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Broken piggy bank with band aid bandage AccountingWEB Scandal of £1,043m state pension shortfall
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Scandal of £1,043m state pension shortfall

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Following “administrative discrepancies” by the Department of Work and Pensions (DWP), HMRC has outlined how it will ensure individuals with home responsibilities protection have their state pension entitlement protected as intended.

11th Jul 2023
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There are two UK state pensions payable on reaching state pension age (SPa):

The basic state pension

The basic state pension (bSP) is for a man born before 6 April 1951 and woman born before 6 April 1953. To build up an entitlement, an individual must accrue national insurance (NI) qualifying years which is, simply, a combination of:

  • Years in which NI was paid
  • Years in which NI was treated as paid, for example with national insurance credits; or
  • Years in which voluntary Class 3 NI was paid, effectively filling in any history gaps

To qualify for the full bSP, currently £156.20 per week, the general rule is that men must have 44 Qualifying Years and women 39. If an individual has less than the maximum, they will get a proportion of the full bSP.

The new state pension

The new state pension (nSP) is for a man born on or after 6 April 1951 and a woman born on or after 6 April 1953. Again, there is a qualifying year requirement for the full nSP, currently £203.85 per week. 

This requires a minimum of 10 years and a maximum of 35 years for both men and women. Where there is at least 10 years but less than 35, the nSP is prorated.

It is worth checking your individual state pension forecast and identifying how many qualifying years have accrued. Unfortunately, just because you might have built up the full number of qualifying years does not mean you can stop paying NI – this continues until Spa.

Home responsibilities protection (HRP)

Long before national insurance credits came, home responsibilities protection (HRP) existed between 06 April 1978 and 05 April 2010. This was a similar scheme that provided eligible individuals with credits in qualifying years meaning that time spent caring or raising children would not adversely affect state pension entitlement.

However, on 06 July 2023, HMRC and the Department for Work and Pensions (DWP) released a joint policy paper ‘Home Responsibilities Protection: correction of National Insurance records and State Pension entitlement’. 

This says that individuals who did not provide their national insurance number (NINO) when claiming child benefit before May 2000 may not have had their qualifying years incremented by HRP. May 2000 is an important date as the NINO became mandatory for child benefit claims from then. 

However, this is not new information. It is new action on information already made public in the ‘Department for Work and Pensions Annual Report and Accounts 2021–22’ on page 71. So, a known issue but now a plan of action and immediately, we can see there are two groups of people:

  1. Claimants of child benefit before May 2000 who may not have had the correct qualifying years recorded and, as a result, may not be receiving the bSP to which they are entitled. This will have applied if no NINO was quoted at the time of making the claim.
  2. Claimants of child benefit from May 2000 who will not be affected.

HMRC and DWP action

DWP deletes child benefit data after five years “for data protection reasons”. Therefore, it is not possible to identify individuals who may not have received the credit of qualifying years. So, from Autumn 2023:

  • HMRC will identify and write to those who may have been entitled to HRP and who do not have this recorded on their NI history. If eligible, the individual will be able to make a claim online and HMRC will update their qualifying years data. Then,
  • DWP will recalculate the state pension, advising any arrears that may be due. Then, they will advise HMRC so they can collect any additional tax that may be due

Who is affected?

It is likely that women in their 60s and 70s may be affected more than others. HMRC also concedes some of these individuals may have died. HMRC advises there is no need for individuals to act and they will be contacted in a phased approach depending on age, with those over SPa being contacted first.

However, such is the scale of potential underpayments that individuals may want to pre-empt communication. Gov.uk guidance indicates that completion of the online or postal CF411 should enable HMRC to identify them faster.

Plus, it also advises that qualifying years can be transferred if the partner received the Child Benefit and they do not need the additional years for their NI history.

DWP’s latest report for 2022/23 (see page 374) refers to this latest fiasco as the result of further “administrative discrepancies” resulting in an estimated £1,043m of pension underpaid to 187,000 individuals, with 43,000 of those now deceased. 

I did not notice the report mention the words "apology" or "regret".

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Replies (3)

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By Hugo Fair
11th Jul 2023 16:56

"HMRC also concedes some of these individuals may have died" ... is an interesting example of how HMRC mangles the English language. '*may* have died'?
Not only is it statistically guaranteed (now there's an unusual pairing of words) that some of those individuals *will* have died ... but the DWP report enumerates this as 43,000 people!

The question I'd like to ask is what is being done with regard to those now deceased but whose records were not correctly maintained?

They are hardly likely to complete an online or postal CF411 - and i can't imagine that HMRC will be trying to contact them!

The reason I ask?
Not just out of a general sense of fairness (as in Estates that have been cheated however horrendous those would be to resolve), but because there is yet another category of *current* SP recipients who are likely to be being underpaid:
* namely, men who have reached SPA and are in receipt of SP ... but who are also receiving some of their deceased spouse's SP.

I've never been able to get a clear definition out of DWP as to how that portion is calculated ... but it seems likely that if a living wife has been cheated out of some of her SP, then a widower entitled to some part of that SP is also still being cheated out of an (unknown) amount.

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By moneymanager
12th Jul 2023 15:49

While important, this could just be a distraction, the system is bust COMPLETELY and yet governments have been spending our money as though purging themselves with a laxative, cue the WEF mantra.

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By kaff
12th Jul 2023 18:59

Why must they abbreviate “basic state pension” to “bSP” rather than just type it out in full? Do they think this makes it easier to read???

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