Thousands of women, potentially hundreds of thousands, are owed compensation because of government failings related to the way changes to the state pension age were made, a long-awaited official report has said.

The Parliamentary and Health Service Ombudsman (PHSO) said those affected should be compensated. But the recommended payouts of between £1,000 and £2,950 a person fall far short of the £10,000-plus that campaigners were calling for.

Depending on the numbers affected, the total bill could still end up being in the billions of pounds – more than £10bn if all women born in the 1950s were compensated.

However, the ombudsman cannot compel the government to pay compensation, and said the Department for Work and Pensions (DWP) had clearly indicated it would “refuse to comply”, which was “unacceptable”.

As a result, the PHSO said it was “taking the rare but necessary step of asking parliament to intervene”.

The prime minister’s spokesperson indicated Downing Street would be taking time to consider the report, but declined to say if compensation would be paid by the government, or whether an apology would be issued.

However, the former pensions minister Steve Webb, a Liberal Democrat MP from 1997 until 2015, said he thought the government would have to offer some sort of compensation.

Campaigners claim that almost 4 million women born in the 1950s had their retirement plans “plunged into chaos”, with many of them left thousands of pounds out of pocket after the DWP increased the state pension age from 60 to 65, and then to 66. Some say they received only 12 months’ notice of a six-year delay to their pension.

The ombudsman has been investigating the matter for several years, and in an initial report in July 2021 it found the DWP guilty of maladministration in the handling of the changes.

On Thursday, the PHSO issued its final report, which said “thousands of women may have been affected by DWP’s failure to adequately inform them that the state pension age had changed”.

It added that the department’s handling of the changes “meant some women lost opportunities to make informed decisions about their finances. It diminished their sense of personal autonomy and financial control.”

Campaigners for the Women Against State Pension Inequality (Waspi) group, which formed in 2015, had called for the ombudsman to recommend the highest possible amount of compensation (£10,000 or more).

However, the report said that looking at the sample of complainants’ cases, it would recommend compensation of between £1,000 and £2,950 to reflect a “significant and/or lasting injustice that has, to some extent, affected someone’s ability to live a relatively normal life”.

The total number of women who could in theory be due compensation is unclear. The report said compensating all 3.5 million-plus women born in the 1950s at its recommended payout level would cost £3.5bn to £10.5bn in public funds, but it added: “We understand not all of them will have suffered injustice.”

The report went on to say: “There will likely be a significant number of women born in the 1950s who have … suffered injustice because of maladministration in DWP’s communication about the 1995 Pensions Act. We would have recommended DWP remedy their injustice.”

Many women say they had expected to receive their pension at 60, then discovered their state pension age had increased by perhaps four, five or even six years. The government did not write to any of the women affected until almost 14 years after the law was passed.

Waspi has said hundreds of thousands of women did not have enough time to make alternative plans, and that some had had to sell their homes, go without essentials or rely on their elderly parents because of the way the changes were made and communicated. Some have claimed the changes would leave them tens of thousands of pounds out of pocket.

One sample complainant, “Ms U”, told the ombudsman she had suffered a financial loss of £39,000, “being the amount I would expect to receive from my perceived [state pension age] to my actual [state pension age]”.

“Ms W”, meanwhile, said she had lost about £45,000 because of reaching state pension age six years later than she had expected.

Others mentioned even bigger sums. “Ms E” reported losing about £186,000 in work she would have found had she been told about the age increase, while “Ms W” said she lost more than £442,000 in additional pay she would have earned had she stayed in her job.

However, the ombudsman said: “We do not consider these losses could amount to direct financial loss in accordance with our guidance since they result from different choices Ms E and Ms W would or might have made if they had known their state pension age sooner.”

Angela Madden, the chair of Waspi, said: “The DWP’s refusal to accept the clear conclusions of this five-year-long investigation is simply unbelievable. One of the affected women is dying every 13 minutes, and we just cannot afford to wait any longer.”

She added that all political parties “owe it to the women affected to make a clear and unambiguous commitment to compensation. The ombudsman has put the ball firmly in parliament’s court, and it is now for MPs to do justice to all the 3.6million women affected.”

A DWP spokesperson said: “We will consider the ombudsman’s report and respond in due course, having cooperated fully throughout this investigation.”

They added: “The government has always been committed to supporting all pensioners in a sustainable way that gives them a dignified retirement while also being fair to them and taxpayers.”

Webb told the BBC that in an election year he did not think parliament would “vote for nothing to be done”, adding: “So, I think we will end up with some form of rough justice – I would guess in that £1,000 to £3,000 range that the ombudsman has recommended.”

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