Ombudsman slams DWP for “maladministration” over state pension age increases

The Department for Work and Pensions (DWP) may be forced to pay compensation to women born in the 1950s after a report found the department had failed to communicate changes adequately.

A damning report from the Parliamentary and Health Service Ombudsman has called for parliament to act as the DWP has refused to comply with its recommendations so far – a response the ombudsman’s chief executive has called “unacceptable”.

The department also failed to act on research and feedback that showed its communication policy had not raised awareness of the changes.

The bill for compensation could be anything from £3.5 billion to more than £10 billion, according to the ombudsman’s report.

Rebecca Hilsenrath, chief executive of the Parliamentary and Health Service Ombudsman, said the department should be “held to account” for its failings, including its refusal to comply with the recommendations.

“Complainants should not have to wait and see whether DWP will take action to rectify its failings,” Hilsenrath said. “Given the significant concerns we have that it will fail to act on our findings and given the need to make things right for the affected women as soon as possible, we have proactively asked parliament to intervene and hold the department to account.

“Parliament now needs to act swiftly, and make sure a compensation scheme is established. We think this will provide women with the quickest route to remedy.”

Thousands of women born in the 1950s were affected by a decision made in the 1990s to raise their state pension age from 60 to 65. For some, the change pushed their state retirement date back by just a few months, but for others it was as much as five years.

Complainants have argued that the DWP did not communicate the changes sufficiently or give women enough time to make changes to their financial plans.

The ombudsman’s report recommended that the DWP issue a formal apology to those affected, as well as pay compensation to reflect the severity of the impact to different groups of women. The bill for this could range from £3.5 billion to £10.5 billion depending on how it is formulated, the report said.

The report stated: “Parliament may want to consider a mechanism for assessing individual claims of injustice. Or it may consider a flat-rate payment would deliver more efficient resolution, recognising that will inevitably mean some women being paid more or less compensation than they otherwise would.”

It also recommended service improvements to DWP’s administration to ensure future changes are communicated better. The department had failed to respond adequately to feedback and research at least twice, despite this showing that communications had not had the desired effect.

In response, the DWP has said that the issues have since been addressed through upgrades to communication systems and processes.

Former pensions minister Steve Webb, partner at LCP, said “If DWP refuses to accept the ombudsman’s recommendation and refuses to establish a redress scheme, there is no chance that this position will hold. Particularly during an election year, the government will struggle to secure a majority for ignoring the ombudsman’s report.

“Instead, DWP should respect the ombudsman’s conclusions, which have been carefully considered over many years, and should come up with a redress scheme for their failure to notify women of sometimes life-changing increases in their state pension age.”

The report adds to mounting pressure on the DWP over pension payment issues. New data from the department shows that it has identified £570 million in state pension underpayments as of 29 February 2024.

Administration errors that persisted for many years have been blamed for the underpayments, which could total £3 billion according to the Office for Budget Responsibility.

Tom Selby, director of public policy at AJ Bell, said: “It is absolutely critical all those affected by this [underpayment] scandal receive the money they are owed as quickly and efficiently as possible.”