Pension Refund

Gatser

I am puzzled.
I received a letter from Pensions Company saying "We made a mistake with the value of your plan, sorry"
We have corrected this and enclose a cheque for £xxx
Although taxable, we will deal with this and there is no tax payable.

I am puzzled why they did not just increase my pension by £xxx??
Why go to the trouble of sending me a cheque?

Any ideas please?

Marcon

Have you asked the pension company? They are best placed to answer your query. Anything here is just guesswork.

Gatser

Marcon wrote: »

Have you asked the pension company? They are best placed to answer your query. Anything here is just guesswork.

Yes indeed... but it's the weekend and I thought someone here may have had this happen to them. Otherwise, I will call them... and post the answer.

SonOf

I am puzzled why they did not just increase my pension by £xxx??

It used to be the case that it had to be via the pension wherever possible but the rules changed some years back to allow direct to policyholder refunds.

Why go to the trouble of sending me a cheque?

Its cheaper and more beneficial to you.

Gatser

Thank you SonOf.
I will see what the official response is tomorrow and let you know

Dox

Gatser wrote: »

I am puzzled.
I received a letter from Pensions Company saying "We made a mistake with the value of your plan, sorry"
We have corrected this and enclose a cheque for £xxx
Although taxable, we will deal with this and there is no tax payable.

I am puzzled why they did not just increase my pension by £xxx??
Why go to the trouble of sending me a cheque?

Any ideas please?

Idea, yes - but with so little info it may be wide of the mark. If your pension was invested in some sort of unitised fund and/or with profits fund, it could be that the wrong amount was used to buy your annuity - not that unusual with those sorts of investment vehicles. The pension company has now discovered their error and it would be quite difficult to work out what it should 'buy' you in terms of extra pension, so the extra amount is being paid as a cash lump sum with the pension company footing the tax bill by way of apology.

Probably a bit of patience (i.e. waiting until their helpline opens in the morning) is the better option.

Look forward to hearing the answer!

SonOf

I will see what the official response is tomorrow and let you know

In case you are wondering why more beneficial, it allows you (in many cases) to pay the redress back into a pension to get tax relief or use an alternative tax wrapper that may be more appropriate. It avoids Lifetime allowance issues and HMRC didnt like that redress got tax relief that helped the provider to lower their payout at the expense of taxpayers.

Gatser

A detailed and clear reply from the pension company:
An error in the charges applied over a few months meant that I had suffered in terms of units within my WP and property funds.
Whilst a financial value had been calculated, it is not possible to add “new” money back into these funds, so the amount was paid to me whilst settling the tax with HMRC, as it was their error.

I have banked their cheque, happy with my new knowledge!
Thanks for your feedback too...