The Department for Work and Pensions has been forced to hand back thousands of pounds to benefit claimants after admitting that hundreds of fraud penalties were wrongly imposed.
The DWP has rescinded almost 200 so-called administrative penalties handed to benefit claimants suspected of fraud, after a review found that some should never have been offered. The revelations were reported by Civil Service World, which said the department blamed procedural errors and cases where there was insufficient evidence to justify the penalties.
Administrative penalties, known as ‘ad pens’, can be offered to claimants suspected of benefit fraud as an alternative to prosecution.
They are calculated at 50% of the amount overpaid, up to a maximum of £5,000, and are imposed on top of the requirement to repay the original benefit overpayment.
But the DWP cannot simply impose an administrative penalty. It offers one when its fraud investigators believe the evidence is sufficient to provide a realistic prospect of a criminal conviction.
The department’s latest annual report and accounts reveal that more than one in five penalties accepted by claimants during 2023-24 and 2024-25 were subsequently found to have been wrongly offered.
In total, 128 of the 567 penalties issued in 2023-24 were later rescinded. A further 69 of the 272 issued in 2024-25 were rescinded.
That means 197 penalties – around 23% of the total issued across the two years – have been cancelled, with affected claimants receiving, or being due to receive, refunds. However, they will still have to repay the underlying benefit overpayments linked to the penalties.
The DWP’s report said: “We identified that some administrative penalties that were offered and accepted should not have been offered in the first place and action has been taken to correct this.”
It said the reasons included “procedural errors” and evidence which, after being examined again, was not considered sufficient to provide a reasonable prospect of securing a conviction.
The department also said circumstances surrounding some cases had not been fully taken into account when decisions were originally made.
Civil Service World asked the DWP how much money was being refunded, but the department did not provide a figure.
Based on the minimum £350 penalty and the £5,000 maximum, the value of the cancelled penalties could be between £68,950 and £985,000. The review comes as the DWP faces a huge battle against benefit fraud.
The department estimates that the benefits system lost £6.8billion to fraud-related overpayments in 2025-26, while more than 600 fraud prosecutions were launched during the year.
Despite the much larger number of administrative penalties issued in previous years, DWP fraud investigation teams secured just 68 administrative penalties in 2025-26. The department says it has now tightened its procedures following the review.
Its annual report says the changes include updated training for criminal investigators, stronger operational guidance, a new permanent approach to deciding when an administrative penalty can be offered and greater involvement from independent senior decision-makers.
A DWP spokesperson told Civil Service World: “In an effort to identify opportunities for improvement we proactively reviewed our use of administrative penalties and identified a small number of cases where they were incorrectly applied.
“We have put this right by removing and refunding those penalties, contacting affected customers, and strengthening our processes to ensure decisions are made consistently and appropriately in future.”
The department said its counter fraud and compliance work generated £1.8billion in savings during 2025-26.
