About 70,000 people on employment and support allowance could be in line to receive up to £20,000 each after being underpaid by the Department for Work and Pensions.
An investigation by the National Audit Office (NAO) has found that since 2011 the Department for Work and Pensions (DWP) has underpaid an estimated 70,000 people who transferred to employment and support allowance (ESA) from other benefits.
The majority of those owed are thought to be due around £2,500 but some people will be owed significantly more and the DWP has committed to correcting its error and paying arrears by April 2019 - though arrears will only be paid dating back as far back as 21 October 2014.
Altogether the DWP estimates that by the end of the 2022-23 financial year it will need to pay a total of between £570 million and £830 million more in ESA than previously expected.
For more info on benefits and what you could be entitled to, see our Benefits Check-up.
Get Our Free Money Tips Email!
Who is owed a backdated payment?
The error relates to people who may have been entitled to income-related ESA but were instead only awarded contribution-based ESA, and therefore may have missed out on premium payments.
People are usually owed income-related ESA if they’re on a low income and haven't paid enough National Insurance contributions.
A review of a sample number of cases suggests that 45,000 claimants entitled to the enhanced disability premium may be owed around £2,500 and around 20,000 claimants who are entitled to the severe disability premium may be owed around £11,500 each. A small number could be owed around £20,000.
The error happened because the DWP's process for converting people's benefits to ESA did not reflect its own legislation, which from 2010 obliged the DWP to assess people's entitlement to both income-related ESA and contribution-based ESA when their benefits were first converted to ESA. In practice it did not always do this.
Eligible claimants will only be paid arrears as far back as 21 October 2014, the date of a legal tribunal ruling. The DWP estimates there may be approximately £100 million to £150 million of underpayments accrued before 21 October 2014 which it cannot pay, in addition to the £340 million it will pay for the period after 21 October 2014.
I think I'm affected - what should I do?
The good news is you don't actually have to do anything.
The DWP is identifying eligible claimants and will contact them with further information - if you are affected, you will be contacted by April 2019 at the very latest.
After eligibility is established, payments will be made within 12 weeks.
'Tens of thousands of people have been underpaid by £1,000s'
Amyas Morse, head of the National Audit Office, said today: “The facts of this case are that tens of thousands of people, most of whom have severely limiting disabilities and illnesses, have been underpaid by thousands of pounds each, while the department for several years failed to get a proper grip on the problem.
"The department has now committed to fixing this error by April 2019, but not everyone will be repaid all the money they have missed out on.”