RBS Pension Overpayment Error

rhinestonemaiden · 13 March 2011 at 10:52AM

Royal Bank of Scotland has overpaid a pensioner and wants to recoup the money. Has anyone on here heard of that happening to others?

rhinestonemaiden · 26 March 2011 at 3:44PM

I have contacted the Daily Mail about the recent Royal Bank of Scotland Overpayments as I now believe there are many others who are being treated in a very hard handed way by RBS, a company largely owned by the Government and bailed out by the taxpayer. First of all a letter arrives demanding immediate repayment from the pensioner of the whole amount which could be many thousands of pounds. This is obviously very unfair and is against Office of Trading Standards Guidance to creditors, which states that large amounts should not be demanded by creditors (let alone pension providers!) to be paid in one go. Then next a letter is received asking for payment over twelve months, but this can still be hundreds of pounds a month - most pensioners can ill afford such a reduction in their income. The mistake is all Royal Bank of Scotland's, but this bank does not believe in paying for its mistakes, and likes to chase pensioners for small amounts, when it is quite ready to write off billions of bad debts.

It is a little known legal fact that under Section 91(1) of the Pensions Act 1995, pension providers of an occupational pension are not permitted to recoup overpayments by deducting them from future pension payments. This is unlawful even if the pensioner agrees. Such an agreement is invalid. The Pension providers do their best not to spread the consequences of Section 91(1) around, as it obviously is a problem for them, as they make so many errors... Meanwhile, pensioners are bullied by some pension providers into agreeing to recoupment which is unlawful.

downshifter98 · 26 March 2011 at 4:05PM

How I wish this was Fred Goodwin....

molerat · 26 March 2011 at 4:23PM

From http://www.sackers.com/latestnews/glossary?pageid=bdcf54eabf3b40da9262692e2c75f339

Trustees should rest easier now as section 266 of the Pensions Act 2004 amends section 91 of the 1995 Act to specifically allow for recoupment.

so no longer as clear cut as you painted.

From http://www.legislation.gov.uk/ukpga/2004/35/notes/contents

Section 266: Inalienability of occupational pension

1036.Section 91(1) of the Pensions Act 1995 sets out the general rule that entitlement or a right to an occupational pension cannot be assigned, surrendered or charged, or a lien or set-off be exercised in respect of it. Section 91(5) sets out a number of exceptions to that rule. This section amends section 91(5), at subsection (5)(f), to provide for a further exception to section 91(1), where a payment of a pension is made in error, giving rise to a monetary obligation in favour of the scheme. This amendment brings section 91 into line with what had always been the policy intent.

Debt_Free_Chick · 27 March 2011 at 12:39AM

rhinestonemaiden wrote: »

Royal Bank of Scotland has overpaid a pensioner and wants to recoup the money. Has anyone on here heard of that happening to others?

Very common. The pensioner is unlikely to win this one. The Trustees can only pay what the pensioner is entitled to and an overpayment is an amount in excess of their entitlement.

Best the pensioner can hope for is repayment of the amount owed by instalments, rather than a lump sum - has that been offered?

rhinestonemaiden · 28 March 2011 at 8:10PM

Yes, I was mistaken (I was looking at old law) and the links provided are very helpful. So as you say, the pension provider can now legally make deductions from pension payments by way of recoupment and the position is now unfairly weighted, in my view, against the pensioner who has received the overpayment. The pensioner may well have spent the money innocently assuming he was entitled to it. Then as well as a sudden reduction in his income, he is further punished by possibly receiving no income at all until the overpayment has been repaid. This cannot be fair or just to the pensioner. And perhaps the best way to highlight this is to report such injustice to the media. The Daily Mail is a champion of pensioners who have received overpayments and recently intervened in a case where a pensioner had received over the course of some years an overpayment of £7000 odd. As a result, the bank concerned waived recovery of the money. Apart from help from the media, the only other remedies are for the pensioner are 1. the government steps in (as it did in the recent past where a huge number of pensioners had been overpaid, including judges) and simply ordered the provider not to try to recover the payments or 2. there is the "change of position" defence available to the individual pensioner in a legal action for recovery. This defence has given rise to a number of legal cases, including the one involving an overpayment by the singer Phil Collins to another singer. I think she had to pay some of the overpayment back, but not all of it, because with some of it she had improved her lifestyle. What is clear from the cases is that the court has to perform a balancing act between the provider's claim of "unjust enrichment" of the pensioner and the pensioner's claim of "change of position" having spent the money and the court must always be mindful too of the fact that the problem was caused by the pension provider's mistake.

jh2009 · 29 March 2011 at 3:16PM

Something not explained in the media in this situation is that Pension Schemes are set up under Trust.

