Pension overpayment - provider wants to take back £20k

Pat38493

Tommyjw said:

Pat38493 said:

Tommyjw said:

Cbu0210 said:

Just an update on the first response received from the administrator for those who may be interested. This is copied from their response, and appears to include the advice from their legal team:

"The recovery of overpaid pension benefits has been considered on many occasions by the courts and the Pensions Ombudsman, who has made it clear that trustees have a duty to attempt to recover such overpayments, even where a member is not at fault. The principles set out in those cases must guide the way that the Trustee proceeds in these circumstances.

The additional money that you received as part of your transfer value is money to which you were not entitled under the Scheme and is money that should not have been paid. The fact that this occurred due to an error on the part of (the administrator) ....... is broadly immaterial in the eyes of the Pensions Ombudsman in such cases. We have received advice that by failing to seek recovery of funds which have been paid in error, the Trustee could be criticised for providing you with more than your entitlement under the Scheme and for failing to meet its duties to other beneficiaries of the Scheme, for whose benefit the overpaid funds would otherwise have been available. (The administrator) is therefore obliged to ask you to repay these funds.

As regards the wording of “full and final settlement” that you have described, this would not curtail the Trustee’s ability to attempt to recover a payment to which you were never entitled, and which was paid to the SIPP by mistake, as in this case. The Trustee’s duty to attempt recover would override any such contractual considerations. It is also clear from the Pensions Ombudsman cases referred to above that the duty on trustees to recover overpaid benefits applies equally in cases where the recipient of an overpayment could not have been expected to have known that they had been overpaid. "

They go on that 'in the interests of transparency' I may have a possible 'change of position' defence. I have to respond to their Senior Legal Counsel with my decision and they have said I can contact that person to discuss my complaint before making a decision, if I so wish (which I don't).

At this point I am considering seeking independent legal advice rather than speak to their team, and I will request that the trustees pay for that advice as this has occurred because their mistake, not mine. I want to understand why the contract law doesn't apply in this case, and what other defence can be used. It has also been suggested above that I request a DSAR and for details of how the calculations have been made, so I will do that.

Whilst I understand I may well have to pay the sum back, or at least part of it, I am so very angry now that I have been put in this position and am determined to fight it regardless of the outcome. I am seeing my IFA on Thursday to plan the next stage.

Again, I'm grateful for all your contributions, thank you, and the links that have been posted here have been really useful. If anyone has any further advice/suggestions, please let me know

I will update again as and when .....

All of what they have said is correct and as said backed up by many prior cases, unfortunately, it is just a very odd part of the industry that for whatever reason hasnt sorted itself out yet (from e.g. the admin or Trustee having insurance to cover these scenarios).

Speaking as someone who has prepared a response to a DSAR many a time over the years, i feel i need to temper people's expectations with it. You absolutely will not see anything about the calculations themselves. Even if (and its not guaranteed) there is an excel version of a CETV calculation held on your file, you'd get a PDF of it, not see any formula, and even then they could redact background detail such as certain Scheme specific assumptions etc.

And i understand how crap the whole situation is, but you'll also get nowhere asking the Trustee to pay for legal advice from my experience but worth a try.

Also not sure why you wouldnt speak to their legal counsel, of course theres the ol don' take legal advice from the other side, but for the sake of a conversation which could lead to your change ofg position defense being successful, seems odd to refuse.

I’m not really clear what the grounds would be under a DSAR response for redacting “scheme specific assumptions”.  Normally redactions on DSAR responses are on the grounds that they would interfere with commercial secrets and/or the legitimate privacy rights of another individual.  Assumptions about what interest rates might be in future or growth rates or whatever are neither.

Not sure what wouldnt be clear, A DSAR is for personal information, background assumptions and calculations used to calculate a CETV aren't personal information.

Regardless it will mean mean absolutely nothing to OP complaint  as they have already admitted the error, what part of the process the area comes from is irrelevant 

I have to admit that one thing really confuses me with all this stuff.  Trustees are holding members money on their behalf and have a duty to act in members interests.  How is actively concealing the financial assumptions and factors currently in effect from members, in the interests of all members?  Maybe I’m just missing something but it seems like the only reason to conceal this information is just in case it might be wrong and they don’t want anyone to be able to check or challenge it.

