Widow, 71, issued huge payout of £23,000 after being underpaid state pension for years
HUNDREDS of thousands of women are owed big payouts after being caught up in a huge state pension error.
One of those individuals, Mary Cunningham*, now 71, has received a £23,000 windfall after falling victim to the issue.
Mary, who lives in Surrey, first contacted the Department for Work and Pensions (DWP) eight years ago when she thought she was being underpaid, she told The Times.
She believed she should be due more than the £400 a month she was receiving, along with a small pension from her husband after he died.
Despite frequently trying to get help her pleas went unheard until finally the DWP admitted that she was right and paid her £23,000.
Around 700,000 pensioners, mainly women, are also thought to be affected by the same underpayment error and are set to have their entitlements reviewed.
So far, the DWP has paid out £571.6million to almost 100,000 whose payments should have been boosted.
Many of these women did not receive the entitlement they were due under their husband’s National Insurance records.
Others did not get the uplifts they were eligible for when their husbands died.
That’s what happened to Mary, who cared for her husband Harry from 2013, when he began showing signs of dementia, until his death in 2016.
Mary was trying to get by on less than £400 a month from her state pension and relying on money from Harry’s pension to get by.
When Harry died, Mary struggled financially and had to ask for help from her family.
She ended up calling the DWP to ask if her entitlement was right and was told that she was getting the maximum payment she was entitled to.
Mary said: “The stress of losing my husband was made worse by the worry of struggling on a low pension and how I would afford to live and this made my health much worse.”
She had also previously had an operation to remove breast cancer in 2013.
Over the next eight years, she called the DWP frequently to query her low pension payments but was denied help each time.
*Mary and Harry’s names have been changed to protect their privacy
WHO IS MISSING OUT
How much state pension you get is based on your National Insurance contributions.
You need 35 full years of contributions to get the new full state pension, which is currently £221.20 a week or £11,502 a year.
You need 10 years of contributions to get any cash at all.
But women born before April 6, 1953, and men born before April 6, 1951, get the old basic state pension, which pays less.
And under the old system pensions can be boosted based on your spouse’s NI record, either after your spouse dies, or reaches state pension age.
Although, this depends on how you paid NI and how much you paid.
In Mary’s case, Harry had run a fruit and vegetable wholesaler in Fulham, London, for 27 years while Mary had stayed at home.
While she had made some contributions, but didn’t have a full record, so was not entitled to a full basic state pension.
But, when Harry died, her payments should have gone up, because he had a full record of contributions.
Prior to 2008, married, widowed or divorced women used to have to contact the DWP to get payment boosts.
From that point on, the extra payments should have been made automatically. But unfortunately, this hasn’t always been what has happened.
The DWP has been trying to correct systematic state pension underpayments since 2021.
It said: “Our priority is ensuring pensioners get the dignity and security they deserve in retirement and that state pension underpayment rates remain as low as possible.
“We have completed the majority of cases as planned and expect to complete by the year-end.”
What is National Insurance?
NATIONAL Insurance is a tax on your earnings, or profits if you're self-employed.
These contributions make you eligible for things like the state pension and certain benefits.
You’ll usually pay National Insurance Contributions (NICs) when you’re over the age of 16 and earning a certain amount.
For example, if you earn £1,000 a week, you pay nothing on the first £242.
Earn over that and you pay 10% on the next £725 – so £72.50. Then you pay 2%o on the rest, so £33, which works out as 66p.
For the self-employed rates are slightly different.
You can also get something known as National Insurance in some circumstances when you’re not working, for example when you have kids and claim certain benefits.
NICs are usually taken automatically by your employer and paid to HMRC, so you don’t need to do anything.
You can see how much NICs you pay on your wage slip.
Anyone working for themselves usually has to pay NICs themselves when completing a self-assessment tax return.
GETTING THE CASH
By January this year, Mary was only getting £441 a month in state pension and she desperately called the DWP again.
Mary said: “I told them I couldn’t survive on so little and they advised me to apply for pension credit.
“I sent off all the paperwork in February and must have chased eight or nine times on its progress but was told there was a big backlog.”
In May she was told by an agent that the DWP was waiting for a reply to a letter it had sent to her that month, which she said never arrived.
The letter confirmed what Mary had suspected for years — her state pension had been underpaid and the government now owed her a whopping £23,000.
The money was paid into her bank account, but she hasn’t been paid any interest to reflect the eight years that she was forced to wait.
How does the state pension work?
AT the moment the current state pension is paid to both men and women from age 66 - but it's due to rise to 67 by 2028 and 68 by 2046.
The state pension is a recurring payment from the government most Brits start getting when they reach State Pension age.
But not everyone gets the same amount, and you are awarded depending on your National Insurance record.
For most pensioners, it forms only part of their retirement income, as they could have other pots from a workplace pension, earning and savings.
The new state pension is based on people’s National Insurance records.
Workers must have 35 qualifying years of National Insurance to get the maximum amount of the new state pension.
You earn National Insurance qualifying years through work, or by getting credits, for instance when you are looking after children and claiming child benefit.
If you have gaps, you can top up your record by paying in voluntary National Insurance contributions.
To get the old, full basic state pension, you will need 30 years of contributions or credits.
You will need at least 10 years on your NI record to get any state pension.
HOW YOU CAN CLAIM
You can go to the DWP directly and query whether you have been affected but there are online tools and advice sites that can help.
An online tool launched by former pensions minister Steve Webb on behalf of actuarial firm LCP can help married women check if they might be affected.
If you use the LCP calculator and think you qualify for a top-up, the DWP should also pick up the error and contact you.
The DWP started working to fix the problem on January 11, 2021 and is working through issuing compensation for those affected.
If you are owed money, you’ll likely have to sit tight and wait for the DWP to send you a letter confirming your payment.
Those considered at “high risk” like those over 80 and widows are being prioritised.
Top tips to boost your pension pot
DON'T know where to start? Here are some tips from financial provider Aviva on how to get going.
- Understand where you start: Before you consider your plans for tomorrow, you’ll need to understand where you stand today. Look into your current pension savings and research when you’ll be eligible for the state pension, and how much support you’ll receive.
- Take advantage of your workplace pension: All employers are legally required to provide a workplace pension. If you save, your employer will usually have to contribute too.
- Take advantage of online planning tools: Financial providers Aviva and Royal London have tools that give you an idea of what your retirement income will be based on how much you’re saving.
- Find out if your workplace offers advice: Many employers offer sessions with financial advisers to help you plan for your future retirement.
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