The shortfall is due to delays and restrictions in the claims process for Home Responsibilities Protection (HRP) before 2010, which helped parents and carers fill gaps in their National Insurance records to qualify for the full basic State Pension.
HRP was designed to support those who took time out of work to care for children or loved ones, but many women are now missing out on thousands of pounds in owed pension payments because of blocked claims.
Elaine Walker, director at pensions reclaim firm AskRose, said: “At AskRose alone, we have more than 100,000 claimants on our books, patiently waiting for HMRC to process their claims.
“The government has only allotted a fraction of what would be needed to give these women what they deserve.”
The Department of Work and Pensions (DWP) has cut payments from £101 million for 2024/25 to just £7 million for the year ending March 2026.
This reduction follows a decision to lower the original £1.2 billion set aside for claimants to just £29 million, based on low response rates from those contacted by HM Revenue and Customs (HMRC).
Of 67,000 applications submitted to HMRC, only 21,878 were passed to the DWP, resulting in just 12,379 arrears payments being issued.
Sir Peter Schofield, then permanent secretary at the DWP, told MPs in January that he remained concerned that many state pensioners continue to miss out on “the money that they are entitled to”.
He explained that the DWP had retained staff to process cases, but the volume of applications was far lower than expected.
Pensions reclaim companies say they have been blocked from submitting claims for the past nine months and are now limited to a small number of applications each week.
Ms Walker said: “The DWP has set aside £22 million for this year.
“With an average payout of more than £8,377, this means that they will be able to pay 2,676 claimants.
“HMRC has been dragging its feet on this issue for a long time – and it is staggering that the DWP has been putting resources into this while HMRC has been allowing it to waste those resources.
“And now the DWP has ring-fenced just a fraction of what is needed to repay the tens of thousands of applicants because HMRC appears to be deliberately obstructing the process.”
Eligibility for HRP applied to those who claimed Child Benefit for a child under 16, partners of Child Benefit claimants who were the main carer, or those who received Income Support or cared for someone receiving certain benefits.