The Department for Work and Pensions (DWP) estimates it has underpaid 134,000 pensioners, mostly women, over £1 billion of their state pension entitlement, with some errors dating as far back as 1985.
In January 2021, DWP started an exercise to correct the errors – the ninth such exercise since 2018, the Public Accounts Committee (PAC) said.
The errors mostly affect widows, divorcees and women who rely on their husband’s pension contributions for some of their pension.
Complex pension rules and a reliance on highly manual systems led to the underpayment of thousands of pensioners.
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The committee of MPs said the underlying IT system relied on to manage millions of pensioner records dates back to 1988.
Quality checks failed to identify the systematic underpayments and small errors added up over years to significant sums of money.
The PAC said the department should consider whether there are cost-effective ways to upgrade its IT systems “as a matter of urgency”.
There is currently no formal plan for contacting the next of kin where a pensioner who was underpaid is dead, the committee said.
The DWP is only paying those it has identified as having a legal entitlement to arrears, in some cases many years after the event, and has been inconsistent in paying interest, it added.
It has also shown little interest in understanding the further knock-on consequences, including on social care provision, for those it underpaid, MPs said.
Fixing DWP’s mistakes comes at great cost to the taxpayer and is expected to cost £24.3 million in staff costs alone by the end of 2023, the PAC added.