Pension overpayment - provider wants to take back £20k

Cbu0210
Cbu0210 Posts: 9 Forumite
First Post Name Dropper
Hi all. 
I withdrew my DB pension from (Removed by Forum Team) in 2018, for which I received a sum in full and final settlement. I reinvested in a personal drawdown pension and used the tax free lumpsum to pay off some debt, and the rest of the lump sum towards a deposit for a mortgage on a new home. I'm still employed full-time, but draw a small pension from this investment to supplement my income and over pay my mortgage. I'm due to retire in 2 years. I was hoping to use the lump sums from my current employment pension, and a previous deferred  pension, to clear the rest of my mortgage so i'd be mortgage free. 
I've now had a letter from (Removed by Forum Team) to tell me that their actuaries ([Removed by Forum Team]) made a mistake when they did their original figures and overcalculated by over £20,000, and they want to take it back.
Apart from the demand for the overpayment back, this would also have tax implications for the lump sum, I'm thinking, as that will have been overpaid, too?
Apologies for the long text - I'm in complete shock. It wasn't a huge amount to begin with and, had I been given a figure of £20,000 less, I wouldn't have transferred out. 
I've started the complaints process, but not overly hopeful and so scared. 
It would be good to hear from anyone else who's been through/going through this and any advice would be gratefully received. 
Many thanks. 

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Comments

  • Marcon
    Marcon Posts: 10,594 Forumite
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    edited 26 October 2023 at 9:51AM
    Cbu0210 said:
    Hi all. 
    I withdrew my DB pension from (Removed by Forum Team) in 2018, for which I received a sum in full and final settlement. I reinvested in a personal drawdown pension and used the tax free lumpsum to pay off some debt, and the rest of the lump sum towards a deposit for a mortgage on a new home. I'm still employed full-time, but draw a small pension from this investment to supplement my income and over pay my mortgage. I'm due to retire in 2 years. I was hoping to use the lump sums from my current employment pension, and a previous deferred  pension, to clear the rest of my mortgage so i'd be mortgage free. 
    I've now had a letter from (Removed by Forum Team) to tell me that their actuaries ([Removed by Forum Team]) made a mistake when they did their original figures and overcalculated by over £20,000, and they want to take it back.
    Apart from the demand for the overpayment back, this would also have tax implications for the lump sum, I'm thinking, as that will have been overpaid, too?
    Apologies for the long text - I'm in complete shock. It wasn't a huge amount to begin with and, had I been given a figure of £20,000 less, I wouldn't have transferred out. 
    I've started the complaints process, but not overly hopeful and so scared. 
    It would be good to hear from anyone else who's been through/going through this and any advice would be gratefully received. 
    Many thanks. 

    What's the  exact wording on the indemnity form you will have signed at the time of the transfer?
    Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!  
  • xylophone
    xylophone Posts: 44,322 Forumite
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    edited 26 October 2023 at 9:51AM
    Are you saying that you took the advice of a Pension Transfer Specialist and that subsequent to this, your DB pension was transferred into a DC scheme from which you took the maximum PCLS and a regular income?

    The transfer value was calculated incorrectly by (Removed by Forum Team) resulting in an overpayment of £20,000 to the receiving  scheme? 

    You could try for some initial assistance here.


    https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-problems/dealing-with-mistakes-and-overpayments-with-your-pension#:~:text=If a pension scheme provider,the overpayments to be returned.


    In the meantime, have you obtained a state pension forecast?

    https://www.gov.uk/check-state-pension





  • Thank you for your replies. The agreement was 'in full and final settlement'.
    I transferred to a private pension plan, after taking professional advice based on the transfer value I was offered. 
    I have had a state pension forecast and can take that next year if I decide to.
    I have googled it but there's very little information on the internet. I did find one article, written in August, which seems to be about this subject, but I can't access it as I'm not in the Financial Services profession. 
    I will speak to Moneyhelper, thank you, and look at the other threads that you have highlighted. 
    I wasn't sure whether I should ask on here, so I appreciate you all taking the time to offer advice and suggestions, many thanks. 
  • LHW99
    LHW99 Posts: 4,197 Forumite
    First Anniversary Name Dropper First Post
    I transferred to a private pension plan, after taking professional advice based on the transfer value I was offered.

    Have you had any contact from the adviser regarding this, or only from the DB pension Co?

  • Pat38493
    Pat38493 Posts: 2,605 Forumite
    First Anniversary First Post Name Dropper Combo Breaker
    Unfortunately there has been a few threads like this recently, and some of the experts on here have stated that pension administrators do have the legal right to claim money back from members that they have overpaid.

