Unjustly claimed pension credits lead to unprecedented overpayments soaring to a new peak
Overdue Payments in Pension Benefits Reach a Record High
The financial year concluding in April 2025 has seen astonishing records in pension-related overpayments, with a staggering 10.3% rate, equating to over £610 million, according to the Department for Work and Pensions (DWP). This marks a concerning rise from 9.7% (£530 million) a year ago.
A startling revelation is the almost 50% share of these overpayments attributed to fraud, reaching an unprecedented £270 million, up from £210 million the previous year[1]. Claimant errors accounted for another £240 million, also on the rise from £210 million previously[1]. Interestingly, official errors accounted for only £100 million, a slight decrease from £110 million[1].
The primary causes of these overpayments were under-reporting of financial assets and claimants remaining abroad for extended periods, making up £6 out of every £10 overpaid in pension credits during the last financial year[1].
Director of Retirement Policy at Quilter, Jon Greer, expressed concerns, stating, "Given that pension credit is aimed at some of the most financially vulnerable pensioners, the system needs to strike a delicate balance between accessibility and fraud prevention. It seems to be struggling on both fronts"[2]. Greer added that claimant errors and administrative failures contribute to a significant portion of overpayments.
In contrast, the DWP reported that only 1.2% of pension credit claims were underpaid, accounting for £70 million. However, this percentage rose from 1.0% the previous year, and the number of underpaid claims fell from 4 in 100 to 3 in 100[2].
Meanwhile, state pensions faced their own set of issues. Underpayments amounted to as much as £450 million, a decrease from £470 million the year before[3]. Notably, some state pensioners were underpaid by nearly £6,000 each due to errors by the DWP[2].
While specific data on state pension overpayments is limited, the focus has been on rectifying underpayment issues rather than overpayments. It's crucial to address these issues to ensure the right amount reaches the individuals who require it the most.
Steve Webb, partner at LCP and This is Money's pensions agony uncle, urged the government to rectify the errors promptly[2]. Greer echoed similar sentiments, emphasizing the importance of accurate and proactive communication from the DWP and HMRC, particularly for those with complex entitlements[3].
In the financial year concluding in April 2025, concerns were raised regarding personal-finance matters, as overpayments in pensions reached a record high of £610 million, with mortgages seemingly unaffected. Despite the focus on rectifying underpayment issues in state pensions, it is essential to allocate resources towards addressing overpayments as well, such as fraudulent activities or claimant errors in pension credits.
