Employer made error pension deductions

James1822

I would appreciate some advice.

My employer has made an error in my pension deductions. 3 years ago I asked for my contribution to be increased from 6 to 8% (this would also increase my employers contribution from 7 to 10%). That was never actioned and they continued to take deductions at 6%. (I recall at some point during the last 3 years ringing them up and querying it and was told I was on the 8% rate).

So, they are now saying this error has come to their attention and I have two options: a) keep the deductions at 6% or b) pay the difference in one lump sum and continue thereafter at 8%.

My questions are:

• What about the employer's contributions? Presumably they would have to pay the equivalent lump sum at 10%?
  
• What about all the interest that would have been generated and which I have lost out on due to their error? Should I be pushing for that to be paid too? After all, this is their error.

Marcon

Can you afford to pay the extra in one lump sum? If not, say so and ask them to agree a payment plan.
Yes, the employer should pay their contributions, preferably in one lump sum but if you ask to pay in stages, they may argue for the same facility.
You should be put in the same position you would have been in had they not made the error, so they (let them do the legwork) should be asking the provider what the appropriate fund adjustment would be.

Hopefully the above will work well, but they may argue that you should have been able to see from your payslip that you weren't having 8% deducted - but cross that bridge only if you get to it. If in doubt, get some impartial, free help: https://www.pensionsadvisoryservice.org.uk

AnotherJoe

When something similar happened to employees in my company, but on a far smaller scale (in essence the pension company didn't buy any investments one month and this was discovered few months later) they rectified the situation by providing the investments at the price they were those months back.
In your case you've missed out on 2 years of company contributions and investment growth and I think the company should be putting you back in the position you would have been in had they done it properly by adding those back in.

Dox

AnotherJoe wrote: »

I think the company should be putting you back in the position you would have been in had they done it properly by adding those back in.

Isn't that exactly what the post above yours has already said?

James1822

Thanks for all the above. I will look at the pensions advisory service.

Fortunately, I have savings and probably have the funds to pay in one lump sum. However, that means I will lose out on the interest that that money would otherwise earn.

worried_jim

James1822 wrote: »

Thanks for all the above. I will look at the pensions advisory service.

Fortunately, I have savings and probably have the funds to pay in one lump sum. However, that means I will lose out on the interest that that money would otherwise earn.

The money earned via your pension should be far greater.

Dox

James1822 wrote: »

Thanks for all the above. I will look at the pensions advisory service.

Fortunately, I have savings and probably have the funds to pay in one lump sum. However, that means I will lose out on the interest that that money would otherwise earn.

You've had the use of the money/it has been earning interest because it hasn't been deducted from your pay. You can't have it both ways.

AnotherJoe

James1822 wrote: »

Thanks for all the above. I will look at the pensions advisory service.

Fortunately, I have savings and probably have the funds to pay in one lump sum. However, that means I will lose out on the interest that that money would otherwise earn.

Will they add in the missed employers contribution and buy you investments at the prices applicable over those two years?

MallyGirl

Probably best to not talk about interest when referring to a pension. It will be invested and the stock/fund prices could have gone up and down in that time. They should be able to calculate the effect of that based on the activity for the 6% that did actually go in.
Then you can discuss making it right.

James1822

Update: My employer has agreed to make (and pay) the necessary adjustments to the fund to put me in the position I would have been had the error not been made.


Thanks all for the advice.