DWP urged to make rules clearer after huge Pension Credit 'errors'

The Government has been urged to clarify complex pension credit rules after it emerged that more than £500 million was lost last year through fraud and mistakes - with older Brits unwittingly falling foul of strict conditions around savings and time spent abroad.

Pension Credit is designed to top up the incomes of the poorest pensioners, offering around 1.4 million people an average of £3,900 a year.

But official figures show that £270 million was lost to deliberate fraud in 2024-25 - the highest level recorded - while a further £240 million vanished through what the Department for Work and Pensions (DWP) calls "claimant error".

Campaigners say many of those caught up in the figures may not be 'big-time' benefit cheats, but vulnerable older people confused by red tape and lengthy forms.

Sir Steve Webb, a former pensions minister, said: "I don't want to be naïve about some of it being deliberate, but the idea there is a large number of pensioners conniving money through malicious fraud seems unlikely."

Fraud overpayments linked to pensioners going abroad for too long, or failing to report capital gains, now account for 76 per cent of all pension credit fraud cases, the DWP said in its annual report.

Pension Credit cannot be claimed if someone permanently moves abroad - and holidays must be limited to four weeks unless there's a medical emergency or a death in the family. Yet some pensioners may be unaware of these rules.

"Some breaches of pension credit rules could be accidental," said Sir Steve, now a partner at consultancy LCP. "There may be people visiting a son or daughter in say, Australia, for slightly over four weeks. You could see how that will happen."

Others may have unknowingly become ineligible after inheriting savings or property, or building up nest eggs slowly over time.

"Some people may have gradually built up savings over time since they first applied for pension credit, but not realised this has to be reported," Sir Steve told The i Paper.

"Some people may have inherited money or property after they started claiming, and not realised this also needs to be notified [to the DWP]."

Applying for pension credit can involve filling out a 24-page form with over 200 questions - mostly focused on financial information.

Morgan Vine, director of policy at the charity Independent Age, said the form was too complicated and likely contributing to the issue. She said some of the fraud statistics may simply reflect "people who have struggled to work out the rules".

Campaigners argue that while the Government focuses on catching pensioners who fall foul of the rules, it is ignoring the far greater issue of underclaiming. Around 760,000 eligible people are missing out on pension credit, worth an estimated £1.5 billion a year.

Dennis Reed, director of older people's group Silver Voices, said: "We're not talking about big-time criminality." He described the Government's approach as heavy-handed and disproportionate.

The Labour Government is currently pushing a benefits fraud bill through Parliament which it says will "initially focus" on tackling bogus claims for universal credit, pension credit and other support.

The legislation would allow the DWP to access bank and building society records to check whether claimants are telling the truth about their finances - prompting fears that some genuine claimants could be put off.

Reed warned it amounted to "a snooper's charter" and accused Labour of "a blunderbuss" approach that risked deterring vulnerable older people from applying.

"Some vulnerable older people will be put off from even applying for the pension credit if they worry their bank account will be checked and under scrutiny," he said.

A DWP spokesperson said the department was committed to ensuring pensioners receive the money they're entitled to "whilst safeguarding taxpayers' money from fraud and error".

They added: "It's vital that people report any changes in their circumstances to avoid overpayments that could result in unexpected debt." The department is investing in better data systems and extra staff to detect and prevent mistakes.