DB pension transferred, now they want some money back

LHW99

It appears a number of pension cos are trying to claw back overpayments on DB Transfers

https://webcache.googleusercontent.com/search?q=cache:HGB3-IdUwgwJ:https://citywire.com/new-model-adviser/news/revealed-capita-demands-1m-db-transfer-money-back-from-members/a2423312&cd=12&hl=en&ct=clnk&gl=uk&client=firefox-b-e

(sorry its a cached, I can't access/find the original)

Pat38493

LHW99 said:

It appears a number of pension cos are trying to claw back overpayments on DB Transfers

https://webcache.googleusercontent.com/search?q=cache:HGB3-IdUwgwJ:https://citywire.com/new-model-adviser/news/revealed-capita-demands-1m-db-transfer-money-back-from-members/a2423312&cd=12&hl=en&ct=clnk&gl=uk&client=firefox-b-e

(sorry its a cached, I can't access/find the original)

This raises a number of interesting points:

"..... apologised for its error and offered to contribute to any advice fees the former member may incur if they have their DB transfer advice reviewed in light of the incorrect valuation. "

and

"Members should not benefit from an error and all parties should take steps to put the member in the position they would have been if the error had not been made"

These statements imply that it should be an option for the member to be put back how they were i.e. they can pay the whole transfer back and go back into the DB scheme.  However this option is not explicitly offered in the letters they are sending out.  If the IFA determines that the correct CETV value would have resulted in negative advice, putting the member back to how they would have been if the error had not been made, means giving them the option to go back into the DB scheme.  

Also - errors in calculations like this are not going to always be in the member's favour, but there doesn't seem to be nearly as much attempt to identify any underpayments made.

NedS

Pat38493 said:

LHW99 said:

It appears a number of pension cos are trying to claw back overpayments on DB Transfers

https://webcache.googleusercontent.com/search?q=cache:HGB3-IdUwgwJ:https://citywire.com/new-model-adviser/news/revealed-capita-demands-1m-db-transfer-money-back-from-members/a2423312&cd=12&hl=en&ct=clnk&gl=uk&client=firefox-b-e

(sorry its a cached, I can't access/find the original)

This raises a number of interesting points:

"..... apologised for its error and offered to contribute to any advice fees the former member may incur if they have their DB transfer advice reviewed in light of the incorrect valuation. "

and

"Members should not benefit from an error and all parties should take steps to put the member in the position they would have been if the error had not been made"

These statements imply that it should be an option for the member to be put back how they were i.e. they can pay the whole transfer back and go back into the DB scheme.  However this option is not explicitly offered in the letters they are sending out.  If the IFA determines that the correct CETV value would have resulted in negative advice, putting the member back to how they would have been if the error had not been made, means giving them the option to go back into the DB scheme.  

And how would that work if markets have materially shifted in the meantime? Having the option to "be put back" does not necessarily make it feasible.

squirrelpie

It seems to me that the law is wrong.

The pensioner has done nothing wrong, and has no practical means of checking for errors at the time of the transaction. They should be entitled to rely on the details provided at the time.

Also the trustees, and the pension fund itself, have done nothing wrong* and should not suffer a loss.

The error was committed by the administrator and they should bear the loss for their mistake. If necessary they could buy insurance in advance perhaps.

The law needs to change to acknowledge this situation, in my opinion.

* Unless it could be proven that their choice of administrator was somehow incompetent or malicious.

Pat38493

squirrelpie said:

It seems to me that the law is wrong.

The pensioner has done nothing wrong, and has no practical means of checking for errors at the time of the transaction. They should be entitled to rely on the details provided at the time.

Also the trustees, and the pension fund itself, have done nothing wrong* and should not suffer a loss.

The error was committed by the administrator and they should bear the loss for their mistake. If necessary they could buy insurance in advance perhaps.

The law needs to change to acknowledge this situation, in my opinion.

* Unless it could be proven that their choice of administrator was somehow incompetent or malicious.

Exactly - this would seem like how the law and the system should work.  If the company doing the estimates was liable for any errors, and had to get insurance to cover mistakes, they would make less mistakes in order to avoid higher insurance premiums.

retroman62

Any update on this? Surely the Ombudsman must have given a ruling on this important case by now?

Col349

retroman62 said:

Any update on this? Surely the Ombudsman must have given a ruling on this important case by now?

The last email I received said it would be 12 to 15 months (which is about now) but they were taking on more staff so hopefully would be quicker.
Will let you know when I hear anything more

vacheron

Could you imagine if your builder had their structural engineer calculate the size of a steel beam needed on your house extension and you accepted the quote and paid the price, only to have the builder come back 4 years later and say:

"Actually, my engineer cocked up his calculations, so we put in a larger beam than needed. In hindsight, this adversely affected my profit margin, so I'm here to dismantle your house and put in a smaller cheaper beam so that I can correct my error by pocketing the cost saving!" 

dunstonh

vacheron said:

Could you imagine if your builder had their structural engineer calculate the size of a steel beam needed on your house extension and you accepted the quote and paid the price, only to have the builder come back 4 years later and say:

"Actually, my engineer cocked up his calculations, so we put in a larger beam than needed. In hindsight, this adversely affected my profit margin, so I'm here to dismantle your house and put in a smaller cheaper beam so that I can correct my error by pocketing the cost saving!" 

That example is not comparable.  Profit margins are not the same as legal entitlement.

Milltir

I don't think it is that far off the mark. If the builder can demonstrate that the smaller beam meets the relevant design codes...