The Department for Work and Pensions (DWP) has published new figures showing £9.9 billion was lost to benefit fraud and payment errors in the financial year ending 2026, according to official DWP data.
The Department for Work and Pensions (DWP) has released new data revealing that billions of pounds were incorrectly distributed across the benefits system last year. The latest Fraud and Error in the Benefit System report estimates 3.2 per cent of benefit expenditure was overpaid in the financial year ending 2026, equivalent to £9.9 billion.
A further 0.4 per cent was underpaid, worth £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, with total benefit expenditure reaching £308.6bn in the financial year ending 2026, up from £286.6bn the previous year.
The DWP noted that overpayments arise due to fraud, claimant error and official error. Fraud accounted for £6.8bn of overpayments, claimant error for £2bn, and official error for £1.1bn.
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 draws on a sample of benefit claims scrutinised for accuracy by a specialist team. The claims were sampled between September 2024 and October 2025.
The data highlights varying concerns across different benefits. Universal Credit continues to be the largest source of overpayments in monetary terms, Pension Credit has the highest overpayment rate as a proportion of expenditure, and Personal Independence Payment (PIP) saw a statistically significant increase in overpayments.
State Pension maintains the lowest overpayment rate, though underpayments remain substantial due to the magnitude of expenditure and persistent National Insurance record problems.
Universal Credit continued to be the primary contributor to overpayments in cash terms. The DWP calculated that 8.5 per cent of Universal Credit expenditure was overpaid in the financial year ending 2026, amounting to £6.72bn. This represented a decrease from 9.5 per cent the previous year, though DWP noted the change was not statistically significant.
Universal Credit expenditure 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, with claimant error accounting for £690m and official error representing £610m. The primary drivers of Universal Credit fraud overpayments were earnings and employment, living together rules and capital, which collectively accounted for more than £6 in every £10 overpaid through fraud.
The report indicated that earnings and employment fraud, including under-declaration of income from work, declined 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 represented the largest expenditure of any DWP benefit at £146.1bn, comprising 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. According to the report, National Insurance contribution errors continued to be the primary cause of State Pension underpayments, with problems surrounding historic Home Responsibilities Protection accounting for £6 in every £10 underpaid due to contribution errors.
Home Responsibilities Protection operated between 1978 and 2010 to safeguard the State Pension entitlement of individuals with domestic caring responsibilities.
Pension Credit recorded the highest overpayment rate relative to spending for the second consecutive year. The overpayment rate reached 10 per cent, valued at £620m, compared with 10.3 per cent, valued at £610m, the previous year.
The proportion of Pension Credit claims overpaid rose from 28 in 100 to 33 in 100. DWP indicated this was statistically significant and represented the third successive year that Pension Credit had the highest proportion of claims being overpaid.
Nevertheless, the report noted most 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 principal causes of Pension Credit overpayments, collectively accounting for more than £5 in every £10 overpaid. Claimant error linked to capital rose 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 involving additional amounts, predominantly linked to unpaid Extra Amount for Severe Disability.
Personal Independence Payment (PIP)
Personal Independence Payment saw one of the most significant shifts in this year’s report. The PIP overpayment rate increased to 2.3 per cent, worth £660m, from 1.3 per cent, worth £330m, the previous year. The DWP described this as a statistically significant rise. The proportion of PIP claims overpaid also climbed 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 driver behind the increase. PIP fraud overpayments rose to 1.4 per cent, worth £410m, 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 the DWP stated 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 increased to £1.03bn, up from £500m the previous year. PIP underpayments remained at 0.2 per cent, worth £70m. All PIP underpayments in the report were due to award determination, meaning an incorrect decision on entitlement by DWP.
Housing Benefit overpayments fell significantly. The overpayment rate dropped to 6.2 per cent, worth £800m, from 7.2 per cent, worth £1.1bn, the previous year. The proportion of Housing Benefit claims overpaid also fell from 17 in 100 to 15 in 100.
DWP attributed the decline primarily to reductions in pension age Housing Benefit overpayments, including non-passported pension age claims. Capital, meaning under declaration of financial assets, remained the principal 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 (DLA) incorrectness increased from four in 100 claims to nine in 100 claims compared with when it was last measured in the financial year ending 2024. The DLA overpayment rate was 0.9 per cent, worth £70m, while underpayments rose to 2.3 per cent, worth £190m. DWP confirmed that all DLA underpayments recorded in this year’s report were the result of award determination.



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