    It's been discussed on other threads that it seems a bit strange that the administrators who made the mistake don't have to be insured or have any apparent penalty from making these mistakes.  Even if legal action has to be taken against the member to recover the money, I think the legal costs would come from the members fund and not the administrator!

    However - you probably don't have anything to lose by challenging this every step of the way, find out what your financial adviser says about it and make sure you have all the relevant documents.  If for example it should have been obvious to the IFA that there was an error, it might be that their insurance has to bear some responsibility. 
  • xylophone
    xylophone Posts: 44,322 Forumite
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    pension administrators do have the legal right to claim money back from members that they have overpaid.

    This is the case but it is surely time and more than time that responsibility falls where it lies, rather than with the victims of errors?


    https://www.thepensionsregulator.gov.uk/en/document-library/scheme-management-detailed-guidance/administration-detailed-guidance/transfer-values


    2. As from 1 October 2008, it is the responsibility of the trustees to take the decisions on which the calculation of cash equivalent transfer values (CETVs) is based. Previously, the calculation had to be certified by the scheme's actuary as consistent with a professional technical standard.

    3. Whilst the guidance is primarily aimed at trustees, it will also be relevant to actuaries and others involved with transfer values, such as scheme administrators. It is also likely to be of interest to employers.

    4. Trustees may find it helpful to discuss the more technical aspects of this guidance with their actuary as part of their overall discussions on the assumptions to be adopted for calculating CETVs.



    In no way whatsoever was it the responsibility of the OP to calculate the CETV of his DB pension or to check it once calculated.

    He has made irrevocable decisions on the basis of that CETV.

    It has taken the Administrators over five years to discover their actuary's error.

    As a layman, how could he possibly have known that it was incorrect, either at the time or since?

    Neither  (judging by the above) was  the calculation the responsibility of his Pension Transfer Specialist (although as a professional, the PTS could have queried it had he had reason to suppose that it was incorrect).

    Given the fact that such values can differ so widely between different schemes, unless the CETV was egregiously out of kilter with what might have been expected, it is very possible, even perfectly likely, that there were no grounds for suspicion.

    The error was made by the actuary employed by the Trustees/Administrators.

    It seems to me that their first recourse should be to the actuary (the professional in the case), rather than to the scheme member.

    If a doctor/lawyer/architect makes a proven mistake, then responsibility for correcting it lies with him/his insurers?

    Why should it be any different for the Trustees/Administrators of pension schemes?



  • Pat38493
    Pat38493 Posts: 2,605 Forumite
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    I don't disagreee @xylophone except that I don't think pension trustees normally have the technical skills to make, or even check, these estimates and I don't think any but the largest pension scheme is going to employ an actuary to do it directly - my impression is that the outsource these tasks.  

    Also - the above quote says that it's the responsibility of the trustees to make the decision on which the calculation is based, but this still leaves it open as to who is liable if the calculation, as defined, is done wrong.

    I agree that it's scandalous that pension schemes try to force the member to pay back these items, except in cases where maybe it should have been completely obvious to everyone that a mistake was made (10 times the amount or whatever).
  • MeteredOut
    MeteredOut Posts: 1,288 Forumite
    First Post First Anniversary Name Dropper
    edited 26 October 2023 at 4:39PM
    Pat38493 said:
    I don't disagreee @xylophone except that I don't think pension trustees normally have the technical skills to make, or even check, these estimates and I don't think any but the largest pension scheme is going to employ an actuary to do it directly - my impression is that the outsource these tasks.  

    Also - the above quote says that it's the responsibility of the trustees to make the decision on which the calculation is based, but this still leaves it open as to who is liable if the calculation, as defined, is done wrong.

    I agree that it's scandalous that pension schemes try to force the member to pay back these items, except in cases where maybe it should have been completely obvious to everyone that a mistake was made (10 times the amount or whatever).
    OP, is the £20K a significant portion of the overall payout. You said "It wasn't a huge amount to begin with".

    eg, if it was 50%, could the trustees state that it would be obvious it was an overpayment?
  • A material overpayment of a pension in payment might be reasonably construed as something that should have been apparent to the pensioner. However, CETV calculations are pretty complex and we have seen the values move very significantly in recent years due to changing real yields. I don't think it is reasonable to expect the average person (or even financially numerate person) to identify even a significant error here. Let's say that the CETV given was £80k and should have been £60k...that's well within the range of what we've seen in variance due to market factors and that's before taking account of individual scheme factors. 

    I say this as a pension fund trustee. I would be asking some serious questions of my scheme administrators (it's unlikely to have gone to the actuary for specific checking at this level of CETV I suspect). 
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