MARTIN Lewis has warned thousands of women on the “old” pensions system to check whether they’re owed a £13,500 payout.
Up to 200,000 women of retirement age may have been underpaid their state pension after the system failed to automatically give them a pay rise.
Martin Lewis urged viewers to check if they have been affected by the pension error
Last week, the Government finally agreed to repay the estimated £2.7billion worth of arrears after a campaign by This is Money and former pensions minister Sir Steve Webb.
It means on average, women pensioners could be owed a payout of £13,500, although the amount will vary.
Mr Lewis explained to viewers of last night’s The Martin Lewis Money Show that the error, which stretches back 30 years, affects married women and widows aged 67 and older.
Women who retired on small state pensions before April 2016 were supposed to see pension payments go up when their husbands reached retirement age.
Payments should have risen by 60% of their husband’s basic state pension, which was the amount that women with low National Insurance payments got under the old pension system.
Mr Lewis said: “Under the terms, you’ll receive an automatic rebate if your husband was 65 or older on March 17, 2008 and you received no state pension uplift when they passed away.
“However, some people won’t receive automatic payments.
“You will need to claim yourself if you husband turned 65 before March 2008 and you’re being paid less than 60% of the basic state pension.
“You’ll also need to make a claim if you got divorced after retirement and your pension is less than your former husband’s one.”
But there is concern up to 80,000 married women are set to miss out due to a rule change in 2008 that saw payments run automatic.
Before then, women had to apply to get the full sum they were owed, meaning the onus fell on them.
The law currently means they can’t backdate a claim further than 12 months, leaving them out of pocket.
The Department for Work and Pensions (DWP) has promised to correct the historical underpayments and will contact those who are affected.
How did the pension error happen?
The underpayment error happened when an old pension scheme policy, which meant women’s pensions were linked to their husband’s, was changed in 2016.
Currently, we have a system where there’s an old state pension, which is referred to as the basic state pension, and the new state pension.
The old state pension was for those who reached retirement age before April 6, 2016, while the new state pension is for those who reach retirement age after this date – although there is some crossover for people who’ve accrued National Insurance contributions under both systems.
It was decided that married women could pay a reduced rate of NI contributions, known as the “married woman’s stamp”.
This meant they were not paying towards their own state pension, but when their husband retired they could get an uplift to 60% of his pension so long as he had a full record of contributions.
Married women who had not paid the stamp but had missed out on making contributions due to staying at home with the kids also qualified for the boost to 60%.
The policy was deemed unfair and was changed in 2016 so women’s pensions were no longer linked to their husband’s.
But campaigner Sir Steve Webb discovered that women who have an old state pension and retired before 2016, have not been getting the increase to 60% — and are due payouts.
The current Pensions Minister Guy Opperman recently explained that it occurred because junior civil servants failed to manually update women’s individual records during past decades.
He said that its IT systems are meant to flag when an individual’s State Pension amount should be increased.
DWP staff would then respond by changing the pension amount manually but in some cases, this did not happen.