State pension: Extra DWP funding ‘tucked away in Budget’ for women underpaid state pension | Personal Finance | Finance


Chancellor of the Exchequer Rishi Sunak delivered his 2021 Spring Budget statement in the House of Commons yesterday, and HM Treasury has since published the Budget 2021 document. The Office for Budget Responsibility (OBR) has also published the March 2021 Economic and fiscal outlook.

In this latter document, the sources of changes to the OBR’s welfare spending forecast since March 2020, are addressed.

Among the changes, is the matter of state pension spending.

Within this, it said: “The DWP has also identified underpayments of state pension relating to entitlements for certain married people, widows and over-80s back to 1992.

“Our forecast reflects an initial estimate that it will cost around £3billion over the six years to 2025-26 to address these underpayments, with costs peaking at £0.7billion in 2021-22.”

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Kay Ingram, Director of Public Policy at national financial planning group at LEBC, was following the Budget, and has shared her reaction on the analysis.

Addressing the state pension specifically, she told “Tucked away in the Budget announcements yesterday was an extra £3billion of funding for the DWP to pay to those older women whose state pensions have been underpaid.

“Thousands of women have already claimed an increase in their weekly pension and a backdated lump sum averaging over £3,000.

“Thousands more women over age 67 who are married, widowed or divorced and receive less than £80.45 per week now may qualify for a pension increase once their husbands are over 65.”


Showing her support for the announcement, Ms Ingram went on to urge women who could potentially be affected to take action.

“As a campaigner on gender pension inequality I welcome this but would urge women who think they may be eligible to contact the Pensions Centre to make a claim as past experience suggests that this will be more effective than waiting for the DWP to contact them,” she said.

The Chartered Financial Planner also highlighted a guide to the underpayment issue by LEBC.

Claim on the NI record of a spouse, ex-spouse or deceased spouse

“Married women entitled to claim their state pension before April 6, 2016 may also be entitled to an uplift in pension when their spouse turns 65,” Ms Ingram said.

“This applies where the woman’s pension is less than 60 percent of the basic state pension paid to her husband (around £80.45 per week).

“Widows and divorcees may also be eligible for this increase but must actively apply for it, including any arrears which may be due.”

Last year, LCP launched an online calculator for those impacted by the issue.

Ms Ingram also commented on the freezing of Income Tax allowances which was announced by Mr Sunak yesterday.

“The Chancellor has announced that Income Tax thresholds will increase as planned from April 6, 2021 so that no tax will be payable on incomes up to £12,570 and higher rate tax of 40 percent at £50,270,” she said.

“Thereafter these thresholds will be frozen until 2026. It is estimated that this will drag 800,000 taxpayers into the higher tax bracket and the same number into becoming basic rate taxpayers.

“Taxpayers can counter the effect of this stealth tax by making pension contributions or donating to charity.

“Both of these reduce the income which determines the rate of tax they pay and eligibility for other tax allowances such as marriage allowance and tax free Child Benefit.”

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