Also - it seems to me that, legal technicalities and tricks aside, the calculations are entirely relevant because if the pension administrator and trustees are admitting fault, how do we know that they won't come back again next year and say - oh, we've now realised the original calculation was correct so here's your money back again, or, we've now realised it was even more wrong and we want another 10K.  

Also, how is the member supposed to feel confident that these "mistakes" are genuine mistakes based only on the information that was available at the time, and not retrospectively changing the numbers because we had very high inflation the last 2 years for example - if the figures are secret, nobody can ever know what is going on and to me that seems entirely unacceptable.

Sea_Shell

Cbu0210 said:

Just an update on the first response received from the administrator for those who may be interested. This is copied from their response, and appears to include the advice from their legal team:

"The recovery of overpaid pension benefits has been considered on many occasions by the courts and the Pensions Ombudsman, who has made it clear that trustees have a duty to attempt to recover such overpayments, even where a member is not at fault. The principles set out in those cases must guide the way that the Trustee proceeds in these circumstances.

The additional money that you received as part of your transfer value is money to which you were not entitled under the Scheme and is money that should not have been paid. The fact that this occurred due to an error on the part of (the administrator) ....... is broadly immaterial in the eyes of the Pensions Ombudsman in such cases. We have received advice that by failing to seek recovery of funds which have been paid in error, the Trustee could be criticised for providing you with more than your entitlement under the Scheme and for failing to meet its duties to other beneficiaries of the Scheme, for whose benefit the overpaid funds would otherwise have been available. (The administrator) is therefore obliged to ask you to repay these funds.

As regards the wording of “full and final settlement” that you have described, this would not curtail the Trustee’s ability to attempt to recover a payment to which you were never entitled, and which was paid to the SIPP by mistake, as in this case. The Trustee’s duty to attempt recover would override any such contractual considerations. It is also clear from the Pensions Ombudsman cases referred to above that the duty on trustees to recover overpaid benefits applies equally in cases where the recipient of an overpayment could not have been expected to have known that they had been overpaid. "

They go on that 'in the interests of transparency' I may have a possible 'change of position' defence. I have to respond to their Senior Legal Counsel with my decision and they have said I can contact that person to discuss my complaint before making a decision, if I so wish (which I don't).

At this point I am considering seeking independent legal advice rather than speak to their team, and I will request that the trustees pay for that advice as this has occurred because their mistake, not mine. I want to understand why the contract law doesn't apply in this case, and what other defence can be used. It has also been suggested above that I request a DSAR and for details of how the calculations have been made, so I will do that.

Whilst I understand I may well have to pay the sum back, or at least part of it, I am so very angry now that I have been put in this position and am determined to fight it regardless of the outcome. I am seeing my IFA on Thursday to plan the next stage.

Again, I'm grateful for all your contributions, thank you, and the links that have been posted here have been really useful. If anyone has any further advice/suggestions, please let me know

I will update again as and when .....

The bit I've made bold above stands out to me...

They use the words "attempt" and "ask".     So maybe they have to be seen to be trying to recover the money?!?  Maybe?

Will they pursue you through the courts for £20k??   Who knows.    

Interested as to what their next move would be if you ignored their response.   Not suggesting you should (or shouldn't) as IANAL.

xylophone

PENSION SCHEMES ACT 1993, PART X

DETERMINATION BY THE PENSIONS OMBUDSMAN

 

Applicant	Mrs Barbara Wytch
Scheme	Pearl Group Staff Pension Scheme (the Scheme)
Respondents	The Trustees of the Scheme (the Trustees) First Actuarial, the Scheme Administrators

 

 

 

Subject

Mrs Wytch complains about the Trustees’ intention to recover pension overpayments which resulted from a miscalculation.

The Pensions Ombudsman's determination and short reasons

The complaint should be upheld against the Trustees because Mrs Wytch relied on the overpaid benefit and her position changed because of it.

https://brodies.com/insights/pensions/recovery-in-overpayment-cases-pensions-ombudsman-ruled-not-a-competent-court/#:~:text=In cases where occupational pension,through the remedy of recoupment.

