‘My mum was owed £89,000 in state pension – and now the council’s trying to take it off us’

Hundreds of thousands of retired women are starting to receive cash windfalls after years of being underpaid their state pension. But many are finding that they still cannot access their money until it is too late.

One 94-year-old woman, who received £89,000 last ­September, spent the last six months of her life hounded by the taxman and local council which demanded it be put towards care fees.

Her daughter, 63, from Heysham, near Morecambe, Lancs, said her mother, who she did not want to identify, had been blocked from accessing the money that she should have been paid over 12 years. She said: “It has been appalling. It sounds like it would be absolutely marvellous to get all that money but you can’t spend it and everyone else wants a piece of it.”

HM Revenue & Customs called in the days leading up to and after her death demanding £6,900. She said: “I told them they lacked humanity. All I really wanted to do was lock myself away and grieve but I couldn’t.”

After gaining power of attorney over her mother’s finances at the start of 2020, the daughter discovered that she had been receiving far too little in her state pension. After a six-month battle with the Department for Work and Pensions (DWP), she was told that she was right and her mother’s monthly pension rose from £333 a month to £1,100.

Her mother had been receiving too little since her husband’s death 12 years earlier and received the £89,000 lump sum in September. But her mother never got to spend the money. “It took a long time for them to accept that they had made a mistake and then they never apologised. I was then told that I couldn’t spend any of the money on my mother’s behalf until the tax had been paid,” she said.

The council was also quick to demand a portion of the cash, as the windfall meant the 94-year-old no longer qualified for support on her care fees, her daughter said. The fees would increase from £800 per month to £5,000.

Watch: Is a UK state pension enough to survive on in retirement?

“They wrote a letter saying that my mother couldn’t spend any of her money because they wanted backdated payment on her fees. They called the day after she died to remind me we still owed them money,” she said. “This was money she should have had each month over a 12-year period – a sum that would never have been large enough to attract a large tax bill; a sum that would have meant she could have enjoyed herself a little more in her widowhood.”

The Government apologised to the family, but Sir Steve Webb, former pensions minister and now partner at consultancy LCP, said it was shocking that no help or guidance was provided by the DWP once the lump sum was paid. He said that the majority of those affected are vulnerable elderly people and the Government should be going the extra mile to help but instead they are “treated with contempt”.

Steven Cameron, of the pensions group Aegon, said it was scandalous that so many elderly people had been forced to make financial sacrifices year after year because of the DWP’s errors. “There can be a nasty sting in the tail for people in care homes receiving local council funding,” he said.

Any compensation paid to those who were underpaid will be treated as adding to that person’s assets. If this pushes their total capital above £23,250, they will be asked to pay for all of their own care until it falls back below that level, regardless of whether they had previously received support.

Mr Cameron said: “To receive compensation through a back payment now, only to be asked to use all of it to pay for care, is adding insult to injury.”

More than 237,000 women are owed £1.5bn were short-changed because of errors in pre-2016 state pensions. The DWP has pledged to track down and reimburse all those who have missed out by late 2024.