MPS Rip-off

Ex-miner

My Mineworkers' Pension Scheme have let me know that, due to an administrative calculation error they have reduced my retirement pension by £11 per week! I took out my pension based on the original calculation and now find myself struggling to manage on £572 less per year! Are MPS allowed to do this, when it was their mistake in the first place?? Please help!!!

PensionTech

Yes, they can do this.

It's an unfortunate but common occurrence that people are overpaid pensions due to administrative errors. It's not what you want to hear, but the basic legal position is that you should be paid whatever your correct pension entitlement turns out to be - even if you have previously been led to believe that you were entitled to more. If they pay you more than you're entitled to, then it ends up (in principle) coming out of someone else's pocket, because the pension scheme is funded for all members as a whole. That's not to say that an overpayment to you will directly and immediately result in an underpayment to everyone else, because scheme funding and pension entitlement laws are much more complicated than that, but the fundamental point remains.

In fact, schemes aren't even allowed to continue overpaying benefits once they've realised the mistake, because of the funding implications - to do so creates an "unauthorised payment" which carries heavy tax fines for you and the scheme (and possibly other consequences for the scheme in the long term).

One way to think of it is to imagine it like a tax error. If HMRC make an error and you don't pay enough tax one year as a result, they're entitled to correct the error, and to reclaim any overpayment from you. If they just let you keep the money because it was their mistake rather than yours, then other taxpayers suffer.

There are frequently complaints about this kind of thing, as you might imagine, and they have to go through the pension scheme's internal dispute resolution procedure first, and then - ultimately, if they're pursued - to the Pensions Ombudsman. The Ombudsman takes the view that members should be returned to the position that they would have been in if the maladministration hadn't occurred (the maladministration, in this case, being the original miscalculation of your pension resulting in overpayments). So the Ombudsman would consider if you would - in his opinion - have done anything differently if they had been quoting and paying your pension correctly from the start, and whether that's resulted in an irreversible financial loss for you which you now can't mitigate in other ways. Would you, for instance, not have bought a car for your child? Would you have thought twice about giving all that money to charity because you needed every penny of your savings to live on? Would you have stayed in work because you wouldn't have been able to retire and stay afloat on the correct figures, and you now can't get a job because you've been out of work for too long? This is called a "change of position" defence and it's rarely effective, although it is quite common for people to be given awarded some nominal compensation for distress and inconvenience - depending on the size and severity of the mistake. By the time it's gone to the Ombudsman, there is indeed quite a lot of inconvenience involved.

From the figures you've given, it seems relatively unlikely to me that you would be able to argue that you have made irreversible decisions on the basis of that £11pw discrepancy which you would (provably) not have otherwise made, and have therefore suffered a loss - but this does all depend on your individual circumstances, and I'm not saying at all that it's impossible. You should consider it objectively, and decide whether it's reasonable to pursue a complaint.

The answer is probably that it's not a nice thing to happen and it's certainly someone else's fault, but the fact that there's blame doesn't always mean that there's a claim. Sorry to be the bearer of bad news.