The Department for Work and Pensions (DWP) has published new figures
The Department for Work and Pensions (DWP) has released fresh data revealing that billions of pounds were incorrectly paid out across the benefits system last year. The latest Fraud and Error in the Benefit System report estimates that 3.2 per cent of benefit expenditure was overpaid in the financial year ending 2026 (down from 3.3% in 2025), equivalent to £9.9 billion.
A further 0.4 per cent was underpaid, amounting to £1.2bn. The DWP stated that underpayments featured in the report occur as a result of official error, including mistakes or delays by the department, a local authority or HM Revenue and Customs (HMRC).
The DWP distributes benefits to approximately 24.3 million people, and total benefit expenditure reached £308.6bn in the financial year ending 2026, rising from £286.6bn the previous year.
The DWP confirmed that overpayments arise due to fraud, claimant error and official error:
The net loss from overpayments, following recoveries, stood at £8.6bn. The DWP confirmed that £0.6bn of Universal Credit, £0.2bn of other DWP benefits and £0.4bn of Housing Benefit was recovered throughout the year, reports the Daily Record.
The report is based on a sample of benefit claims scrutinised for accuracy by a specialist team, with claims sampled between September 2024 and October 2025.
A DWP spokesperson told the Daily Record: “We are determined to tackle fraud and error in the system and at just 3.2 per cent the overall rate is at its lowest since the pandemic.
“Our new Fraud Act gives us tough new powers to go after cheats and claw back taxpayers’ money – including accessing new data from banks to help find incorrect payments.
“We’ve also secured a number of high-profile recent convictions of people committing PIP and Universal Credit fraud – proof our sustained efforts are working.”
Pension Credit and PIP stand out
The figures reveal contrasting problems across various benefits. Universal Credit remains the largest source of overpayments in monetary terms, Pension Credit carries the highest overpayment rate relative to expenditure, and Personal Independence Payment (PIP) recorded a statistically significant increase in overpayments.
The State Pension continues to have the lowest overpayment rate, yet underpayments remain considerable due to the sheer scale of spending and ongoing National Insurance record complications.
Universal Credit
Universal Credit remained the primary driver of overpayments in cash terms.
The DWP estimated that 8.5 per cent of Universal Credit spending was overpaid in the financial year ending 2026, amounting to £6.72bn. This represented a fall from 9.5 per cent the previous year, though the DWP noted the change was not statistically significant.
Universal Credit spending rose from £65.3bn to £79.2bn, meaning monetary figures cannot be directly compared across the two years.
The report revealed that 24 in every 100 Universal Credit claims were either overpaid or underpaid, while 21 in every 100 were overpaid. Fraud represented £5.42bn of Universal Credit overpayments, while claimant error accounted for £690m and official error for £610m.
The primary drivers of Universal Credit fraud overpayments were earnings and employment, living together rules and capital, which together made up more than £6 in every £10 overpaid due to fraud.
The report stated that earnings and employment fraud, including under-declaration of income from work, dropped from 2.2 per cent to 1.5 per cent.
Universal Credit underpayments were estimated at 0.4 per cent, amounting to £350m.
State Pension
The State Pension had the highest expenditure of any DWP benefit at £146.1bn, representing just under half of total benefit spending.
The State Pension overpayment rate stood at 0.2 per cent, totalling £230m. The DWP noted this is consistently the lowest overpayment rate across all DWP benefits.
State Pension underpayments remained at 0.3 per cent, totalling £390m.
The report indicated that National Insurance contribution errors remained the principal cause of State Pension underpayments, with issues surrounding historic Home Responsibilities Protection comprising £6 in every £10 underpaid due to contribution errors.
Home Responsibilities Protection existed between 1978 and 2010 to safeguard the State Pension entitlement of people with domestic caring responsibilities.
Pension Credit
Pension Credit recorded the highest overpayment rate relative to expenditure for the second consecutive year. The overpayment rate was 10 per cent, worth £620m, compared with 10.3 per cent, worth £610m, the previous year.
The proportion of Pension Credit claims overpaid rose from 28 in 100 to 33 in 100. The DWP described this as statistically significant, noting it marked the third successive year in which Pension Credit recorded the highest proportion of overpaid claims.
Nevertheless, the report noted that the majority of Pension Credit overpayments were relatively modest, with more than half of all overpaid claims amounting to less than £10 per week.
Capital and abroad rules remained the two principal causes of Pension Credit overpayments, accounting for more than £5 in every £10 overpaid.
Claimant error linked to capital climbed from 1.8 per cent to 2.5 per cent. Pension Credit underpayments were estimated at 1.3 per cent, worth £80m. The primary cause was official error relating to additional amounts, largely connected to unpaid Extra Amount for Severe Disability.
Personal Independence Payment (PIP)
Personal Independence Payment recorded one of the most significant shifts in this year’s report.
The PIP overpayment rate rose to 2.3 per cent, worth £660m, up from 1.3 per cent, worth £330m, the previous year. The DWP confirmed this represented a statistically significant increase.
The proportion of PIP claims overpaid also increased from one in 100 to three in 100.
Functional needs, where claimants failed to report an improvement in their needs, remained the leading cause of PIP overpayments, accounting for more than £7 in every £10 overpaid on PIP. Fraud was the primary factor driving the increase. PIP fraud overpayments rose to 1.4 per cent, worth £410m, up from 0.4 per cent, worth £100m.
However, the report also draws attention to a separate “Not Reasonably Expected To Know” category. These are instances where a claimant was incorrectly overpaid, yet the DWP determined they could not reasonably have been expected to know they were required to report the change.
The value of PIP cases excluded from overpayment estimates under this category climbed to £1.03bn, up from £500m the previous year.
PIP underpayments held steady at 0.2 per cent, worth £70m. All PIP underpayments recorded in the report were attributable to award determination, meaning an incorrect entitlement decision made by the DWP.
Housing Benefit
Housing Benefit overpayments dropped considerably. The overpayment rate fell to 6.2 per cent, worth £800m, down from 7.2 per cent, worth £1.1bn, the year before.
The proportion of Housing Benefit claims that were overpaid also declined from 17 in 100 to 15 in 100.
The DWP attributed the reduction primarily to decreases in pension age Housing Benefit overpayments, including non-passported pension age claims.
Capital, referring to the under-declaration of financial assets, remained the leading cause of Housing Benefit overpayments, accounting for more than £4 in every £10 overpaid.
Housing Benefit underpayments were estimated at 0.3 per cent, worth £40m.
Disability Living Allowance
The rate of incorrect Disability Living Allowance (DLA) claims has more than doubled, rising from four in every 100 claims to nine in every 100, compared with figures last recorded in the financial year ending 2024.
The DLA overpayment rate stood at 0.9 per cent, equivalent to £70m, while underpayments climbed to 2.3 per cent, amounting to £190m. The DWP confirmed that all DLA underpayments highlighted in this year’s report were attributable to award determination.
