State pension secret computer failure hits Universal Credit claimants

Up to 10 million people who claimed Universal Credit could face a shortfall in their state pensions due to a classified computer glitch uncovered by This is Money.

That includes up to 137,000 people already receiving state pensions, though the exact total is unknown and those who may be underpaid have not been informed by the Department of Work and Pensions.

The new figures were revealed by the National Audit Office, which confirms that the DWP agreed with HMRC in 2017-18 to stop automatically adding National Insurance credits to claimants’ files, but did not tell those affected.

Manual updates took place just before people reached state pension age.

But they can fall through the net and be underpaid as a result, or waste money on state pension supplements they don’t need.

“System issues” that had been causing problems in the National Insurance database for the past six years were not resolved until February of this year, according to the NAO.

That was the same month that our investigation exclusively revealed that many NI records were riddled with gaps due to missing state pension credits, and that the government had blocked Universal Credit claimants and evaded our efforts to expose the scandal.

The revelations come after the government also confirmed last week that mothers are missing out on an estimated £1 billion in state pensions due to gaps in their child benefit records.

That was after a separate discovery in 2020 that some 237,000 older women were receiving an estimated total of around £1.5 billion in state pensions.

In the case of Universal Credit beneficiaries, lost NI credits could mean they receive a reduced AOW pension upon retirement, unless their records are recorded in time.

We first reported a “mysterious” glitch involving NI credits last fall, and eventually published evidence handed to us by readers that the automated system was broken.

The government admitted the problem, admitting it would take another year to fix all the mistakes in March, after Liberal Democrat Work and Pensions MP Wendy Chamberlain demanded answers about pensions and UC in parliament.

At the time, we reported that nearly 5.9 million people had Universal Credit at the start of the year, but many more could have been affected if those who no longer file a claim were taken into account.

However, the DWP and HMRC have never officially revealed any serious issues with these people’s state pension administration, either to the general public or to MPs.

Hidden scandal of up to TEN MILLION people with missing NI credits

The full extent of the fiasco is now being exposed by the National Audit Office, which is scrutinizing government spending. DWP’s recently published annual report.

The NAO says of the system problems between 2017 and 2023: “Individuals who applied for Universal Credit in the intervening period have credits missing from their National Insurance record.

About 10 million people filed a claim with Universal Credit in the six-year period affected.

“Unless these people have National Insurance credits for some other reason, their National Insurance record will be incorrect.

“If these people use the government’s Check Your AOW tool, they see an incorrect valuation of their AOW.

‘As a result, there is a risk that some people have unnecessarily voluntarily bought class 3 national insurance contributions to supplement their AOW.

“DWP failed to inform potentially affected plaintiffs about these issues.”

The NAO says that if it turns out someone bought top-ups they didn’t need, the DWP will ask HMRC to make arrangements for a refund.

Meanwhile, the NAO says that of the estimated 137,000 affected people who have now reached state pension age, the DWP does not yet know how many are underpaid or how high the underpayment is.

Some may already have enough NI contributions from work or other sources to pay their maximum state pension entitlement, while others need the missing National Insurance credits and risk being underpaid state pension.

The NAO says: ‘DWP has been manually updating National Insurance data as people approach state pension age, but cannot start checking for underpayment of state pension until HMRC provides updated National Insurance data.

“HMRC began correcting records in February 2023 and expects this work to be completed by the end of March 2024.”

‘Some people have already retired without the problem being solved’

Former Pensions Minister Steve Webb, who is This is Money’s pensions columnist, says: ‘These new official figures show the huge number of people who may currently have errors in their NI data.

“It’s not good enough for DWP to say it’s all going to be sorted out and it won’t matter.

“Some people have already retired without the problem resolved, while others may have wasted money paying voluntary NI for those years.”

Webb, who is now a partner at pension advisor LCP, says: “DWP must commit to repay wasted NI contributions and conduct a thorough review to ensure that everyone who has already retired has the right pension.”

Wendy Chamberlain MP, from the Liberal Democrats, points out that the government has known about problems with incorrect NI data for more than five years.

“It is absolutely appalling that the government only started repairing its systems in March this year, and will not be done for another year.

‘Thousands of people have already been affected, because they no longer have their full AOW benefit or have accidentally bought unnecessary credits to top up.

It is clear that these delays could result in thousands of pounds being withheld by the government when it should be in the pockets of pensioners.

“The refusal to act quickly and the refusal to put in place an early warning system to detect future errors is an absolute dereliction of duty.

“It probably means that other schemes are already making mistakes that, under Conservative scrutiny, will cause increasing losses to pensions.”

Matt Rodda MP, Labour’s Shadow Pensions Minister, says: ‘It is simply unacceptable that the DWP’s longstanding failures to correctly calculate people’s state pension rights have still not been resolved.

“The government has promised time and time again to solve the problem and yet thousands of pensioners are being abandoned.

Labor believes that if you work hard and contribute to our society, you should get the pension you are entitled to.

“This government has proven incapable of fulfilling the basic functions of government and ministers must address these issues before more damage is done.”

The DWP and HMRC have been asked for comment but have not provided a statement for publication.

In March, Labor MP Rachael Maskell asked the DWP for an estimate of the cost and need for staff hours of manually correcting NI contribution data for people within four months of state pension age

DWP Minister of State Guy Opperman – the UK’s longest-serving Pensions Minister before his promotion last year after a five-year term – replied: ‘No estimate has been made.

“The department has worked with HMRC to resolve this issue. We expect NI records to be fully updated by HMRC during 2023/24, with any entitlements to AOW reassessed and any underpayment addressed accordingly.”