Pension provider complaint

Millsandovis

Hi, hope this is the right board but please feel free to move to the tax board or similar if I’m wrong! 

I lost a parent in 2020 and am executor and sole beneficiary for their estate. They had two pensions that I dealt with at the time and completed all the necessary steps around IHT, property and the like without a hiccup. I was their carer and sole child so knew of career path and knew they’d had just two long terms jobs so two pensions made the most sense. 

Fast forward 2 years and my parent (same address, still here) received a pension plan letter from a different provider in 2022. After reaching out to them they confirmed there was another pension and there was a lump sum payable to the estate. 

This lump sum was heavily taxed (40%) and when I queried this they said it was because the ‘pension had not been claimed’ so was in arrears and therefore taxable. I asked for a p60/p45 at the time to confirm the tax paid. 

They also said I could receive a dependents pension if I was financially dependent on the deceased. Due to being a sole carer and putting my career on hold with my parent paying all the bills I was and set out my story to the provider. The only stipulation on the initial letter was that I was financially dependent. 

I then laid out my story about how I relied on my parent financially and what effect losing them had had on me moving forward. I mentioned that I was in counselling due to the manner in which I had lost my parent (they died at home during early lockdown whilst we waited for an ambulance that took 3 hours). I was met with a cold email simply stating that I was too old to receive a dependents pension. I thought this was fair enough but said to them that they could have let me know that before I replied and unnecessarily revisited some unpleasant memories. I also have an inkling this is decided on a case by case basis as I am in receipt of a nominal pension from another provider regardless of my age (I am 30). Maybe it just depends on the company but who knows, from their own wording it seems only financial dependency is a factor when they offer it via letter when you apply as a beneficiary. 

Ever since the payment was received I have known the tax was too much. I initially stupidly thought I had been taxed my self as it didn’t feel like the same type of payment as the lump sum benefit payments in 2020 which were income tax free. 

I have since become self employed and thus had to fill out a self assessment. I did so with the figures of the pension (as my parent’s estate never received a refund) and was expecting a 7k tax refund. HMRC investigated it for nearly 14 weeks and on the day I thought I would get it I logged into my SA account to discover I had a 6k tax bill.  I went to two accountants after this for guidance and they both advised the tax liability was my parent’s and I had erroneously put it into my SA. I amended my tax return and HMRC luckily realised I had made an error and fixed my account to 0 (I had been upskilling last year so was living off savings & the lump sum whilst training). Both accountants also essentially ‘ghosted’ me due to the complexity of the issue which is another thing in itself! 

I have been in constant contact with the pension provider over email and phone trying to get a tax document from them for my parent’s estate to get a refund. I have spoken to, without exaggeration, about 12 different people dealing with it. They take a few week/months at a time to reply so I have been dealing with it on the back burner.

i received a statement of earnings from them and then got onto HMRC who said it was not enough. I emailed again and said I need an official tax document and it took them another 3/4 weeks to produce another statement of earnings. After doing some research online I realised I could directly contact HMRC to see what was going on… I did this on Friday last week and they had a look at my parent’s NI number and pointed out no pension payment had been made since 2020. They then confirmed the liabilities and that they should have been notified. 

I got straight onto the company and by this point had the manager of the pay team’s email who had been dealing with it. I mentioned the dependants pension decision, what HMRC had said and she confirmed after investigation they had in fact not declared the payment to HMRC.  She assured me it was getting rectified immediately and marked as urgent.  The reply time was now minutes rather than months/weeks. 

Thank you if you’re still reading… so my question is: how serious is this that they have failed to declare the payment to HMRC? Even without the fact they have ‘deprived’ my parent’s estate of nearly 7 grand for nearly 18 months. Even without the whole compo face element they have genuinely caused me upset and distress by how they initially dismissed my case for the pension and not declaring the payment allowing the estate to get a tax refund. My personal debt has grown due to this because I was expecting a tax refund (not blaming anyone else for this, just a fact) 

What, if any are my next steps? The payroll manager has said she had referred the dependents pension decision back to the pension operations team but I am of a mind to make an official complaint about this but not sure where to turn. 

Thanks! 

xylophone

https://www.gov.uk/tax-on-pension-death-benefits

https://www.sackers.com/blog/youve-got-a-dependant-in-me/

Are you saying that your only surviving parent died in 2020 so that the letter received in 2022 was addressed to the deceased?

You mention the possibility of a dependant's pension, so was this a defined benefit arrangement?

Is the case that your deceased parent reached SPA in this scheme at some point prior to his death but did not claim it?

The scheme caught up with this situation so that the lump sum that was paid out was simply arrears of pension (no lump sum death benefit or anything of that sort)?

Below may be relevant.

https://www.linkedin.com/pulse/can-you-pay-arrears-pension-after-death-dave-king#:~:text=In terms of the taxation,arrears are actually paid

Millsandovis

 xylophone said:

The scheme caught up with this situation so that the lump sum that was paid out was simply arrears of pension (no lump sum death benefit or anything of that sort)?

Yes I think that’s the case after doing some research online. I’m not necessarily disputing being taxed, more the lack of action in regards to them reporting it to HMRC and how serious it potentially is? As my parent’s estate is essentially 7k out of pocket due to them not declaring the tax that they took from the lump sum.  

Yes only remaining parent so was addressed to them. And no didn’t even know about a dependants pension on this particular one, the initial letter from them offered me the chance to put my case across to receive one if I was financially dependent on them but they just refused it due to my age. Which I can understand as they have no obligation to give me it. 

dunstonh

Fundamentally, there are two types of pensions.  Defined benefit and defined contribution (money purchase).