As I have said before, I am strongly of the opinion that responsibility for these errors should fall where it lies, with the professional body or person making the error - such bodies/persons ahould be required to take out liability insurance to cover such errors.

The above may be of interest.

If you decide to take the "halfway house" option proposed (you repay £10,000?), do you still get the compensation payment for distress and inconvenience?

Over what period would you have to make the repayment?

Would this be interest free?

Cbu0210

Thanks for your comments and the links - very interesting.

I did have a look through the PO determinations to see if I could find anything relatable, but must’ve missed that one, so will check that out. I called their advice line today, but they obviously couldn’t give me any advice other than they look at each case individually and consider the evidence provided.

It’s not clear from the letters whether I would still get the stress payment, or the matters of repayment period and if it would be interest bearing if I paid it back over a number of years.

They are questions that I will ask, though.

I did read one determination from the PO which looked at the fact that the complainant had used their pension to buy and improve a house and it was suggested that, as it was an asset, it could be sold to pay back the fund.

I think in my case, the difference is that I still have funds in the pension, which means the monies would be taken from the fund rather than me personally. I’m not sure that that solution would be suggested, but who knows - it feels like it’s a bit of an unknown quantity. 

I agree that the responsibility should be with the actuaries who made the mistake, and I asked why they weren’t and why they wouldn’t have insurance to protect themselves - they just skirted around that point and  doubled down on the fact that the law states I shouldn’t have got it so it’s on me to return it.

Thanks again, I will read through the links and I will update again once I have any news.

dunstonh

I agree that the responsibility should be with the actuaries who made the mistake, and I asked why they weren’t and why they wouldn’t have insurance to protect themselves - they just skirted around that point and  doubled down on the fact that the law states I shouldn’t have got it so it’s on me to return it.

Insurance may protect them but the insurers would then go for recovery from you.    And it doesn't get away from the fact that in most cases, a mistake does not equal a windfall for you.   Hence why they are emphasising that point.

xylophone

Insurance may protect them but the insurers would then go for recovery from you.

So that every one of us with either a DC or DB pension should be taking out insurance against a mistake made by the Administrator's actuary?

dunstonh

xylophone said:

Insurance may protect them but the insurers would then go for recovery from you.

So that every one of us with either a DC or DB pension should be taking out insurance against a mistake taken by the Administrator's actuary?

Why would you do that?    You have the ombudsman etc for if you are worse off. 
This is not a case where the OP is worse off.  They have had financial benefits from a mistake and are being asked to return money that was never meant for them.  They are arguing that they should profit from the mistake.   

xylophone

This is not a case where the OP is worse off.

How do you conclude that having to repay money that he accepted in good faith and has already spent does not make him worse off?

dunstonh

xylophone said:

This is not a case where the OP is worse off.

How do you conclude that having to repay money that he accepted in good faith and has already spent does not make him worse off?

Repay money that was never meant to have been paid in the first place.   

yes it is extremely frustrating but look at it the other way round.  If the pension company underpaid by £20k but then said whoops, we have spent the money and can't pay you, would that be accepted?

Sea_Shell

dunstonh said:

xylophone said:

Insurance may protect them but the insurers would then go for recovery from you.

So that every one of us with either a DC or DB pension should be taking out insurance against a mistake taken by the Administrator's actuary?

Why would you do that?    You have the ombudsman etc for if you are worse off. 
This is not a case where the OP is worse off.  They have had financial benefits from a mistake and are being asked to return money that was never meant for them.  They are arguing that they should profit from the mistake.   

So what are people supposed to do, if they are, unknowingly, in receipt of such a pension payment/transfer (CETV)?   

Mentally and physically ringfence that money and don't touch it, because it might not be legally yours?    What timescale should one allow, before making plans for the money, just in case?

If a figure is wildly out, it may be obvious, but as was said upthread (IIRC), £20k may not be an obvious error.

On the flipside, how would a layperson ever know they'd been underpaid either?