DWP errors leave more than 200,000 pensioners £1.3bn out of pocket

More than 200,000 pensioners were left out of pocket by a total of £1.3bn last year and many will never be repaid because of lax record keeping, according to parliament’s spending watchdog.

Computer errors at the Department for Work and Pensions (DWP) meant 165,000 also missed out on £1.2bn in the previous year, the public accounts committee (PAC) found.

Its annual report on the department concluded that the government was leaving thousands of pensioners shortchanged while it failed to fix basic mistakes made over many years when civil servants managing the state pension system had been “asleep at the switch”.

In a wide-ranging critique of the pension and benefits system, the report said the department was presiding over “eye-watering” levels of fraud and errors that added £8.2bn to the benefits bill in 2022-23. This represented a fall from £8.6bn in the previous financial year but remained much higher than the £4.4bn in 2019-20.

The committee’s chair, Dame Meg Hillier, said the level of fraud and error in the system remained unacceptably high, and raised the alarm over responses by DWP officials who said they did not expect a return to pre-Covid levels in this area until 2027-28.

“While it is good to see benefit fraud and error fall slightly this year, we are yet to see any significant post-pandemic strides made in addressing it,” she said.

The majority of fraud and error continues to be driven by universal credit, the report said, which was “overpaid by a staggering 12.8% (£5.5bn) in 2022-23”. DWP officials estimate that 18% of universal credit claims, relating to more than 800,000 people, contain an element of fraud.

The committee acknowledged the department’s plan to tackle such fraud and error, commending the DWP for giving further details of its plans, including investing a further £895m in counter-fraud and setting an annual savings target.

However, the committee added: “DWP expects most of the savings to come from a £443m project to cleanse the benefit system of incorrect payments by reviewing some 8 million live universal credit cases over the next five years.

“The success of this project is dependent on DWP’s ambitious plans to scale up recruitment and productivity of the team reviewing the claims.

The report said that while it was difficult for HMRC to cross-check national insurance records with state pension records to determine the correct level of payment, the department must “do more to detect underpayments before they build up and have a significant impact on pensioners and other claimants”.

A DWP spokesperson said: “Our priority is ensuring everyone receives the financial support they are entitled to, 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.

“At the same time, we are cracking down on fraud with new powers which will root out those who try to steal from the most vulnerable while saving the taxpayer £600m over the next five years. This comes on top of the billions being saved through our counter-fraud plan and will be targeted at areas where fraud and error is higher such as universal credit.”