A Department for Work and Pensions administrative error may have left many thousands of Universal Credit recipients out of pocket, with those affected potentially entitled to both increased payments and backdated arrears.
The blunder, brought to light by pensions expert Steve Webb, centres on claimants who contribute to pension schemes while receiving Universal Credit.
Multiple benefit recipients came forward after discovering that DWP staff had incorrectly declined to subtract their pension payments from earnings when calculating their Universal Credit entitlement.
Under the rules, pension contributions should be removed from income calculations before UC awards are determined, ensuring those saving for retirement are not financially penalised for doing so.
One reader who contacted This is Money described their ongoing battle with the DWP. They said: “I’m writing to let you know, following your previous articles, that Universal Credit are continuing to incorrectly not recognise pension payment contributions when calculating net income for the purpose of UC awards.”
The claimant explained they had begun paying £200 monthly via direct debit into a personal pension alongside their workplace scheme, bringing total contributions to 15 per cent of gross salary.
“Despite reporting this on my journal online they have repeatedly told me that I cannot have my net pay award adjusted to reflect the total pension payments that I am making,” the reader stated.
Their request for a mandatory reconsideration was subsequently ignored, leaving them considering tribunal action.
DWP continues to make this error despite the issue being highlighted for several years
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PAMr Webb, responding to the reader’s case, expressed deep frustration that the DWP continues to make this error despite the issue being highlighted for several years.
He emphasised that claimants should not need to pursue tribunal proceedings simply to have regulations applied correctly.
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The former pensions minister explained that Universal Credit rules require pension contributions to be deducted when assessing income, a measure designed to encourage those on benefits to maintain retirement savings.
For employees with workplace pensions, the system operates smoothly through ‘real-time information’ transmitted directly from employers to the DWP.
The DWP systems appear unable to handle situations where workers make voluntary contributions to personal pensions
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GETTYHowever, the department’s systems appear unable to handle situations where workers make voluntary contributions to personal pensions separately from payroll deductions.
Mr Webb noted that despite claimants reporting payments through their online journal with supporting evidence, staff repeatedly claim adjustments cannot be made.
He first raised this problem in a column during summer 2024, after which the DWP addressed individual cases brought to its attention, leading to hopes the matter had been resolved.
Yet reports have continued to emerge of frontline staff failing to grasp the correct procedures.
After Mr Webb intervened on behalf of the reader, the DWP acknowledged the pension contributions should have been deducted throughout
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PAAfter Mr Webb intervened on behalf of the reader, the DWP acknowledged the pension contributions should have been deducted throughout and revised their UC award accordingly, resulting in an additional £110 monthly.
A DWP spokesman said: “We have resolved this issue and informed your reader. We have improved guidance for staff to accurately assess Universal Credit entitlement to help prevent this issue happening again.”
Despite welcoming the admission and additional training, Webb questioned how many other claimants may have simply abandoned their claims after being wrongly turned away.
