State pension secret computer failure hits Universal Credit claimants

State pension: Records of millions of Universal Credit claimants are riddled with holes

Up to 10million people who claimed Universal Credit could have shortfalls in their state pension due to a secret computer failure exposed by This is Money.

That includes up to 137,000 people already drawing a state pension, although the exact total is unknown and those potentially being underpaid have not been informed by the Department for 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’ records, but did not tell those affected.

Manual updates were done just before people reached state pension age. 

But they could fall through the net and be underpaid as a result, or waste money buying state pension top-ups they didn’t need.

‘System issues’ causing problems in the National Insurance database for the past six years were not fixed until February this year, according to the NAO.

That was the same month our probe exclusively revealed many NI records were riddled with holes due to missing credits towards the state pension, and that the Government had stonewalled Universal Credit claimants and dodged our attempts to uncover the scandal.

The revelations come after the Government also confirmed last week that mums are missing out on an estimated £1billion in state pension due to holes in their child benefit records.

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

In the case of Universal Credit claimants, lost NI credits can mean they receive a reduced state pension in retirement unless their records are fixed in time.

We first reported a ‘mystery ‘glitch’ with NI credits last Autumn, and eventually published evidence handed to us by readers that the automated system was broken.

The Government confessed to the problem and admitted it would take another year to fix all the mistakes in March, after Liberal Democrat Work and Pensions Spokesperson Wendy Chamberlain MP demanded answers on pensions and UC in Parliament.

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

However, the DWP and HMRC apparently never revealed serious problems with these people’s state pension records officially, either to the wider public or MPs.

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

The full scale of the fiasco is now laid bare by the National Audit Office, which scrutinises Government spending, in the DWP’s recently published annual report.

The NAO says of the system problems between 2017 and 2023: ‘Individuals who claimed Universal Credit during the intervening period have credits missing from their National Insurance record.

‘Around 10 million people made a claim to Universal Credit during the affected six-year period.

‘Unless these people have a National Insurance credit for some other reason, then their National Insurance record will be incorrect.

‘If these people use the government’s Check Your State Pension tool, they will see an inaccurate valuation of their state pension.

‘There is therefore a risk that some people may have unnecessarily purchased voluntary Class 3 National Insurance contributions to top-up their state pension.

‘DWP has not informed potentially affected claimants about these issues.’

The NAO says if anyone is found to have bought top-ups they did not need, the DWP will ask HMRC to make arrangements for a refund.

Missing NI credits: The Government was forced to admit the problems after Liberal Democrat Wendy Chamberlain MP demanded answers in Parliament.

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

Some may already have enough NI contributions from employment or other sources to be paid their maximum state pension entitlement, while others need the missing National Insurance credits and are at risk of being underpaid state pension.

The NAO says: ‘DWP has been manually updating National Insurance records as people approach state pension age, but cannot begin to check for any state pension underpayments until HMRC provides updated National Insurance records.

‘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 fixed’

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

‘It is not good enough for DWP to say that it will all be fixed and it doesn’t matter.

‘Some people have already retired without the problem being fixed, whilst others may have wasted money paying voluntary NI for those years.’

Webb, who is now a partner at pension consultant LCP, says: ‘DWP needs to commit to refund any wasted NI contributions as well as do a thorough check to make sure anyone who has already retired is on the correct pension.’

Wendy Chamberlain MP, of the Liberal Democrats, points out that the Government has known about problems with incorrect NI records for over five years.

‘It is absolutely atrocious that it was only in March this year that the Government started trying to fix its systems, and that this won’t be finished for another year.

‘Thousands of people have already been impacted, either finding themselves short of their full state pension or mistakenly buying unnecessary credits to top up.

‘It is clear these delays could led to thousands more pounds being kept by the Government when it should be in pensioners’ pockets.

‘The refusal to act quickly, and the refusal to put in an early warning system to find future errors is an absolute dereliction of duty.

‘It likely means that other schemes are already accruing errors which will cause more and more losses for pensions under the Conservative’s watch.’

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

‘The Government has promised to fix the issue time after time and yet thousands of pensioners are being let down.

‘Labour believes that if you work hard and contribute to our society, you should receive the pension you are entitled to.

‘This Government has proved itself incapable of fulfilling the basic functions of government and ministers must resolve these problems before more damage is done.’

The DWP and HMRC were asked for comment but did not provide a statement for publication.

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

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

‘The Department has been working with HMRC to resolve this issue. We expect NI records will be fully updated by HMRC over the course of 2023/24, any state pension entitlement will be reassessed, and any underpayment addressed accordingly.’