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Underpaid
state pensions – what have we learned and what should happen next?

Policy papers

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Two months ago, LCP published a report looking at the issue of many women potentially having had their state pension underpaid.

The response to that report has been enormous, with over 160,000 people visiting the LCP website calculator site, questions being raised in Parliament and several million pounds having already been refunded by DWP to women affected.

This follow-up paper summarises what has been learned about the issue in the two months since the original report was published, and what needs to happen next. A key message of the paper is to encourage a much wider group of women to come forward to get their state pension checked.

Key findings include

  • We estimate that DWP has already refunded several million pounds to hundreds of women. The average refund is just over £9,000
  • Although refunds are taxable, they are not taxed as if the money had all been due in a single year; instead they are treated as if the pension had been paid on time, which means many women will not have to pay any tax on their refund
  • We have identified 6 groups who should check their eligibility:
    • Married women whose husband turned 65 before 17th March 2008 and who have never claimed an uplift to the 60% rate (currently £80.45 per week in basic pension);
    • Widows whose pension was not increased when their husband died;
    • Widows whose pension is now correct, but who think they may have been underpaid while their late husband was still alive;
    • Over 80s who are receiving a basic pension of less than £80.45;
    • Widowers and heirs of married women;
    • Divorced women, and particularly those who divorced post-retirement, to check that they are benefiting from the contributions of their ex husband

LCP has created a calculator for married women to help you identify if you may be affected. The web page also has other information relevant to other women. By entering a few details about you and your husband, you’ll be able to get an indication of whether you may be receiving too little here.

You can read the first paper we did here which explores the background to this issue in greater depth. The problem affects a set of women covered by the ‘old’ state pension system – that is, those who reached state pension age before 6th April 2016.

What’s on point?

LCP’s on point papers delve behind the headlines of topical issues and news on the pensions and finance agenda. Our experts give their insight and analysis on a variety of topics, shining a light on potential policy responses, outcomes and solutions.

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