DWP pension error could mean thousands of claimants have been underpaid their Universal Credit payment

Those on Universal Credit with jobs are likely enrolled into their work place pensions, or some make personal contributions into private schemes if they can afford it.

These pension payments are meant to be deducted before their Universal Credit is calculated, to avoid penalising people who receive state benefits – in some cases, temporarily - for saving for their old age.

However some people have been wrongly told that their pension contributions cannot be deducted.

Steve Web, partner at LCP and former pensions minister, first uncovered the issue after a reader questioned whether their pension contributions were being accounted for in their Universal Credit payments.

Following the initial query, more claimants reported receiving incorrect information from DWP staff - and as a result, they were shortchanged on Universal Credit payments.

Webb believes this error could affect many thousands of people who make personal pension contributions whilst receiving Universal Credit.

In his This is Money column, Webb wrote: "Paying into a pension has many attractions but particularly for people on Universal Credit.

"This is because your pension contribution should be deducted from your wage before they work out your benefit, giving you a bit extra each month.

Webb helped a reader recover around £100 in arrears and a £23 a month hike in his monthly Universal Credit payments.

Before Webb's intervention, the reader was "absolutely adamant"' his pension contributions could not be deducted from his earnings prior to his Universal Credit payments being calculated

In a second case, Webb helped another person get arrears of around £1,500.

The pensions expert added: "Whilst I am pleased we were able to get things sorted out for these readers, it makes you wonder how many more people have been misled.

"We will keep investigating until we are sure that all types of pension contributions are being correctly deducted for the millions of working people receiving Universal Credit."

The mistakes made raise wider questions for Webb about whether the DWP is processing other types of pension contribution correctly – a problem that could potentially affect more than a million people.

A DWP spokesperson said: "We have apologised to these claimants and are working with them to ensure their future Universal Credit entitlement is correct."

It confirmed that personal pension contributions should be deducted from earnings before Universal Credit is calculated.

However, evidence of contributions has to be provided before the end of a claimant’s assessment period to ensure accuracy.

The DWP added staff including work coaches at Jobcentres receive on-going training and access to guidance which is refreshed at regular intervals.

Webb encourages those who believe they may be affected to contact DWP with details of their pension payments.

Claimants can contact Universal Credit through their online account by visiting www.gov.uk/sign-in-universal-credit. They can also call the Universal Credit helpline on 0800 328 5644.

To appeal a decision, individuals can call for "mandatory reconsideration".