Pension overpayment - provider wants to take back £20k

dunstonh

Pat38493 said:

What's astonishing is that there are not stronger controls in place to prevent such overpayments.  What if for example the person who received the payment had spent all the money, or died and left it to charity, or emigrated to Australia and transferred all the money there?  Good luck to the trustees getting the money back.

In recent years, there has been some consolidation of pension administrators and it has become increasingly common for errors to be found by the new administrators.  Errors in both directions.

Some errors do result in amounts being written off.  Some errors require repayment.   Usually on a repayment plan or reduction in income for x years.  The timescale can often be as long as the error period.  i.e. if the error occurred 5 years ago, then you get 5 years to repay it.

It does appear that the professional trustees are finding things that previous trustees missed and that leads to be better position going forward.   We just need them to improve their service.  Ca***. Me****,  X** in particular.

MarkCarnage

Pat38493 said:

What's astonishing is that there are not stronger controls in place to prevent such overpayments.  What if for example the person who received the payment had spent all the money, or died and left it to charity, or emigrated to Australia and transferred all the money there?  Good luck to the trustees getting the money back.

There are supposed to be controls in place at the administrator. At lower value levels where the CETV calculation process can be automated to a large degree, it will be done solely at the administrator, but should always be subject to dual sign off. The actuarial adviser will usually only have to sign off on higher value/complex cases.
It might surprise some to know how many errors there are in calculating pensions at time of initial payment. Many of them are trivial and while they will be corrected if discovered they often won't seek recovery of trivial back payment or will do so by very minor adjustment to current pension. Where there is an error that should be manifestly clear to any reasonable person, e.g. pension paid is £20k a year not £10k then I think it's reasonable to seek clawback provided it's done appropriately. Even more so where a pension is paid for a time after death due to lack of notification by relatives. That's really bordering on theft and I would pursue that actively. 
CETV....as I said above, an error here could be quite significant but perfectly reasonably not picked up by the member, given the sensitivity of values to lots of factors, notably real discount rates. I think that if the member can show that they acted in good faith and would now be in a disadvantageous position, they should not be obliged to pay it back and I think that Trustees might hesitate to pursue that type of situation. It's an error at the admininstrator and that's where they should be looking for recompense. The calculation basis is pretty opaque to most members. I would be inclined to tell the Trustees that I'd see them in court. 

Qyburn

Pat38493 said:

The reason is - people are making big life decisions based on the data provided.  As mentioned by the OP, they would not have made that decision if they had been given correct data in the first place.  

It's not obvious what would be both fair and possible. Giving the option to reverse the transfer would be fair, put him back in the position he'd be in if the lower figure had been given and he'd decided not to transfer. But it might not be possible, depending on what he'd done with the funds. 

leosayer

Pat38493 said:

Exodi said:

xylophone said:

What if it was £20k short?   Is that just tough luck because the pension company's error shouldn't be your concern?

The error is still that of the professional person who made it and the error lies with him or the firm that engaged him.

The OP is the victim of that error, whether it is an over payment or an underpayment.

The victim of the error should not have to suffer for it.

If he has been underpaid, he should be compensated.

If he has been overpaid, if he is able to repay without detriment to his own situation, then morally he should make the repayment (without interest and on easy terms if necessary).

If any action taken with regard to the overpaid funds is irrevocable and he cannot repay, then the person who made the error (or their insurers) should take the hit.

Agreed. And I think the three of us are in agreement and hold the same view on that-

That the money should be paid back if it is found to have been overpaid, but it should not put out the OP by doing so (e.g. agreeing payment plans if needed, etc).

This is different to suggestions in this thread that the money should not be repaid at all because it was not the OP's mistake, which is nonsense.

penners324 said:

Lodge a complaint to the fos, pension regulator, your MP, etc etc.

The pension company’s error shouldn't be your concern 

I have to say I disagree.  I mean, I know that what you are saying is the current legal situation.

However, in my opinion, overpayments (not underpayments) should simply not happen and everything should be checked, double checked, checked 10 times if that's what is needed.  Once the provider has written an official letter saying - this is the mount you are getting etc, it should be just as binding as an employment contract - your employer can't suddenly turn round and say - oh, we made a mistake in our market surveys and offered you too much salary so we're just going to cut your salary - ok?

The reason is - people are making big life decisions based on the data provided.  As mentioned by the OP, they would not have made that decision if they had been given correct data in the first place.  

I am pretty sure that if the company that does the calculations had to pay the mistake when there was an overpayment, they would change their processes pretty quick to ensure that this can't happen.

My thoughts exactly. 

One side is a regulated professional, the other is amateur.

Why is this not treated like any other contract like the sale of a business or a house? A buyer can't ask for a partial refund if they misunderstand or miscalculate the value of what they were buying.

leosayer

Qyburn said:

Pat38493 said:

The reason is - people are making big life decisions based on the data provided.  As mentioned by the OP, they would not have made that decision if they had been given correct data in the first place.  

It's not obvious what would be both fair and possible. Giving the option to reverse the transfer would be fair, put him back in the position he'd be in if the lower figure had been given and he'd decided not to transfer. But it might not be possible, depending on what he'd done with the funds. 

It's not just about what has been spent.

The pension administrator might be able to reverse the transfer but the same can't happen with life events such as quitting a job, changing house or mortgage or making promises eg. paying for a wedding or medical treatment.

Sea_Shell

Interesting thread.   It raises some issues that many people are likely unaware of (me included!)

Do these issues occur with DB pensions, paid monthly too, as well as CETVs as being discussed?

What should one do to check that the amount being paid out is accurate and won't be clawed back at some point in the future?

Ringfence x% of your payments just in case?

Pat38493

Sea_Shell said:

Interesting thread.   It raises some issues that many people are likely unaware of (me included!)

Do these issues occur with DB pensions, paid monthly too, as well as CETVs as being discussed?

What should one do to check that the amount being paid out is accurate and won't be clawed back at some point in the future?

Ringfence x% of your payments just in case?

Yes - there has been threads where DB admins claimed that the person was overpaid in their monthly payment and they wanted the money back and/or the PCLS was too high and wanted some back.

The two recent ones if I recall correctly though were both cases where the CETV was calculated too high.

I think the only thing you can really do is do a lot of research and read all the small print you can get your hands on about the scheme, and then attempt to do your own calculation of what your benefits will be - I have done this and it's at least in the right ballpark compared to what Mercer sent me recently.  It's not exact but my assumption is that if I'm in the right ballpark and the commutation rates and ERF is in the same ballpark as others quoted on these boards, it should be close enough.

However even that doesn't help with CETV calculations as I don't think I have any hope of making my own CETV calculation (not that I am contemplating transferring out of my DB scheme anyway).

It also doesn't help if the error is in the actual setting or documenting of the commutation rates or early retirement factors - you can only estimate it based on the information they provide to you.  Example - in my case my DB scheme has still not provided me with an up to date copy of their rules and fact sheet, and the commutation rates they actually used, didn't tally at all with their own fact sheet.  The fact sheet clearly has not been updated since they did the GMP equalisation but 2 requests for an updated version have gone unanswered.

Sea_Shell

Interesting.

DH had a statement from his DB scheme(s) on leaving, and he's been trying to update the annual adjustments, as per the scheme rules on a spreadsheet.   Most people won't do that.   We'll see at the time how close we get to their figures 😉

Even if they're a bit out, it could still end up as an unpleasant shock if down the track they want even just £50 x 12 months x 5 years back (for example).   You'd likely never know if you'd been underpaid!! 

Especially if someone only has that plus SP to live on. 😞. (we don't)

MallyGirl

I have a small DB pension from my first job. For much of the employment I was under 25 so couldn't join the DB bit so I was in a DC type scheme. For years I could look up the values of the 2 parts online with various slide bars to play with tax free sums, retirement age and the like. A couple of years ago Barnett Waddingham took on the administration and their figures are significantly different. They also report on the 2 parts completely separately most of the time and then at random intervals send me letters which imply that the under 25 bit will be used to prop up the DB GMP bit. I am not a stupid person but I cannot understand it or check the figures. BW cannot answer why the numbers are different to the old provider numbers - they just say that they are right! If it turns out later that they are wrong I would be pretty miffed, but unsurprised. On the basis of their documentation I still can't work out if I even get both parts - it is that unintelligible. I have 4 years till I reach NRA so I will get to the bottom of that aspect before then but I don't look forward to the pain it will take to get there.

Doctor_Who

Sea_Shell said:

Interesting.

DH had a statement from his DB scheme(s) on leaving, and he's been trying to update the annual adjustments, as per the scheme rules on a spreadsheet.   Most people won't do that.   We'll see at the time how close we get to their figures 😉

Even if they're a bit out, it could still end up as an unpleasant shock if down the track they want even just £50 x 12 months x 5 years back (for example).   You'd likely never know if you'd been underpaid!! 

Especially if someone only has that plus SP to live on. 😞. (we don't)

I've been doing this for the past ~3 years since deferring my DB scheme (USS). So far my figures have been pretty accurate compared to those from USS. I have different pension sums that get increased by different inflation amounts, but once you have a spreadsheet setup it's not that difficult. I agree that most people won't do this, but at least I know what I should get when the pension becomes payable.