DWP to pay out £1 billion in state pension arrears to 187,000 parents

DWP has announced that it is expecting to pay out £1 billion in state pension arrears due to an error in the National Insurance records of some people – mostly mothers - who should have had NI credits for time at home raising children.

The people in scope will mainly be women in their 60s and 70s who made a claim for Child Benefit before May 2000. If they made a claim without putting a National Insurance number on their claim it is possible that their credits may not have been transferred to their NI account from the Child Benefit computer. These credits were previously known as ‘Home Responsibilities Protection’ or HRP.

HRP was available between 1978 and 2010 for people in receipt of Child Benefit and those caring for sick and disabled people.

In its annual report last year, DWP noted the error but said that they were unable to estimate the scale of the problem, though subsequent DWP ‘fraud and error’ statistics implied that underpayments relating to NI errors of this sort could amount to around £100m per year.

However, an update in DWP’s 2023 annual report, released yesterday, shows that its central estimate is £1.043m in arrears owed to 187,000 people, of whom 43,000 are deceased.

On this basis, average arrears payment would be just over £5,000 depending on how long affected people have been retired.

However, DWP says the "final value of the missing HRP provision could range from £310 million to £1,530 million", stating that the wide range is "driven by uncertainty surrounding the value of underpayments and the volume of cases that will be corrected".

The report added: "The value of the provision reflects our current estimate of the amount that will be paid out to correct State Pension underpayments due to missing HRP. The HRP underpayment exercise is complex, requiring first HM Revenue and Customs to correct the National Insurance records and then DWP to correct State Pension entitlement. This estimate is subject to significant uncertainty which will continue to be refined as further information becomes available, with the final value of underpayments only being confirmed once the exercise has been completed."

Ahead of the report, the Government has announced that in Autumn 2023 it will begin a large-scale write-out to parents who may be affected.

HMRC say that they will be writing to people who have no HRP on their record and who have gaps in their NI record between 1978 (when HRP was created) and 2010 (when HRP turned into NI credits). Where errors are found, NI records will be corrected and DWP will then recalculate state pensions and pay arrears where appropriate.

LCP partner and former pensions minister, Steve Webb, commented: “The scale of these errors is huge. It is shocking that so many women have been underpaid so much money. This makes it essential that things are put right as a matter of urgency.”