Thousands of people - mainly consisting of women in their 60s and 70s - may have been underpaid a collective sum of £1billion through a substantial state pension error. The issue is thought to largely affect stay-at-home mums who made a claim for Child Benefit before May, 2000.
Should they have made a claim without giving their National Insurance number, their credits may not have been transferred to the system in the correct fashion. This in-turn could mean that those people were wrongly underpaid their Government pension for years.
A person's state pension entitlement is based on their NI record, and you need in the region of 35 qualifying years in contributions to get the full new state pension. It's 30 years for the full basic state pension.
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The Mirror reports that National Insurance credits allow you to build up your qualifying years when you're not actively making contributions - for example, you're unemployed for a period of time. These were previously known as Home Responsibilities Protection (HRP).
HRP reduced the number of qualifying years needed to claim the state pension, and was available between 1978 and 2010 for those who were caring for the sick or disabled. The Department for Work and Pensions are now working with the HMRC to identify people who might have been entitled to HRP, with none showing on their records.
The old system was replaced in 2010 by National Insurance credits. HMRC will look into National Insurance records to identify as many people as they can, before the DWP will recalculate state pensions to see if people are due arrears.
Those who are affected will be contacted as of the autumn in phases, in order of how close they are to the qualifying state pension age. If you're found to be eligible, you'll be invited to submit an online claim.
Through an official report published this afternoon, the UK Government said that it estimates a grand total of 187,000 could be owed money. 43,000 of whom have now passed away.
The DWP approximates that a little over £1billion is owed to affected parties, with the average arrears payment amounting to just over £5,000 based on this. However, the DWP has revealed uncertainty with regards to the grand pay out, admitting that the total figure could be anywhere between £300million and £1.5billion.
How much you are owed depends on how much you were underpaid, and for how long. Families of those affected who have sadly passed away will be entitled to check their eligibility and make a claim for any arrears owed.
The mass underpayments were first highlighted by Steve Webb, previously the minister of state for pensions and now LCP partner, last year. LCP has previously campaigned to raise awareness of the issue and launched a "mothers missing millions" website to help people work out if they might be due money.
Steve Webb is now urging anyone who has received Child Benefit since 1978 to check their National Insurance record. He said: "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."
Tom Selby, head of retirement policy at AJ Bell, added: "Given many people rely solely on their state pension to make ends meet in retirement, the fact even more have been identified as receiving too little – particularly during a cost-of-living crisis – as a result of administrative failures is unforgivable.
"The most important thing now is that those who have been underpaid are identified as quickly as possible and put back in the position they should have been."
A Government spokesperson, went on: "Most people’s records will be unaffected, and we will shortly be launching a new online tool to help people check whether they need to claim. HMRC will also begin writing to those likely to be affected from the Autumn.
"Our priority is ensuring everyone receives the financial support to which they are entitled, and State Pension underpayment rates due to Official Error remain low at 0.5% of expenditure. Where errors do occur, we are committed to fixing them as quickly as possible."
