Pension credit fraud balloons resulting in overpayments hitting a record high

Overpayments of pension credit have reached a new record high of 10.3 per cent for the financial year ending in April 2025, new data reveals.

These overpayments mean taxpayers have overpaid more than £610million, rising from £530million, or 9.7 per cent, a year ago, according to figures from the Department for Work and Pensions.

Fraud accounted for almost half of the overpayments, reaching its own record of £270million, increasing from £210million the previous year, the data showed.

Claimant error accounted for £240million of overpayments, also rising from £210million previously, while official errors accounted for just £100million, falling from £110million.

The two main causes of overpayments were under-declarations of financial assets and claimants remaining abroad for longer than is allowed. These accounted for £6 of every £10 overpaid in pension credits in the last financial year.

Jon Greer, head of retirement policy at Quilter, said: ‘Given that pension credit is targeted at some of the most financially vulnerable pensioners, the system needs to strike a careful balance between accessibility and fraud prevention and it appears to be struggling on both fronts.

‘A large share of overpayments stemmed from people failing to declare financial assets or staying overseas for longer than the rules permit, highlighting the difficulty of monitoring eligibility for a means-tested benefit with complex rules.’

Meanwhile, the DWP said 1.2 per cent of pension credit claims were underpaid, accounting for £70million.

This increased from one per cent the year prior, with £50million underpaid. However, the DWP said the proportion of underpaid claims reduced to three out of every hundred, from four the year before.

Greer said: ‘Underpayments of pension credit, while lower in proportion, still amounted to £70 million, and nearly £7 in every £10 underpaid was due to administrative failings. 

‘These errors mostly relate to additional amounts for severe disability, which are often the lifeline for those on the lowest incomes.

State pensions, were also underpaid by as much as £450million, though this was a decrease from £470million a year ago.

‘Underpayments remain a bigger issue than overpayments,’ Greer said, ‘with £450million of state pension payments not reaching the people entitled to them. 

‘That includes many women who were impacted by historical issues with Home Responsibilities Protection, a now-defunct mechanism designed to protect the pensions of those with caring responsibilities.’

Steve Webb, partner at LCP and This is Money’s pensions agony uncle, said: ‘Given how complex the system is, it can be hard for people to know if they are getting the right amount or not, so it is all the more important that the Government gets it right.

‘You would have hoped that all of the recent correction exercises would have resulted in a falling rate of errors, so it is all the more shocking to see underpayment rates increasing. 

‘DWP need to redouble their efforts to track down these errors and fix them as a matter of urgency.’

State pension overpayments, while accounting for 0.1 per cent of payments, still equated to £190million.

Greer said: ‘What’s more concerning is the sharp rise in official error. Overpayments due to administrative mistakes by the DWP tripled in value from £20million last year to £110million, a statistically significant increase driven by miscalculations on the additional components of the state pension.

‘These figures underscore the importance of proactive communication from the DWP and HMRC, particularly for people with complex entitlements. Given how vital these benefits are in old age, there’s little room for error.’