Thousands of people could be owed more in universal credit payments following a mistake by the Department for Work and Pensions (DWP).
Those working, who receive the benefit and make retirement contributions, should have their pension payments deducted from their wages before their universal credit is calculated.
However, some noticed this was not happening and that they had been short-changed on their payments.
After contacting the DWP to clarify, they were wrongly advised by staff that personal pension contributions cannot be deducted.
The mistake was discovered through an investigation by former pensions minister Steve Webb for This is Money.
He said these people, and others who have been affected, could be in line to not only have their payments corrected but also to be paid arrears as a result of the costly mistake.
Sir Steve, now a partner at consultants LCP, said: “Large numbers of people have been benefiting from paying into a pension when they were receiving working tax credit which is gradually being phased out.
“But when they are moved over onto universal credit some have found that the allowance for pension saving has wrongly been stopped. DWP needs to check all those who it has reassessed to make sure that pension contributions have not slipped through the net.”
Although there have been just several cases identified so far, there is likely to be many more affected.
Sir Steve has suggested that the error could affect thousands of people who make personal pension contributions whilst receiving universal credit.
It also raises a wider question about whether the DWP is processing other types of pension contribution correctly.
Some of the cases came to the surface as HMRC seems to have correctly deducted personal pension contributions when working out people’s working tax credit.
The issue has been when people are being migrated across to universal credit.
The people who may be affected included those who had no idea that their personal pension contributions could be deducted and never even asked.
Currently, there doesn’t seem to be a standardised way of asking people about personal contributions when compared to workplace pension deductions where employers are reporting through real-time information.
Others who may be affected are people who did think that the deductions could be made but gave up when wrongly told that they couldn’t.
The DWP has been contacted for comment.
What to do if you think you’ve been affected
Anyone who is on universal credit and pays into a pension is encouraged to to make sure that the wages figure showing on their universal credit calculation is after any pension contributions have been paid.
If it looks as though the pay figure doesn’t take any account of their pension contributions they need to contact DWP directly with details of their pension payments.
However, this doesn’t apply to people in final salary type pensions, for example those who work in the public sector, because employers already deduct pension contributions before they report earnings to the DWP.