Billions in benefits paid out by mistake

completing a british tax credit ...

A record £1 million in overpaid benefits has been clawed back over the last year - but more than £2 billion remains unrecovered.

According to Department for Work and Pensions figures, overall fraud and error stands at 1.9%, compared with 2.1% in 2010. Overpayments due to official errors are down to just 0.3%, and those due to mistakes by the claimant are down to 0.5%.

Last year, around 5,000 people were prosecuted for benefit fraud, with another 6,000 administrative penalties handed down.

"We will not tolerate fraud and will pursue those who try to cheat the system," says minister for welfare reform David Freud.

"We have strengthened penalties and powers to combat fraud and error in the benefit system and are introducing reforms, such as Universal Credit, which will reduce fraud and error and is expected to save £1 billion when fully rolled out."

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Over the last six years, the government has toughened up on fraudsters, increasing loss-of-benefit penalties and financial penalties up to a maximum of £5,000.

It's also improved its detection methods, cross-checking data from the Real Time Information system to unearth undeclared income.

Despite this, though, around £2.2 billion was wrongly paid out and not recovered during the year.

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Of the total wrongful payments, £1.3 billion related to housing benefit, mostly because claimants had failed to declare their earnings correctly.

Meanwhile, around £450 million was overpaid in employment and support allowance (ESA), along with £330 million in pension credit, £100 million in jobseeker's allowance and £19 million in universal credit.

In many cases, the cash was paid out despite the fact that the claimant had moved abroad. In one headline-making example, housing benefit wrongly paid to a man who had long left the country was handed to Mohamed Abrini, the Brussels and Paris attacks suspect nicknamed 'the man in the hat'.

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However, error works both ways. This year, a record amount of benefits - £1.7 billion - was wrongly withheld from claimants, with people on Employment and Support Allowance underpaid the most.

The biggest rise in benefit underpayment was in Pension Credit, mostly thanks to official errors.

We need tougher penalties on those who abuse the system," says Baroness Cathy Bakewell, the Lib Dem spokesman on work and pensions. "But we also need action against administrators who are failing in their basic duty of care."

How we spend our pensions
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How we spend our pensions

Figures from Saga show that the over 50s now account for the majority of money spent by Brits on travel and tourism. They have the time to spare, the money, and they are healthy enough to take on the world.

A poll from Abta found that in the wake of pension freedoms, 35% of people were considering cashing in at least part of their pension to travel. A separate study by Senior Railcard found that pensioners take an average of three holidays a year, plus two weekends away, and 17 day trips.

Research from Senior Railcard found that retirees eat out an average of three times a month. However, one in ten do so more than twice a week, and one in three people said that one of the first things they did when they retired was to go out for lunch with their friends.

Of course, just because retirees want to enjoy themselves, it doesn't mean they are happy to throw money away. The vast majority are keen to eat at lunchtimes, when a fixed lunch menu tends to be cheaper, and canny retirees are skilled at tracking down pensioner special offers too.

Figures from the Office for National Statistics show that on average nearly a fifth of the money spent by people aged 65-74 is on leisure. This includes everything from the cinema and theatre to golfing and gardening. They spent more on this than on food, energy bills and transport.

A report by Canada Life found that retirees are spending £4,279 a year on having fun - that’s more than £1,000 more than they spend on boring essentials, and is a 74% increase over the past ten years. It went on to predict that this trend was set to continue, and that pension freedoms would encourage people to spoil themselves a bit more in retirement

Pensioner property wealth is now over £850 billion, and all these family homes don’t look after themselves. The Senior Railcard survey put home renovations in the top 20 activities people got stuck into on retirement, and figures from ABTA found that almost a third of people who were considering raiding their pension pots under the new pension freedoms planned to spend the cash on their home. This seems like an eminently sensible investment - looking after what is undoubtedly their most valuable asset.

Unsurprisingly, while some pensioners are very well off indeed, others are struggling with debt. Figures from Key Retirement found that the average retiree has £34,000 of debt.

Most of this is mortgage borrowing - in many cases driven up by the number of people who unwittingly signed up to an interest-only mortgage. However, credit cards, overdrafts, and loans are also common. It’s why so many pensioners have used pension freedoms to access enough cash to pay their debts.

The day to day basics are swallowing up their fair share of pensioner cash too. On average, people aged 65-74 spend a third of their weekly income on essentials like food and bills - which is hardly living the high life.
The bank of gran and grandad has become an increasingly vital source of cash for families. According to Key Retirement, of those who release equity from their property, 21% of them use the cash to treat their children and grandchildren. This includes an average of £33,350 to help children get onto the property ladder, £6,000 to buy them a new car, £11,000 on family weddings, and £24,780 giving grandchildren a helping hand.

While retirees are quite rightly spending what they need to enjoy retirement, they are hardly all throwing caution to the wind, buying flash cars and spending the kids' inheritance.

Most expect to have something left over to pass onto their family after their death. Some 69% expect to leave property in their wills, and 75% expect to leave cash - according to - because while baby boomers know how to have fun - they also know how to save for the future.

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