The Department for Work and Pensions (DWP) has revealed that billions of pounds were incorrectly paid out in benefits last year, with overpayments reaching £9.9 billion. The latest Fraud and Error in the Benefit System report shows that 3.2 per cent of total benefit spending was overpaid in the financial year ending 2026, down slightly from 3.3 per cent the previous year. Underpayments totalled £1.2 billion, attributed to official errors by the DWP, local authorities or HMRC.
Universal Credit remains the largest source of overpayments in cash terms, with an estimated 8.5 per cent of its spending overpaid, worth £6.72 billion. Fraud accounted for £5.42 billion of these overpayments, while claimant error and official error contributed £690 million and £610 million respectively. The report highlights that 24 in every 100 Universal Credit claims were either overpaid or underpaid, with fraud driven primarily by earnings and employment issues, living together rules and capital.
The State Pension, which accounts for nearly half of all benefit spending at £146.1 billion, had the lowest overpayment rate at 0.2 per cent, valued at £230 million. However, underpayments remained at 0.3 per cent, worth £390 million, largely due to National Insurance contribution errors and historic Home Responsibilities Protection issues. Personal Independence Payment (PIP) saw a statistically significant increase in overpayments, while Pension Credit had the highest overpayment rate relative to expenditure.
A DWP spokesperson said: '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.' The DWP recovered £1.2 billion in overpayments during the year, including £0.6 billion from Universal Credit.
