000 women are receiving less than 60% of the full amount.
The DWP previously said in response to this that there was “no evidence of systemic error due to missing action taking on notifications of divorce”.
But Mr Timms is asking it to review the decision not to check whether some divorcees may be missing out due to an error, particularly in light of other errors by the department.
While it is not believed that this latest potential error is as widespread as other blunders, the losses for any individuals affected could be significant, according to former pensions minister Steve Webb.
Mr Webb, now partner at consultants LCP, said: “Given the massive scale of errors on state pensions for married women, widows and the over 80s, it is stretching belief to think that divorced people’s pensions have all been worked out perfectly.
“A particular issue is cases where the DWP was notified of a divorce post-retirement and whether this always resulted in a state pension reassessment.
“For any given individual the difference could be very substantial, especially where a woman had a poor NI record but her ex-husband had a full record.
“The DWP should do a thorough search for potential errors of this sort”.
Who may be affected?
The latest error is likely to mostly affect divorced women who reached state pension age before 2016, although Mr Timms raised concerns that some men may also be affected.
Most men tend to get a full basic pension, but there may have been some cases where a man needed to use his ex-wife’s contributions and this was not done correctly.
Those affected could be entitled to a full basic state pension of £169.50 a week as of this tax year.
So, someone receiving less than 60% of this sum would be missing out on around £67.80 a week or £3,525.60 a year.
When can I expect my cash back if I was underpaid?
The DWP has until May 1 to respond to the concerns raised by Mr Timms.
If the DWP does determine there are widespread errors, it will begin contacting those it believes are affected.
We will report the DWP’s response when it is released.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.
Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories