Pension Calculation Error

pension_seeker

My elderly friend has been claiming her company pension since 2002. In 2008 she was contacted by the trustees to say they had miscalculated her pension and she had been overpaid since day one. The trustees decided to withhold any increases and reduce her pension until the overpayments were repaid. She did not question this decision as she assumed they must be correct in what they were saying.
In 2010 she received a letter confirming that all the overpayments had now been recouped and her monthly pension would revert to the correct amount and any increases due would recommence.
In 2012 she received yet another letter from the trustees advising her that the previous calculations were again incorrect and that she had still been overpaid, again since day one. In effect to ignore the letter she received in 2010.
The trustees have asked for a cheque for £5200 to make up for the overpayment, which she cannot pay.
This small company pension together with the state pension are her only source of income as she is a spinster and has no family for help or guidance. She just about manages to live off this income so any reductions will have a great impact.
My friend has contacted the PAS and the ombudsman for
assistance who have asked her to provide evidence of all her income and expenditure since 2002 and have asked if she would have continued to spend her income at the same rate had she been aware of the overpayment.
She is extremely anxious and upset by the situation she now finds herself in and is nervously awaiting the ombudsmans decision.
However she does keep asking 'how can I be sure I won't receive another similar letter from the trustees in a few years time'?
This appears to be maladministration on behalf of the trustees, will my friend ever have guarantee this won't happen again?

jamesd

pension_seeker wrote: »

This small company pension together with the state pension are her only source of income ... She just about manages to live off this income so any reductions will have a great impact ... who have asked her to provide evidence of all her income and expenditure since 2002 and have asked if she would have continued to spend her income at the same rate had she been aware of the overpayment.

Given her income it is very likely that she would have spent all of the income legitimately available to her on her living expenses, perhaps living a bit less frugally due to the higher income level, while telling the pension scheme if she was aware of any errors, so she received exactly what she was entitled to receive.

The reason she is being asked is that there is provision in law for a person who honestly believes that a wrong payment is correct to keep wrongly paid money in certain circumstances. Her circumstances and the assurance she received in 2010 that the amounts were then correct are a strong argument that the pension scheme should not be able to recover the past overpayment.

There is a smaller chance that it will also be found that the original correction should be undone.

She should not expect that her future income would be higher than she is due, so that might still drop, just that she might not be asked to repay any overpayment from the past as well.

While there is provision in law to help in cases like this one, that same law would be unlikely to apply in most cases to something like a single payment into a bank account from a stranger unless the recipient had repeatedly told their bank that they believed the payment was wrong and asked them to correct it. After enough diligent attempts to get the situation corrected it's possible in such circumstances that, provided the money has also eventually been spent, the bank or sender might have to bear the loss. But it's a much tougher hurdle in such cases than for this woman, who could undoubtedly expect that after one correction the amounts would surely be correct.

If the Ombudsman issues a ruling the pension payer is not really likely to be able to go and change things again. They would be expected by the Ombudsman to provide them with a correct justification and not go back on that at a later date. While this isn't a guarantee, it's about as close as it gets.

dunstonh

will my friend ever have guarantee this won't happen again?

No. It is never possible for anyone to guarantee such a thing could not happen again. Certainly getting one error is unusual. Getting two is extremely rare but no company can make any assurances of perfection.

My friend has contacted the PAS and the ombudsman for
assistance who have asked her to provide evidence of all her income and expenditure since 2002 and have asked if she would have continued to spend her income at the same rate had she been aware of the overpayment.

Is this a retail pension (i.e. annuity payment from an insurance company) or an occupational pension?
Did she go through the formal complaints process with the pension provider (you dont get access to the FOS if you dont do that first).

Legally, errors do not automatically mean you are entitled to the overpayment. There has to be a level of expectation that the figure is right.

