'Thousands' of people could be sitting on a ‘pensions goldmine’, LCP partner, Steve Webb, has said, warning that this money could go unclaimed if people do not respond to letters from the Department for Work and Pensions (DWP).

A freedom of information (FOI) request revealed that, at the end of July 2024, 1,859 people who had received letters from the DWP telling them about potential underpayments of state pension to their late parents or late spouse had not responded.

The state pension underpayment issues affected married women whose husbands reached pensionable age before 2008, as well as widows and those over 80, who were unknowingly entitled to an 'enhanced pension' that would have boosted their payments by up to 60 per cent.

According to the FOI, the vast majority of the cases that are still awaiting a reply related to cases where the person who died was a widow (or widower), and DWP now believes they may have been underpaid state pension.

In particular, the FOI confirmed that there are 1,671 letters to next of kin flagging potential underpayments of this sort to which DWP has yet to receive a reply, while a further 131 relate to cases where a married woman’s low pension was not automatically increased when her husband retired, and 57 cases relate to underpaid pensions to the over 80s.

Whilst the DWP said that they only work out the amount potentially owed when they receive a reply to the letter, LCP pointed out that past underpayments have ranged from a few pounds to over £100,000.

However, LCP emphasised that, unless DWP receives a reply to these letters, the underpayment will remain unclaimed, pointing out that these letters arrive ‘out of the blue’ and people may not realise the importance of responding.

Given this, Webb urged people to check if they have received a letter and to act if they have put off responding, stating: “We know that well over 100,000 people were underpaid state pensions and DWP has spent more than three years trying to track them down.

“In thousands of cases, the person who was underpaid is sadly no longer with us, but their heirs should still benefit from any underpayment.

“Although not all underpayments are large, in some cases, people have received £100,000 or more, so the recipients of these letters could be sitting on a pensions goldmine.”

The DWP's latest update on its state pension underpayment correction revealed that, between 11 January 2021 and the end of March 2024, the checking process identified 99,558 underpayments, with a total of £594m owed.

The DWP is expected to complete its state pension underpayment correction exercise by the end of 2024, although work to address broader Home Responsibilities Protection (HRP) related state pension errors are set to continue until 2027/28.

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