The Trustees have to run a trust for the benefit of all beneficiaries (pensioners, widow pensioners, members who've not drawn benefits, etc). So if an issue comes up where a pensioner has been overpaid, the Trustees have a legal duty to reclaim the overpaid funds. If they do not do so, then in reality the member is getting a benefit he/she hasn't paid for...... and effectively subsidised for by the other beneficiaries of the Scheme.

In theory, writing off an overpayment, could lead to insufficient funds in the scheme for the remaining members, and members could then have reductions applied to their benefits..... which is the total opposite of the original overpayment issue, and arguably much more serious.

Trustees do have to act reasonably in requesting any overpayment. Regretably, insensitive letters can be sent out at the first stage, but in the whole process, its normal in significant cases to meet with the pensioner and discuss their individual situation and come to a compromise. Sometimes imaginative solutions can be dreamed up. In the scheme i work for now, an example of this is that we got the member to agree to give up some of their future pension increases in order to keep part of the additional amount. This brought back in an actuarial balance back to the benefit in payment/benefit they were entitled to.

Although there are a lot of members who act in good faith, i have seen evidence that some members are sometimes aware an overpayment has been made, and do opt to chance it. This is especially true of members who have had a string of quotations or who have an expectation of what they will get, but suddenly receive a quotation that you would reasonably expect they should query (e.g. over 2 years quotes are sent out for £2000 pa, £2100 pa, £2,200 pa, £8000 pa - clearly the member ought to query why the sudden jump to £8k!). These are often the members who go to the media, as some members when you raise a problem are actually very co-operative and understanding with the scheme.

bazmack · 17 June 2011 at 7:49AM

RBS pension day has arrived and they have not paid my pension. I have e mailed them but not holding my breath. Anyone else in this position? Need to get money into my account as only have RBS and retirement pension of £105 pw to survive on.

Eden51 · 17 June 2011 at 9:42AM

Hi

I have phoned RBS pensions and they have had a 'problem' and none of their pensioners have been paid. They couldn't guarantee to get the payments through today but are 'hoping' to.They said to phone again this afternoon if no payment had arrived. The number to phone is 03332001017.

Here's hoping.......

Zelazny · 17 June 2011 at 10:01AM

I used to work directly in pensions admin on schemes in wind up, and because of reductions that were applied to some member's benefits we had to deal with this situation on a number of occasions.

As mentioned above, the way that pension schemes are set up means that in the case of an overpayment, there is an obligation to at least try to reclaim the money, and the Trustees don't have a lot of leeway in this. In the case of extreme financial hardship, they may be able to make an exception, and they certainly can agree very generous repayment terms. There were a few important rules of thumb that we used:

1) If someone is repaying an overpayment, it's unreasonable to take more than half of their current benefits in payment. E.g. if someone owes £1000 and is receiving £100 per month, the most we would seek to recover would be £50 a month, meaning repayment would take at least 20 months.
2) Always pay interest on any underpayments made to members, never charge it on overpayments that need to be recovered (unless the rules of the scheme state otherwise).
3) If it's a Pension Protection Fund (PPF) case, everyone has to repay the money that they have been overpaid before a scheme transitions to the PPF if possible. This is because the PPF has to charge interest on any money that has been overpaid to members, whereas the scheme generally has the discretion not to. In a couple of cases where the overpayment was large, the company that I work for arranged to have the money repaid to them and they paid the Scheme/PPF so that the member would avoid interest charges - this was very rare though.
4) The only possible exception to (3) is that if someone is in extreme financial difficulty the payment may be able to be waived. For a PPF case, this has to be documented and reviewed by the PPF because they may disagree with the assessment, meaning the member would face a hefty bill once the scheme transfers.

I'd definitely argue that stopping your pension entirely is grossly unfair, and point out that you need that money to live on. They shouldn't stop the pension or reduce it without your agreement or a court order, anyhow...

bazmack · 17 June 2011 at 10:02AM

Actually got a reply from my E mail. Thanks Eden51 anyway. RBS have said they would pay bank charges if incurred!!!!! Worked for Natwest/RBS for 23 yrs best thing I ever did was to leave.

RBS Pension Overpayment Error

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free