- People handing over hundreds or thousands of pounds are desperately worried
- They tell us of fear it has disappeared into ‘a black hole’ in Government coffers
- Labour has challenged the Government to tackle top-up inaccuracies
Pensioners are ‘terrified’ their money spent on state pension top-ups has ‘simply disappeared’, a Labour Shadow Minister told the Government in parliament yesterday.
The Department for Work and Pensions was urged to ‘get a grip of this terrible problem’ by Matt Rodda MP, who cited our investigation into cases of people handing over hundreds or sometimes thousands of pounds then trying to hunt it down for months.
People whose cash has apparently gone missing have struggled to get answers out of the DWP or HMRC, which between them run the system for making voluntary payments to boost state pensions.
Readers contacted us telling of their fears their money has simply disappeared into a ‘black hole’.
Since last week’s story on the rolling chaos in the state pension top-ups system, we have received a flood of further messages from frustrated savers.
Some paid money to the Government at the end of last year, and one claims they handed over £11,500 in March and have made dozens of calls to no avail.
Buying top-ups can give a generous boost to retirement income if you buy the correct years on your record – see the box below. The state pension is currently worth £10,600 a year if you qualify for the full rate.
Rodda said that our investigation ‘showed that the Government are failing to accurately record people’s top-up contributions’.
Labour’s Shadow Pensions Minister told the House of Commons: ‘As inflation rises, being able to top up pension contributions is vital for many part-time workers, who would otherwise not be able to claim the full state pension.
Buying state pension top-ups
Top-up prices are now frozen until April 2025, even though the full state pension was hiked 10.1 per cent to £203.85 a week earlier this year, and may well rise by a chunky amount next year too.
You can continue to benefit from a special concession allowing you to fill up or buy extra state pension qualifying years going back to 2006/07, rather than just the typical six years.
But it can be hard to work out which years if any will benefit you individually, and the Government itself and other money experts warn you should check with the DWP’s Future Pensions Centre before handing over your cash.
‘Pensioners are terrified that their money has simply disappeared, so when will the Government get a grip of this terrible problem? When will Ministers show that they understand the pressure on families and pensioners due to the cost of living crisis?’
The Conservative Pensions Minister, Laura Trott, replied: ‘With the comprehensive package of support I have talked about today, we have shown that we are taking action during the cost of living crisis to help pensioners as much as we can.
‘We know that accuracy is the most important thing when it comes to the state pension, which is why we have taken action very quickly to correct issues where they have occurred, for example, with LEAP.
‘We will do the same in all such cases.’
‘LEAP’ is the corrections exercise launched by the Government after former Pensions Minister Steve Webb and This is Money discovered tens of thousands of elderly women had been underpaid state pension.
We began raising the alarm about this in early 2020 and spent months campaigning for a full investigation into women’s pension shortfall, which is now estimated at £1.2billion.
After his call for action in parliament yesterday, Mr Rodda later tweeted: ‘This Government is failing pensioners, losing records of people’s pension top-ups, and threatening some part-time workers’ state pensions as a result.
‘An independent report has shown a number of pension top-ups have been inaccurately reported by HMRC. Today, I questioned what the government is doing about this unacceptable mistake, and held them to account for their failings.’
What problems are savers having buying state pension top-ups?
The state pension top-ups system descended into chaos early this year, when savers jammed phonelines ahead of a crunch deadline – ultimately forcing the Government to extend it twice.
Now the previous rush has apparently caused a backlog in processing payments by HMRC, and then updating state pensions which is the DWP’s responsibility.
But savers don’t receive receipts or acknowledgements when they make payments. And when their cash appears to go missing in one or other department or between them, they cannot tell if it is just sitting in a queue, temporarily mislaid or actually lost.
Their worry is compounded when they ring up and DWP and HMRC call handlers cannot give them any information.
Having trouble with top-ups? Email email@example.com. Please put STATE PENSION TOP UPS in the subject line.
If you need help, you should also contact your MP.
How much is the state pension?
The full flat rate state pension is £203.85 a week or an annual £10,600.
People who retired before April 2016 on a full basic state pension receive £156.20 a week or £8,120 a year.
The old basic rate is topped up by additional state pension entitlements – S2P and Serps – if they were earned during working years.
People who have contracted out of S2P and Serps to pay less National Insurance over the years and retire after April 2016 might get less than the full new state pension.
Workers now need to have 35 years of contributions to get the new flat rate state pension, compared with 30 years of qualifying National Insurance contributions to get the old state pension.
But even if you paid in full for a whole 35 years or more, if you contracted out for some years it might still reduce what you get.