HMRC finds thousands of women are owed compensation worth £7859 | Personal Finance | Finance

HM Revenue and Customs (HMRC) is currently undertaking a State Pension corrections exercise to rectify missing periods of Home Responsibilities Protection (HRP), leading to the Department for Work and Pensions (DWP) making incorrect payments.

Between January 8 and September 30, 2024, an eye-opening total of 5,344 cases of underpayment were discovered, resulting in a colossal sum of approximately £42 million owed in arrears. The DWP has recently disclosed figures on their progress in addressing these longstanding mistakes, revealing that the average amount owed to each individual is around £7,859.

Former Liberal Democrat pensions minister Steve Webb, who has been actively uncovering issues with State Pension calculations, suggests that the numbers from the current HMRC operation are likely to rise substantially as the review intensifies.

Sir Steve Webb, now a partner at LCP, recalls a similar HRP initiative from over a decade ago which resulted in State Pension back payments of £83 million. He expressed his concern: “The vast majority of those who lost were women, some of whom were underpaid for decades or even went to their grave never paid the right State Pension.”

He added: “The remaining corrections need to be handled as a matter of urgency. This should never be allowed to happen again.”

Rachel Vahey, the head of public policy at AJ Bell, has voiced her concerns: “This is one of the biggest benefit scandals of modern times. DWP miscalculations have left thousands of pensioners – mainly women – short on their State Pension payments.

“It is absolutely critical all those affected by this scandal receive the money they are owed as quickly and efficiently as possible.”

A spokesperson for the DWP responded to the issue, stating: “Our priority is ensuring pensioners receive the dignity and security they deserve in retirement and that state pension underpayment rates remain as low as possible.

“We have now completed the vast majority of cases in the exercise as planned with a small number of outstanding cases due to further documentation needed from the customer.”

Pensioners who have been shortchanged can look forward to receiving back payments by the end of the current year.

The DWP has also made it known that individuals approaching State Pension age, especially those in their 60s and 70s, are being prioritised in the mailing of letters. Nonetheless, anyone suspecting they have received less than their due State Pension can check their status online through the self-identification tool on the GOV.UK website.

HRP underpayments explained

The DWP discovered in 2022 that there were numerous State Pensions cases where it seemed historic periods of Home Responsibilities Protection (HRP) had been omitted, resulting in incorrect State Pension payments.

Further investigations showed that this problem was related to the National Insurance records managed by HMRC for some individuals both below and above State Pension age.

The Department for Work and Pensions (DWP) and HM Revenue and Customs (HMRC) have initiated a Legal Entitlements and Administrative Practice (LEAP) corrections exercise. This is to identify and invite those potentially affected to apply, correct their records, and make both arrears and ongoing revised State Pension payments.

The DWP has estimated that it underpaid between £300m and £1.5 billion of State Pension due to errors with the recording of Home Responsibilities Protection (HRP). According to the latest data, 493,813 individuals have utilised the online tool on GOV.UK to check if they are missing HRP from their State Pension.

Up until the end of September last year, HMRC processed 37,289 applications from people over State Pension age and 5,428 from those aged below 66.

What is HRP?

HRP was a scheme designed to safeguard parents’ and carers’ entitlement to the State Pension. It was replaced by National Insurance (NI) credits from April 6, 2010. HMRC is using NI records to identify as many people as possible who might have been entitled to HRP between 1978 and 2010 and have no HRP on their NI record.

After May 2000, it became mandatory to include an NI number on claims so people claiming after this point will not have been affected.