Based on absolutely no information at all apart from what you have said, you would expect something along the lines that the first correction was fair and the company entitled to do it. However, the second one would have given her a level of certainty that the amount was correct and that the company may not be able to enforce repayment of that £5200. These are difficult to call as it will come down to documentation and interpretation.

pension_seeker

Thank you both for your replies.
This is a company pension. When my friend was contacted by telephone in July 2012 she was asked to submit a cheque by return of post for the outstanding overpayment of £5200. My friend explained she could not afford this so was given an alternative option of having the pension reduced by almost £100 per month, from £198 to £101. She reluctantly agreed to this as she was told failure make an immediate decision would result in the trustees deciding on a figure, which would most probably reduce her pension further. They required an agreed figure within 5 days so of course she felt under pressure to agree with their proposal.
In August 2012 her pension was reduced and has remained so. It was only after mentioning it myself did she decide to query this sequence of events with the PAS who put her in touch with the pensions ombudsman.

jamesd

The approach that she's following after discussion with you seems like the best one.

It appears that even after the first correction they are claiming that there was still an overpayment that averaged £43 a month over ten years, meaning that they are claiming to have been overpaying by about 50% even after the correction. I don't think it's credible to expect a pension recipient to believe that there could be such a large mistake after a correction had already been made.

I'm very unimpressed by the conduct of the pension provider, particularly their approach to trying to collect the money which amounted to agree with an excessive amount or we'll take whatever we like, without apparently any attempt to work out what was affordable even after they had been told of affordability issues. With an approach like that I think they deserve criticism and possibly a penalty imposed by the Ombudsman, perhaps in conjunction with a requirement to review other cases.

While it's impossible to know, I think it's most likely that the Ombudsman will rule that she does not have to repay the overpayment, or maybe that she has to do so over twenty years, getting normal increases along the way.

Please do let us know how this turns out. While mistakes happen and do need to be corrected in some reasonable way, sometimes there are cases like this one where the pension provider just mishandles things and intervention is needed.

Good work by you!

brewerdave

I find these posts quite frightening -I took an occupational pension early in Summer 2008 after a redundancy.
In October 2010 I was expecting a modest increase in my occupational pension -I actually received a monthly payment nearly £2k more than expected! When I queried with the administrator I was told that it was my pension plus annual increase plus a back payment due to a previous year's miscalculation of the pension increase due.
I couldn't understand this and asked for further clarification - this duly arrived but by my understanding of the Scheme rules they were incorrect!!
However, they again assured me that all was correct, and I have carried on receiving the uplifted amounts.
Now, come 2015, my pension will decrease markedly because I took the levelling option when I retired - one hopes that this doesn't trigger yet another "recalculation" of the 2010 increase as by then I will "owe" in excess of £10k:eek:
In the experience of the assembled pension experts-Do these types of error occur often:(

dunstonh

In the experience of the assembled pension experts-Do these types of error occur often

Errors are unusual. Not the norm. Most of these things are computerised nowadays. So, actual calculation errors are unusual. An error would typically occur if the input by the human was wrong.

Another one that pops up with providers and therefore possible with pension schemes as well as that when a new system is brought it, it can identify problems with the old system. So, out of the blue, many years later, you can find yourself being contacted.

pension_seeker

The latest update to my friends dilemma:
She has received an offer from Hellmann International Forwarders Pension Scheme in which they are willing to award her £400 by way of compensation and will slightly reduce the amount she has to repay each month BUT will increase the term of the repayment.
If she rejects this offer then it will be forwarded to the pensions ombudsman. She has been dealing with the ombudsman for some time so was under the impression that this would be the final stage however it would appear that it was some form of mediator who was attempting to resolve the issue prior to passing it on.
She was told that as she was unwilling to provide 10 years worth of bank statements as evidence of her financial situation this could jeopardise her claim.
She explained she is not unwilling to provide the statements, she simply could not afford to do so as her bank will charge £5 for each copy which she can not recoup.
Her income consists of the small company pension, the state pension and a winter fuel allowance so her finances are extremely limited.
She has until the end of August to decide whether to accept or reject Hellmans offer.
After these two errors with her pension I feel she will reject the offer on moral grounds and in favour of it being brought to the attention of the ombudsman.
I really feel very upset and angry for her as there doesn't seem to be any organisation who could advise or direct her as to what to do next.

As usual any input would be greatly appreciated.

atush

I agree with you, she should pass it on to the Ombudsman.

Include the letter of this new settlement offer, and the unreasonable time frame for acceptance of this, but especially the previous one (ie 5 days).

I agree the mistake was too large esp the second time and it is unreasonable for her to entertain the idea that the pension was incorrect after the first correction.