When Stewart Griffiths informed the Department for Work and Pensions (DWP) of the death of his mother Wendy, he was stunned to find she had been underpaid for 17 years and owed almost £90,000. But the costly mistakes didn’t stop there.
Clumsy officials then wrongly told the grieving family that they would have to pay tax on the pension payments – with interest added on top.
The gaffe is the latest in a long line from the DWP, after it emerged that around 100,000 wives and widows have been deprived of up to £1billion in state pension funds due to mistakes dating back decades.
MPs described the department’s handling of the scandal, which broke two years ago, as a “shameful mess”. And Money Mail can today reveal that the government is still making mistakes and may now be wrongly collecting taxes from victims.
Women who were entitled to larger state pensions because of their husbands’ National Insurance contributions were left out due to human error and outdated systems, with problems dating back to 1985.
Grandmother-of-two Wendy Griffiths lost £89,608 after her state pension was not increased when husband Colin, a former cricketer, died aged 73 in 2004.
The former social worker, from Princes Risborough in Buckinghamshire, died in July last year, aged 79. But when her son Stewart phoned the DWP to stop her pension, he was told she may be underpaid.
Stewart, 48, from Grove in Oxfordshire, received a letter two months later confirming that her mother had missed out and her family now owed tens of thousands of pounds.
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He says the money would have helped his mother travel more to see her family in New Zealand. “It wasn’t a difficult retirement, but there were no luxuries. This [money] would have made a real difference for her,” he adds. As executor, Stewart wrote to HM Revenue and Customs (HMRC) asking if tax was due.
But it took six months to answer, and when the answer came, it was wrong.
Stewart says: ‘I did what I thought was the right thing and sent a letter to HMRC. I have received more than one boilerplate letter saying that tax is due on everything and that there may be late payment penalties.
Sensing something was wrong, he sent a Twitter message to former pensions minister Sir Steve Webb who confirmed it was a mistake.
“What concerns me is if someone more vulnerable receives this letter from HMRC and accepts it, and HMRC makes inferences that they are not allowed to make. It seems like a real mess,” Stewart says.
The underpayment scandal was revealed by Sir Steve when his analysis of government figures revealed that tens of thousands of women were not receiving a married woman’s rate worth around 60% of the pension state base. The DWP has since hired hundreds of employees to uncover the errors and pay the amounts owed.
Sir Steve, now a partner at consultancy Lane Clark and Peacock, says the DWP should tell families whether or not tax is due when it sends letters notifying them of underpayments.
He says: “It was a really shocking case. It’s bad enough that Mrs Griffiths was underpaid for the last 17 years of her life, but it adds insult to injury to then try to tax her son on the missing pension. If we hadn’t gotten involved, Mr Griffiths could have faced a claim for thousands of pounds in tax he didn’t owe.
“The problem could have been avoided if the DWP provided simple information to people about the tax status of these lump sums at the time they are paid.”
HMRC has admitted they wrongly told Stewart he owed income tax. A spokesperson said: ‘We are contacting Mr Griffiths to apologize and advise him that he will not have to pay income tax on his late mother’s pension arrears.’