Apologies to readers whose Mums are no longer around and to younger readers whose Mums are still to retire. but the majority of people who read this blog are millennials and boomers whose Mums are drawing the state pension along with Dad or on their own – as widows. This blog is for pensioner Mums and for adult children who care about their finances.
The DWP have a very complicated set of rules about the payment of state pension to women and a computer system that relies on human intervention. The intervention is usually prompted by claims from pensioners , many of which are not filed – as most citizens don’t understand the rules. The DWP, like all administrators, is also prone to human error. The usual toxic cocktail – lack of financial capability – inadequate automation and over-reliance on manual administration. The WASPI cocktail (II).
Sir Steve Webb highlighted that many older women are being short-changed of their pensions as a result. Initially this was taken up by the Daily Mail’s This is Money website.
The real problem is that most of the problem relates to elderly women who aren’t best placed to sort this out for themselves and are reliant on children who struggle to find out the facts on their behalf.
So to date, restitution, where restitution has been due, has been confined to cases where children have applied obsessive zeal on their mother’s behalf. Witness this case study that will be no doubt be attracting the attention of furloughed PPI claims specialists
Widow, 96, with dementia gets £117k after she’s paid wrong state pension for 20 YEARS
- Rosemary Chattell’s son was fobbed off THREE times by DWP staff
- He made a fourth call about her low pension, thinking ‘I will give it one more try’
- DWP then paid arrears of £107,850 and no interest – but stumped up a further £9,500 when This is Money intervened
- Rosemary might now face a massive income tax bill on the belated payment
- Ex-Minister Steve Webb says: ‘This is one of the most shocking cases I have ever come across’
So what is Steve Webb doing about it?
Credit to the man, Steve is dong a lot. Firstly he’s explaining how the problem came about…
The problem affects a set of women covered by the ‘old’ state pension system – that is, those who reached state pension age before 6th April 2016. Under the old system, married women could claim an enhanced rate of state pension when their husband reached 65 in cases where they had only a small state pension entitlement in their own right. Parallel rules applied to widows and divorced women. At current rates, the pension that a married woman can claim based on her husband’s record of NI contributions stands at £80.45 per week, provided that their husband was receiving a full basic state pension. This is 60% of the full basic state pension rate of £134.25.
Since March 2008, married women on low pensions should have been awarded this 60% rate automatically when their husband turned 65 but before that date they needed to claim the uplift. Data obtained in a Freedom of Information request submitted earlier this year by Steve Webb to the Department for Work and Pensions suggest that many tens of thousands of married women who would be eligible for this rate are not receiving it. In the majority of cases it seems likely that this is because they not actively claimed the uplift, but in some cases it will reflect the failure of DWP computers to automatically award the uplift. Where women needed to make a claim and do so only belatedly they can only backdate their claim for 12 months – any uplift for years before this is lost.
In addition to gaps for married women, LCP have found other groups who may be missing out. These include:
- Thousands of widows who appear to be on very low state pensions, well short of the expected rate for a widow claiming on her late husband’s record;
- Thousands of divorced women who should, in principle, be benefiting from the ability to ‘substitute’ the NI record of their ex-husband for the period up to the end of their marriage;
- Thousands of women aged 80 or over who should in principle be entitled to an £80.45 pension on a *non-contributory* basis provided that they satisfy a simple residency test;
Without access to DWP administrative data, it is difficult to put precise figures on the numbers missing out, but by combining the FOI data with data from the DWP’s online ‘stat xplore’ tool and data from the DWP’s Family Resources Survey, LCP estimates that tens of thousands of women are being paid less in state pension than they are entitled to.
Based on typical amounts repaid when women contact the DWP, the amounts underpaid could be up to £100m in total, not including ongoing increases in regular pension payments. (which the Times are estimating make up the balance of their quoted £135m)
Secondly he’s lobbying for change
Steve Webb is now calling on the government to investigate this issue as a matter of urgency, and to automatically uplift the pensions of those who are entitled. He is also calling for a review of the 2008 rule change which means those who became entitled to a higher pension before that date can only now backdate a claim for 12 months.
We should be giving Steve Webb credit, gratitude and support!
So what can you do?
If you want to understand this problem properly, you need to read LCP’s guide
At the time of blogging, this document hasn’t been posted to the web (no pun-intended), when it is, the link will be here and for now you can request a PDF from firstname.lastname@example.org because it is the weekend and the LCP press office isn’t open.
If you don’t want to “gen-up” but want to check-up, your next port of call is LCP’s web-page for Grannies
You can claim your extra pension either online at the Pension Service or call free 0800 169 0154.
To see if you qualify use this calculator provided by Steve Webb at Lane Clark & Peacock. Note- this is not an exhaustive tool. If you want to exhaust yourself – read on!
What should Grandma have got?
If you want to know what your Mum/Grandma’s entitlement are you can read the brilliant Paul Lewis’ factsheet here.
Tens of thousands of married women aged at least 67 could get up to £4000 a year extra state pension. They aren’t being paid a top up to their pension from their husband’s National Insurance. If they get less than £80.45 a week they should claim now https://t.co/JaneR6q0E3
— Paul Lewis (@paullewismoney) May 23, 2020
And for the hard of clicking, here is what Paul is saying.
Tens of thousands of married women in their seventies or older are being paid too little state pension. Some could be owed £4000 a year.
