Around 134,000 pensioners have been underpaid more than £1bn in state pensions, a new report from the National Audit Office (NAO) has found.

The findings reveal that the underpayment has resulted from years of failures at the Department for Work and Pensions (DWP).

According to the report, The DWP confirmed there was a significant issue in August 2020 and now believes around 134,000 pensioners may have been underpaid. In January 2021, it started a Legal Entitlements and Administrative Practices (LEAP) process to review all cases at possible risk of being underpaid, and in its 2020/21 accounts, the Department estimated it would need to pay £1,034m of arrears in respect of the underpayments.

However, of the 134,000 affected pensioners, only 94,000 of those affected are thought to still be alive – meaning 40,000 could have died before receiving compensation. The report also revealed that the DWP will be unable to trace or pay the next of kin for 15,000 of the total affected pensioners. Of the estimated remaining 118,000 pensioners the DWP believes can be traced, they could expect to receive an average £8,900 by the time the payments are made.

The DWP has found underpayments of between £0.01 and £128,448.37, with the earliest dating back to 1985.

Commenting on the findings, AJ Bell head of retirement policy, Tom Selby, said: “Those lucky enough to still be with us may have been living in penury when they should have been enjoying their retirement.

“The 94,000 people still alive who are owed money by the DWP need to get it back as soon as possible. They also deserve answers about how this was allowed to happen over such a long period of time.

“Once compensation has been paid, the government needs to undertake a comprehensive review of its processes to ensure these mistakes are never repeated.

“Trust in pensions is fragile at the best of times and failures such as this will not help. Sadly, it will likely take years, if not decades, to rebuild the confidence lost as a result of this scandal.”

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