Thousands of Britain's poorest pensioners are missing out on benefits worth �1,000 a year, according to a government watchdog.

Around 770,000 of the two million low-income households entitled to the Minimum Income Guarantee (MIG) - the top-up to the basic pension - fail to make a claim, the National Audit Office says.

The benefits system is now so complicated that take-up of benefits is at catastrophically low levels

David Willetts

It argues that the Department for Work and Pensions should try harder to get older people to claim their full entitlement, and the problem is worse than when Labour came to power.

NAO director Jeremy Lonsdale, who produced the figures, admitted that many pensioners may have been confused by changes to the benefits system.

But Tory MP Edward Leigh, chairman of the House of Commons public accounts committee, said the extra �22 that some pensioners miss out on "can make the difference between barely surviving and living an enhanced life".

'Mystery' benefit

In 1999, pensioners were moved from income support to MIG, but next October Chancellor Gordon Brown is replacing the benefit with a Pension Credit.

According to the NAO, 76% of pensioners receiving MIG said they had not heard of it.

"It was income support two years ago, then it was MIG - now it is going to be Pension Credit," said Mr Lonsdale.

Pensioners have to work through the 'mind-numbing complexity' of the benefits system

"It is part of the problems of confusion around take-up."

Mr Leigh described the figures as "startling". "That they do not claim is in part down to the admirable culture of self-reliance in which so many of them grew up," he said.

"But it is also a consequence of a lack of effort over the years by officialdom to make pensioners aware of their entitlements and to help and encourage them to find their way through the mind-numbing complexity of the benefits system."

Family help

However, a DWP spokesman insisted that getting pensioners to claim cash they were entitled was "a key priority".

"In particular we have targeted help at the poorest pensioners," he said.

Improving benefit take-up is the responsibility of the new Pensions Service.

But the NAO says many of the two million low-income pensioners did not know about the benefits they were entitled to and sought out friends and family for information, rather than official sources.

Elderly people with impaired eyesight or hearing, those living in rural areas or from ethnic minorities faced particular difficulties, the report said.

'Life changing benefit'

The NAO estimated that between �930m and �1,860m in benefits went unclaimed by OAPs in 1999-2000.

Between a quarter and a third of those entitled failed to claim MIG, worth about �12.80 a week, a third did not claim council tax benefit and one in 10 lost out on housing benefit.

NAO head Sir John Bourn, auditor and comptroller general, said: "Taking up entitlements can have a significant effect on the lives of these pensioners since much of the additional money is spent on a range of essential items such as nutritious food and clothing."

While accepting that DWP had simplified the MIG form to make it easier to claim the benefit, more needed to be done, he said.

'Devastating' figures

The DWP needed to make use of the contacts elderly people have with nurses and GPs, and work with local authorities and voluntary bodies, to help them find reliable sources of information about benefit entitlements, the NAO report said.

Shadow work and pensions secretary David Willetts said the NAO figures were "devastating" and stressed: "The benefits system is now so complicated that take-up of benefits is at catastrophically low levels.

"This is a crisis of the government's own making - they keep fiddling with the system and have ended up putting off the very people they want to help."

Lib Dems pensions spokesman Steve Webb said government figures showed that 3m of some 4.1m households entitled to the Pensions Credit will be collecting it by 2005-6.

"The only way to ensure take-up is by delivering support through the basic state pensions, which is claimed by all pensioners," he added.

'Encouraging take up'

But the DWP spokesman argued that the government had launched its "biggest" benefits take-up campaign ever in 2000, resulting in 140,000 pensioners households being �20 a week better off.

Pensioners had been able to claim MIG over the phone and the form was slashed from 40 to 10 pages.

"We continue to pursue a diverse range of initiatives to encourage take up of benefits," he said.