Recommendation 20

Managing Public Money (A4.14) states that ‘when public sector organisations have caused injustice or hardship because of maladministration or service failure, they should consider providing remedies so that, as far as reasonably possible, they restore the wronged party to the position that they would be in had things been done correctly’.50 The payment of a lump sum of arrears may affect the pensioner’s current or future entitlement to other benefits such as Pension Credit, housing benefit, or social care provided by local authorities. The Department told us that it remains the pensioner’s responsibility to advise the relevant authority should their circumstances and eligibility for benefits change. HM Revenue & Customs states that income tax is calculated on arrears of State Pension for the tax year in which the pensioner was entitled to receive it, and not in the year in which a lump sum is paid. Where arrears of State Pension are paid, income tax will only be due on any income that exceeds the personal allowance for the respective tax year.51 However, the Department told us it does not have a clear understanding of all financial consequences of receiving a lump sum on social care provision.52 After our 41 Q 158 42 Q 161 43 Qq 177, 178 44 Qq 108–110; C&AG’s Report, 3.3, 3.5 45 Q 111 46 Department for Work & Pensions, Annual Report and Accounts 2020–21 47 GOV.UK, State Pension underpayments: progress on cases reviewed to 30 September 2021 48 Parliament.UK, State Retirement Pensions, question for Department for Work and Pensions, UIN 56659, tabled on 15 October 2021 49 Qq 68, 69 50 GOV.UK, Managing Public Money, A.4.14 51 C&AG’s Report, para 1.15 52 Q 165–167 16 Underpayments of the State Pension evidence session the Department wrote to us explaining how pensions arrears would affect adult social care provision, benefit entitlement and tax. Specifically, on social care, the Department confirmed that the responsibility to interpret the corresponding regulations sits