You are almost certainly entitled to extra state pension if
- your husband was born before 17 March 1943
- you get less than £80.45 a week state pension
Some slightly younger women – aged at lest 67 – and some women with younger husbands may also be due extra money.
The women affected get the old state pension, not the new one which began for those who reached state pension age from 6 April 2016.
These married women are normally entitled to a top up to bring their basic pension up £80.45 a week. However, many did not claim it or it was not paid due to an error by the Department for Work and Pensions. See ‘Married women’ below.
Some divorced or widowed women may also be entitled to a bigger state pension. See ‘Widowed or divorced’ below.
Anyone aged 80 or more – men and women, married or not – should normally get a state pension of at least £80.45 a week. See ‘over 80’ below
Nowadays most married women have their own state pension paid for with their own National Insurance contributions. But millions of older women do not. Women born before April 1950 needed 39 years of contributions to get a full pension. If they had fewer than that their pension was reduced and women with fewer than 10 years contributions got no state pension of their own.
Many married women did not earn enough at work to pay National Insurance contributions or, if they did, they chose to pay the reduced married woman’s contribution – known in the past as the ‘married woman’s stamp’. It did not count towards a state pension. The result is that millions of older married women are only entitled to a reduced state pension of their own, or none at all.
To help them there is a special rule that when a husband reaches state pension age his wife can get a pension based on his National Insurance Contributions. That married woman’s pension is 60% of the basic pension – and currently comes to £80.45 a week.
If a married woman has a basic state pension of less than £80.45 a week or none at all it is topped up to that amount when her husband reaches state pension age. That applies even if he – but not she – gets the new state pension (men born from 6 April 1951 get the new state pension).
Nowadays that top up to £80.45 a week should be paid automatically when her husband reaches state pension age. However, before 17 March 2008 a married woman who already had a pension when her husband reached pension age had to apply for the upgrade.
Research done by former Pensions Minister Steve Webb indicates that there could be more than 100,000 women whose husbands were born before 17 March 1943 who get a state pension of less than £80.45 a week but who did not apply for the top-up. Those women were born before 17 March 1948 and are now aged 72 or more.
They can apply for the higher pension now. It will top up their state pension to £80.45 a week and the top up will be backdated for a year. A woman with no state pension will get £4183 plus £80.45 a week for life.
There may also be some younger women born between 17 March 1948 and 5 April 1953 and some women with younger husbands – born 17 March 1943 or later – whose pension should have been upgraded automatically but was not. Steve Webb’s figures show that error did happen in many cases. They can apply for this pension now and, because the mistake was made by the Department for Work and Pensions, it will be backdated to the date it should have been paid. That can be up to 12 years.
Any married woman who has a basic state pension of less than £80.45 a week should claim the extra. She will probably be successful.
Widowed or divorced
A widow can use her late husband’s record to get a state pension if that would be more than was due on hers. In most cases her reduced pension can be boosted to 100% of the basic state pension – currently £134.25 a week. She can also inherit some or all of his SERPS.
A woman who is divorced can use her ex-husband’s National Insurance record instead of her own up to the date of the divorce. If she has had more than one husband then it is only the record of the most recent one she can use to boost her state pension. This should be done when she claims her state pension. But it may not have been so it is worth checking.
Women who are widowed or divorced and get less than the full 100% basic state pension of £134.25 should ask the DWP to check they are getting all they are entitled to. If it was worked out wrongly in the past it could be backdated to the date of that error.
Call the Pension Service free on 0800 169 0154.
Once you reach 80 you are entitled to a state pension of £80.45 a week if your existing state pension is less than that or you do not get one at all. To qualify you must be
- aged 80 or more
- live in the UK or the EU when you reached 80 or when you claim
- have lived in England, Scotland, or Wales for at least ten years out of the last twenty.
It is not means-tested and does not depend on your National Insurance record. The full rules are here.
If you are over 80 but get less state pension than £80.45 or none at all then claim it now. It can be backdated up to a year.
You can claim your extra pension either online at the Pension Service or call free 0800 169 0154.
Not every married woman with an old state pension of less than £80.45 will be due extra pension. Some husbands themselves had less than a full state pension – they needed 44 years of National Insurance contributions then to get a full one. If he gets less than the full basic state pension – currently £134.25 a week – then his wife will also get a lower married woman’s pension. However, it is his basic state pension that counts (called Category A), so ignore all extras like additional pension – what we used to call SERPS – graduated retirement benefit, or extra pension for not claiming it at 65.
If he was originally given less than a full basic state pension then his wife’s pension on his contributions will be 60% of that and will be less than £80.45 a week. But she may still be getting too little and should claim.
People living outside the UK in a country where the state pension is frozen – it does not rise with inflation – may well be getting less than £80.45 a week and not be entitled to any top up.
Is this a conspiracy against Grannies? – no. This is what happens when you have a complicated system, poor computers and a problem too big for a Government department.
Is this solvable? It looks like it, though as Ros Altmann points out , the solution looks like it’s in a queue that stretches from Caxton House , round the houses or parliament and back again (all socially distanced).
Is this affordable? – yes. The sums quoted in this article are chicken-feed relative to the State Pension budget.
Why it’s important to get this problem and associated state pension problems sorted, is that our state pension has to be relied upon as the platform for all our retirement. Steve Webb knows this more than anyone and it’s good that he’s spending his and his consultancy’s resources on what is (for them) pro bono.