Can this be right?

Su.e

Are there any pension experts who can point me in the right direction with this? About a year before I was 60 I claimed my Civil Service pension. I was asked to indicate whether I wished to apply for a refund of the Widows and Widowers pension scheme contributions I had made throughout my career. As I was still single I indicated that I did on the form provided. In August 2014 I received my pension and lump sum payment. Being so over the moon at escaping the Civil Service I probably didn't read everything very carefully and assumed the lump sum payment included the refund of these contributions.

Last week I received a letter from MyCSP the people who took over from Capita informing me of the amount of refund I was entitled to and asking me how I wanted to receive the payment. I could take the lump sum but if I chose this option I would have to pay between 40% and 55% tax on it as it was classed as an 'unauthorised' payment. Incidentally a premium almost equal to the amount of interest accrued had been deducted in the event that I marry at some point in time and decide to die before my spouse. My other option is to take a paltry pension of £112 per annum and a greatly reduced lump sum. How can this be classed as an unauthorised payment when I had no choice but to make the contributions even though they were not relevant to me as a single person? Also am I correct in assuming that had this payment been made in 2014 with the pension lump sum I wouldnt have been liable to pay tax on it? Finally is there any right to appeal in cases like this or do I have to simply acquiesce and choose an option? I currently do not pay tax as I am self employed on a low income. To say I'm feeling pretty miffed is an understatement! :mad:

greenglide

I currently do not pay tax as I am self employed on a low income.

But you are in receipt of the Civil Service pension as well, that is taxable as well as self employed earnings.

jem16

Su.e wrote: »

I could take the lump sum but if I chose this option I would have to pay between 40% and 55% tax on it as it was classed as an 'unauthorised' payment. Incidentally a premium almost equal to the amount of interest accrued had been deducted in the event that I marry at some point in time and decide to die before my spouse. My other option is to take a paltry pension of £112 per annum and a greatly reduced lump sum.

So let me just clarify what you are saying here?

You can either receive a refund of the contributions as you have no need for the Widow/Widower pension or you can elect to keep those contributions and get an extra £112pa pension plus lump sum on top of the pension and lump sum you got back in August 2014?

How can this be classed as an unauthorised payment when I had no choice but to make the contributions even though they were not relevant to me as a single person?

Most DB schemes make provision for a widow and dependents. Few schemes allow you to take a refund if single so it's just a benefit that is "lost".

Also am I correct in assuming that had this payment been made in 2014 with the pension lump sum I wouldnt have been liable to pay tax on it?

No you're not correct.

The lump sum you got in 2014 was your tax-free lump sum and was indeed tax-free.

The refund of the contributions initially saved you tax and NI ( as you paid a reduced rate of NI ) so if you want the refund that tax and NI has to be repaid as you're not entitled to it. It is not part of your tax-free lump sum.

Finally is there any right to appeal in cases like this or do I have to simply acquiesce and choose an option?

It's part of the scheme rules but it is also tax rules so there is no option.

I currently do not pay tax as I am self employed on a low income. To say I'm feeling pretty miffed is an understatement! :mad:

There is no reason to feel miffed. You haven't lost out on anything.

Su.e

But you are in receipt of the Civil Service pension as well, that is taxable as well as self employed earnings.

My CSP is very small so it does not take me over the threshhold.

There is no reason to feel miffed. You haven't lost out on anything

Except between 40 & 55% of the money if I take the lump sum.

The refund of the contributions initially saved you tax and NI ( as you paid a reduced rate of NI ) so if you want the refund that tax and NI has to be repaid as you're not entitled to it. It is not part of your tax-free lump sum.

But why 40 - 55%? I have never earned enough to pay that rate of tax. And all for a contribution I didnt want to make in the first place!

So let me just clarify what you are saying here?

You can either receive a refund of the contributions as you have no need for the Widow/Widower pension or you can elect to keep those contributions and get an extra £112pa pension plus lump sum on top of the pension and lump sum you got back in August 2014?

There is no mention of the contributions being kept so I presume not.

I still don't understand why they have waited 18 months to do this when it should have been done at the time my pension was activated. I can' t help but think that they are using some kind of loophole to not refund the full amount I paid.

jem16

Su.e wrote: »

I still don't understand why they have waited 18 months to do this when it should have been done at the time my pension was activated. I can' t help but think that they are using some kind of loophole to not refund the full amount I paid.

Actually you may be correct as I've looked into this further. If it was paid at the same time as your pension then there would have been no tax due. If it's paid more than a year afterwards then tax is due and it's classed as an unauthorised payment.

So if you can prove that you asked for the refund at the time I would put in a complaint now and take this further.

This link helps explain it.

http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=9&cad=rja&uact=8&ved=0ahUKEwjG65SlreDJAhWC6RQKHULDC9gQFghNMAg&url=http%3A%2F%2Fwww.pensions-ombudsman.org.uk%2Fwp-content%2Fuploads%2Fpo-2225.doc&usg=AFQjCNES_b94A5oa_kh4JHnzPLMGJgcu0Q&sig2=Liw-ZNTUr4835D2KUrVuVQ&bvm=bv.110151844,d.ZWU

Su.e

Thank you Jem. I thought I'd seen something somewhere to this effect. I will have a look at the link though I'm not sure how I can prove I signed to say I wanted the refund. I didn't take a copy :-(

jem16

Su.e wrote: »

though I'm not sure how I can prove I signed to say I wanted the refund. I didn't take a copy :-(

That's a pity.

However if you didn't request it why have they started processing it now? Had you been in touch again?

xylophone

I was asked to indicate whether I wished to apply for a refund of the Widows and Widowers pension scheme contributions I had made throughout my career. As I was still single I indicated that I did on the form provided.

Presumably My CSP has the original form?

CathA

I asked my friend about this for you, as she was in a similar position. She left the CS about 18 months ago, and when checking through her paperwork from them she noticed that there was no mention of the Widows pension refund. Apparently, when she spoke to them, they said that the system had changed and you have to ask for the refund. (Might be because MyCSP has taken over from Capita, but I'm not certain).

Anyway, she had it as a lump sum and she had to pay 40% tax on it like you. However, if you are self employed and on a low income, surely you will get a refund on your tax when you do your self assessment? Hope this helps.

jem16

CathA wrote: »

Apparently, when she spoke to them, they said that the system had changed and you have to ask for the refund.

The OP did ask for the refund though when she claimed her pension in August 2014.

Anyway, she had it as a lump sum and she had to pay 40% tax on it like you. However, if you are self employed and on a low income, surely you will get a refund on your tax when you do your self assessment? Hope this helps.

This is not a tax that would be refunded dependent on income. This is a tax which is being taken as a penalty for an Unauthorised Payment from a pension scheme.

Su.e

Jem I have found a letter today confirming that they received my claim form and that the details were passed by electronic data transfer to MyCSP back in May 2014. Surely this will be the proof I need?