The Department for Work and Pensions is handing back thousands of pounds in so-called “administrative penalties” that benefit claimants suspected of fraud have paid as part of deals to avoid prosecution, it has emerged.
DWP estimates that the benefits system lost £6.8bn to fraud-related overpayment in 2025-26. During the year, more than 600 fraud prosecutions were launched.
Administrative penalties – or ad pens, for short – can be offered to benefit claimants suspected of fraud as an alternative to prosecution. Ad pens are calculated at 50% of the overpaid amount, capped at £5,000, and come on top of measures to repay the actual overpayment.
DWP cannot impose ad pens on benefits claimants. Instead, it offers them as an option when the evidence gathered by fraud investigation teams is considered to be “sufficient to afford a realistic prospect of conviction”.
However, DWP’s latest annual report and accounts states that a review has found that more than one-in-five of the ad pens accepted by benefits claimants in 2023-24 and 2024-25 should not have been offered by the department and that almost 200 suspected fraudsters are getting refunds.
“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,” the report says. “Reasons for this included procedural errors and evidence gathered which, on re-examination, was not deemed sufficient to have a reasonable prospect of securing a conviction or where circumstances of a case were not fully factored into the decision making.”
According to the department, 567 ad pens were issued in 2023-24, only for 128 to be rescinded subsequently. Sixty-nine of the 272 ad pens issued in 2024-25 have been rescinded. The figures mean that 23% of benefit claimants who were offered and accepted an ad pen over the two years will either have already received a refund or will be in line for one. They will, nevertheless, still be required to continue repaying the overpayments the penalties related to.
Civil Service World asked DWP for the total value of rescinded ad pens for the two years but it declined the opportunity to provide the information. In line with the upper limit for the penalties, the figure could be as high as £985,000. The minimum level for an ad pen is £350, meaning the amount being rescinded by DWP cannot be lower than £68,950.
DWP’s latest annual report and accounts states that its ad pen review has resulted in “updated training” for all criminal investigators, enhanced operational guidance, a new “permanent approach” to deciding when an ad pen can be offered, and bringing in more independent senior decision makers.
According to the document, DWP’s fraud investigations teams secured just 68 administrative penalties in 2025-26.
A DWP spokesperson said: “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 credits its counter fraud and compliance function with generating £1.8bn of savings in 2025-26.