DWP pension blunder uncovered by Steve Webb means thousands of people could be underpaid on Universal Credit
Thousands of people could be entitled to a boost to their Universal Credit benefits following a pensions blunder by the Department for Work and Pensions, This is Money exclusively reveals today.
Claimants saving for their pension could be in line for increases and arrears, after our columnist Steve Webb uncovered a potentially major – and costly – error.
A This is Money reader wrote to Webb asking whether pension contributions were being correctly accounted for in their UC payments.
More people subsequently contacted us saying they had received written notices from DWP staff wrongly refusing to deduct pension payments from their wages before calculating their Universal Credit.
As a result, they were underpaid for Universal Credit. Here’s what you can do if you may be underpaid.
Former Pensions Secretary Steve Webb and This is Money have investigated a series of DWP scandals over the years, including billions of pounds in underpayments of state pension to older women and a secret computer glitch that saw the state pension details of as many as ten million Universal Credit claimants hacked.
Many Universal Credit claimants are in work and are therefore automatically enrolled in a pension. Some also make personal contributions to private schemes if they can afford to do so.
These pension payments must be deducted before their UC is calculated, to avoid people receiving government benefits being penalised (sometimes temporarily) for saving for their old age.
Rahel Hussain, 43, a carer and part-time restaurant worker from Birmingham, challenged the level of Universal Credit he received and called for a system to allow people like him to declare their pension contributions.
It is shocking to hear from readers that DWP has misled them in writing by claiming that personal pension contributions are not deductible
Former Pensions Minister Steve Webb
“I think this is crucial for claimants like me,” he said.
‘I want to ensure that claimants in my position are not disadvantaged and that DWP has processes and systems in place to ensure their staff are aware of what is and isn’t allowed within the current rules and regulations.’
A 57-year-old picture framer from London has now been left in arrears of around £100 and has received a £23-a-month increase on his monthly UC payments.
He told us that before Webbs’ intervention the DWP had been ‘absolutely adamant’ that his pension contributions should not be deducted from his earnings before his UC payments were calculated.
In a third case, Webb helped a This is Money reader recover around £1,500 in arrears.
A DWP spokesperson said: ‘We have apologised to these claimants and are working with them to ensure they are entitled to the correct Universal Credit benefit in the future.’
It was confirmed that personal pension contributions must be deducted from income before Universal Credit is calculated.
However, to ensure accuracy, evidence of contributions must be provided before the end of an applicant’s assessment period.
The DWP added that staff, including work coaches at Jobcentres, receive ongoing training and have access to guidance which is updated at regular intervals.
Webb, a partner at consultancy LCP, said: ‘Contributing to a pension is attractive, but particularly for people who rely on universal credit.
‘That’s because your pension contribution is deducted from your salary before your benefit is calculated, so you’ll have a little extra each month.
‘It is therefore shocking to hear from readers that DWP has misled them in writing by claiming that personal pension contributions are not deductible.’
He added: ‘I’m glad we were able to resolve the issues for these readers, but you wonder how many more people were misled.
‘We will continue our investigations until we are confident that all types of pension contributions are being deducted correctly for the millions of working people who receive Universal Credit.’
According to Webb, it currently appears this error could impact thousands of people making personal pension contributions while receiving UC.
However, the errors raise wider questions about whether DWP is correctly processing other types of pension contributions – an issue that could potentially affect more than a million people.
That’s why we’re calling on the readers of This is Money to help us get to the bottom of this issue.