Source · Select Committees · Public Accounts Committee
Recommendation 19
19
Accepted
Significant uncertainty surrounds the estimated scale and demographics of Home Responsibilities Protection underpayments.
Recommendation
We asked DWP how much people could receive in back payments of State Pension. DWP told us it assumes an average back payment of £5,000 for people above State Pension age and £3,000 for the next-of-kin of those who are deceased. DWP’s accounts report that overall 210,000 pensioners may have been underpaid some £1.3 billion. Adjusting for take-up, DWP currently expects to pay £1.0 billion to around 187,000 people. DWP warned us that there was a significant amount of uncertainty around these estimates. The possible range of underpayment that DWP will need to pay out was estimated by DWP in its 2022–23 accounts is between £310 million and £1.5 billion.40 We asked DWP what proportion of the affected pensioners will be women and what level of overlap there might be between the HRP issue and previous State Pension underpayments. DWP admitted it did not know because this is an “incredibly complicated” exercise but that it will have to take that into account, along with any interactions with other benefits.41
Government Response Summary
The government agrees to the recommendation, confirming the correction exercise for Home Responsibilities Protection underpayments began in Autumn 2023, and outlining how DWP and HMRC will continue to refine plans and address tax implications.
Government Response
Accepted
HM Government
Accepted
4a. PAC recommendation: DWP should work with HMRC within the next six months to set out a clear plan and timetable for correcting underpayments of State Pension relating to Home Responsibilities Protection and provide clarity on how any tax issues will be dealt with. 4.1 The government agrees with the Committee’s recommendation. Target implementation date: Summer 2024 4.2 The department provided details of the scope of the exercise and plans to address outstanding work in its 2022-23 Annual Report and Accounts. The 2022-23 Annual Report and Accounts also sets out that there is a degree of uncertainty with the number of people affected and the total amount of pension arrears. The correction exercise began in Autumn 2023. The department will continue to refine its plans and timetable alongside HM Revenue & Customs (HMRC) as the exercise progresses. The department will provide updated details of its plans in its 2023-24 Annual Report and Accounts. 4.3 Income tax will be calculated on the arrears payments of State Pension for the tax year in which the customer was entitled to receive the State Pension, not in the year in which the arrears were paid. HMRC will only collect tax for the year that arrears are paid and the preceding four years. HMRC will not collect income tax on any arrears payments where the individual is deceased, and payment was made after the date of death. HMRC will not raise historical interest charges on the tax due from Self-Assessment customers.