The Department for Work and Pensions (DWP) has published new figures
The Department for Work and Pensions (DWP) has released new data revealing billions of pounds were paid out incorrectly across the benefits system last year. The latest Fraud and Error in the Benefit System report estimates 3.2 per cent of benefit spending was overpaid in the financial year ending 2026 (down from 3.3% in 2025), amounting to £9.9 billion.
Additionally, 0.4 per cent was underpaid, totalling £1.2bn. The DWP stated that underpayments featured in the report occur due to official error, including mistakes or delays by the department, a local authority or HM Revenue and Customs (HMRC).
The DWP provides benefits to approximately 24.3 million people and total benefit spending reached £308.6bn in the financial year ending 2026, up from £286.6bn the previous year.
The DWP explained that overpayments occur because of fraud, claimant error and official error:
- Fraud accounted for £6.8bn of overpayments
- Claimant error for £2bn
- Official error for £1.1bn
The net loss from overpayments, following recoveries, stood at £8.6bn. The DWP said £0.6bn of Universal Credit, £0.2bn of other DWP benefits and £0.4bn of Housing Benefit was recovered during the year, reports the Daily Record.
The report is based on a sample of benefit claims examined for accuracy by a specialist team. The claims were 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 in the spotlight
The data reveals contrasting problems across various benefits.
Universal Credit remains the biggest source of overpayments in monetary terms, Pension Credit carries the highest overpayment rate relative to expenditure, while 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 contributor to overpayments in cash terms.
The DWP estimated 8.5 per cent of Universal Credit spending was overpaid in the financial year ending 2026, worth £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 between the two years.
The report revealed that 24 in every 100 Universal Credit claims were either overpaid or underpaid, with 21 in every 100 being overpaid. Fraud represented £5.42bn of Universal Credit overpayments, while claimant error amounted to £690m and official error totalled £610m.
The primary drivers of Universal Credit fraud overpayments were earnings and employment, living together rules and capital, which collectively represented more than £6 in every £10 overpaid due to fraud.
The report indicated 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, valued at £350m.
State Pension
State Pension had the largest 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, valued at £230m. DWP stated this is consistently the lowest overpayment rate across all DWP benefits.
State Pension underpayments remained at 0.3 per cent, valued at £390m.
The report noted that National Insurance contribution errors remained the biggest cause of State Pension underpayments, with issues surrounding historic Home Responsibilities Protection accounting for £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.
READ MORE: DWP fining 20 groups of Universal Credit claimants £50
Pension Credit
Pension Credit had 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 confirmed this was statistically significant, marking the third successive year that 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 overpaid claims involving less than £10 per week.
Capital and abroad rules remained the two primary 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 principal cause was official error involving additional amounts, predominantly linked to unpaid Extra Amount for Severe Disability.
Personal Independence Payment (PIP)
Personal Independence Payment experienced one of the most significant shifts in this year’s report.
The PIP overpayment rate soared to 2.3 per cent, worth £660m, up from 1.3 per cent, worth £330m, the previous year – a rise the DWP confirmed was statistically significant.
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 highlights a separate “Not Reasonably Expected To Know” category. These are cases where a claimant was incorrectly overpaid, but DWP said they would not reasonably be expected to know they needed to report the change.
The value of PIP cases excluded from overpayment estimates under this category jumped to £1.03bn, up from £500m the previous year.
PIP underpayments held steady at 0.2 per cent, worth £70m. All PIP underpayments in the report were attributed to award determination, meaning an incorrect entitlement decision made by 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 previous year.
The proportion of Housing Benefit claims overpaid also decreased from 17 in 100 to 15 in 100.
DWP attributed the decline largely to reductions in pension age Housing Benefit overpayments, including non-passported pension age claims.
Capital, meaning 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
Disability Living Allowance (DLA) incorrectness increased from four in 100 claims to nine in 100 claims compared with the previous measurement in the financial year ending 2024.
The DLA overpayment rate stood at 0.9 per cent, valued at £70m, while underpayments increased to 2.3 per cent, amounting to £190m. The DWP stated that all DLA underpayments in this year’s report were attributed to award determination.
