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Could you claim more pension?

Paul Lewis / 04 May 2021

Married women born before 6 April 1953, widows or over-80s may be due extra money, says Paul Lewis.

Couple on a beach looking ahead to retirement
Are you claiming all the pension you are entitled to?

Buried deep in the Budget papers in March was the admission of ‘a systematic underpayment of state pensions’. It will cost £3 billion to put right. The people affected all get the old state pension and were born before 6 April 1953.

The Department for Work and Pensions (DWP) only discovered the problem because of the work of former Pensions Minister Steve Webb. We reported his exposure of these underpaid pensions in Saga Magazine last August. But the scale of the problem is far bigger than expected. The DWP now estimates that a total of 200,000 married women, widows, and men and women over 80 were underpaid by an average of £13,500 because the DWP did not check their pension as it should have done.

However, tens of thousands of other women are not included in this ‘correction exercise’. They will have to make a claim to get the pension they are entitled to.

Did you know that looking after a grandchild may boost your pension?

Who will get repaid automatically?

Three groups should be paid without having to make a claim. The first is women born before 6 April 1953 and whose husband was born on 17 March 1943 or later. If she is still married to him and gets a basic state pension of less than £82.45 a week she will have her pension topped up to that amount from when she reached state pension age.

Group two is widows born before that date who get a basic state pension of under £137.60 a week. When they were widowed the DWP should have checked if they could use their late husband’s National Insurance contributions to boost their pension. If it did not and she has lost out, she will get her basic state pension topped up to the full amount, backdated to when she was widowed.

The third group is men and women who are over 80 but get a basic state pension of less than £82.45 a week. Everyone aged 80 or more should have a basic state pension of at least that much. The DWP is supposed to check their pension on their 80th birthday but sometimes forgets. They will get their basic state pension increased to this amount backdated to their 80th birthday.

All these amounts refer to the basic state pension – not any extras such as graduated pension or SERPS and all the rates quoted are those paid from 12 April 2021. Backdated payments for earlier years will be less. A few women may get less depending on their or their husband’s circumstances.

The Government says it could take up to five years to find and pay all these people. But if you think you may be one of them you can claim now. That should speed things up.

Who must claim now?

Two groups will not be paid automatically and should claim now. The first is married women born before 6 April 1953 whose husband was born before 17 March 1943. Before 17 March 2008 the DWP did not automatically check that a wife was getting the right pension when her husband reached state pension age. Many married women did get a reduced pension but had to claim if they could get more. The DWP now says it was her fault and to get the extra she must claim now. It will only be backdated 12 months.

The second group is divorced women. When a women divorces, either before or after pension age, she can use her ex-husband’s National Insurance contributions instead of her own if that would mean a bigger state pension. The DWP says it is her job to check. If she is due any extra she can claim now but it will only be backdated 12 months.

Find out if you are eligible

You can check if you are affected by these underpayments at the website of Lane, Clark & Peacock – search ‘state pension’.

To claim, call the DWP Pension Changes line 0800 731 0469 and ignore the messages that encourage you to hang up. Eventually select ‘other enquiry’ and then ‘state pension’. Have your pension details or your National Insurance number with you. If someone who was underpaid has already died, their heirs are entitled to be paid and DWP will try to find them but they can also claim on that number.

If you get pension credit, the extra pension will reduce the amount you get in future. The DWP will also deduct from your back payment any pension credit you got in the past because your income was lower than it should have been. Any remaining back payment will count as capital and if you (and a partner if you have one) have more than £10,000 savings, that will also reduce your pension credit in future.

Budget 2021 tax changes

The amount of income you can have in the year without paying income tax rose slightly in April from £12,500 to £12,570. The annual rise in the state pension is more than that so pensioners will end up paying more tax rather than less, except some on lower incomes in Scotland.

If you have an income more than £50,000 a year, your tax will probably fall slightly as the threshold where higher rate 40% tax is paid rises to £50,270. In Scotland higher rate tax begins at £43,662, a £232 rise on last tax year.

All other tax thresholds are frozen at 2020/21 rates. The £325,000 main Inheritance Tax threshold and the extra allowance of up to £175,000 for the family home left to a descendant will not change.

The £12,300 starting point for capital gains tax, the £2,000 dividend income allowance, and the £1,000 property and trading income allowances are all frozen at their 2020/21 levels.

The Government says the freezes will last until April 2026. Between now and then the Government will gain £20 billion from the freeze as more and more of us pay more and more tax.

Money expert Paul Lewis To enjoy Paul Lewis' expert tips on personal finance, consumer
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The opinions expressed are those of the author and are not held by Saga unless specifically stated. The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.