Defined benefit is as the name sounds. A range of defined benefits.
Defined contribution is a pot of money with a range of choices.

It sounds like the other pension(s) were DC but this one is DB.   That is why you are seeing a difference and why it works so differently.

Marcon

Millsandovis said:

Hi, hope this is the right board but please feel free to move to the tax board or similar if I’m wrong! 

I lost a parent in 2020 and am executor and sole beneficiary for their estate. They had two pensions that I dealt with at the time and completed all the necessary steps around IHT, property and the like without a hiccup. I was their carer and sole child so knew of career path and knew they’d had just two long terms jobs so two pensions made the most sense. 

Fast forward 2 years and my parent (same address, still here) received a pension plan letter from a different provider in 2022. After reaching out to them they confirmed there was another pension and there was a lump sum payable to the estate. 

This lump sum was heavily taxed (40%) and when I queried this they said it was because the ‘pension had not been claimed’ so was in arrears and therefore taxable. I asked for a p60/p45 at the time to confirm the tax paid. 

They also said I could receive a dependents pension if I was financially dependent on the deceased. Due to being a sole carer and putting my career on hold with my parent paying all the bills I was and set out my story to the provider. The only stipulation on the initial letter was that I was financially dependent. 

What, if any are my next steps? The payroll manager has said she had referred the dependents pension decision back to the pension operations team but I am of a mind to make an official complaint about this but not sure where to turn. 

Thanks! 

This sounds like a defined benefit pension scheme. 

Dependents' pensions are almost invariably discretionary for anyone of your age, so the fact another scheme is paying you some sort of pension isn't a guide to what this scheme will do; the rules could be different, as could the decision process.

Millsandovis said:

Fast forward 2 years and my parent (same address, still here) received a pension plan letter from a different provider in 2022. After reaching out to them they confirmed there was another pension and there was a lump sum payable to the estate. 

Was this provider notified of your parent's death? From your post, it suggests not because you didn't think there was a 'third' pension. As the lump sum wasn't paid within two years of the death, it becomes taxable (and you can't reclaim the tax, nor can the estate).

I appreciate you feel hard done by, but I'm not sure the scheme has actually done anything wrong. If you still feel you have grounds for complaint, I suspect the most efficient way to tackle them (if I'm right that it's a defined benefit scheme with a board of trustees, albeit the administration is outsourced to a third party) is to use something called the Internal Dispute Resolution Procedure. Ask the administrators for a copy of the IDRP, or check if there's a website where you can download - it will be scheme-specific.

Try to keep your complaint as concise, factual and unemotional as you can manage. Less is definitely more in this sort of situation, although that is invariably easier said than done. 

Millsandovis

Marcon said:

Millsandovis said:

Hi, hope this is the right board but please feel free to move to the tax board or similar if I’m wrong! 

I lost a parent in 2020 and am executor and sole beneficiary for their estate. They had two pensions that I dealt with at the time and completed all the necessary steps around IHT, property and the like without a hiccup. I was their carer and sole child so knew of career path and knew they’d had just two long terms jobs so two pensions made the most sense. 

Fast forward 2 years and my parent (same address, still here) received a pension plan letter from a different provider in 2022. After reaching out to them they confirmed there was another pension and there was a lump sum payable to the estate. 

This lump sum was heavily taxed (40%) and when I queried this they said it was because the ‘pension had not been claimed’ so was in arrears and therefore taxable. I asked for a p60/p45 at the time to confirm the tax paid. 

They also said I could receive a dependents pension if I was financially dependent on the deceased. Due to being a sole carer and putting my career on hold with my parent paying all the bills I was and set out my story to the provider. The only stipulation on the initial letter was that I was financially dependent. 

What, if any are my next steps? The payroll manager has said she had referred the dependents pension decision back to the pension operations team but I am of a mind to make an official complaint about this but not sure where to turn. 

Thanks! 

This sounds like a defined benefit pension scheme. 

Dependents' pensions are almost invariably discretionary for anyone of your age, so the fact another scheme is paying you some sort of pension isn't a guide to what this scheme will do; the rules could be different, as could the decision process.

Millsandovis said:

Fast forward 2 years and my parent (same address, still here) received a pension plan letter from a different provider in 2022. After reaching out to them they confirmed there was another pension and there was a lump sum payable to the estate. 

Was this provider notified of your parent's death? From your post, it suggests not because you didn't think there was a 'third' pension. As the lump sum wasn't paid within two years of the death, it becomes taxable (and you can't reclaim the tax, nor can the estate).

I appreciate you feel hard done by, but I'm not sure the scheme has actually done anything wrong. If you still feel you have grounds for complaint, I suspect the most efficient way to tackle them (if I'm right that it's a defined benefit scheme with a board of trustees, albeit the administration is outsourced to a third party) is to use something called the Internal Dispute Resolution Procedure. Ask the administrators for a copy of the IDRP, or check if there's a website where you can download - it will be scheme-specific.

Try to keep your complaint as concise, factual and unemotional as you can manage. Less is definitely more in this sort of situation, although that is invariably easier said than done. 

When you say can’t reclaim the tax, do you mean there will be no tax rebate? 

I thought the 2 years was from when they found out, not the death 

Tommyjw

How old was your parent when they died? Over 75?

If so, that would be the reason the lump sum would be taxable. Shouldnt imagine the administrator would have treated it as the two year rule as mentioned, as the two year starts when they are first told about the death (or e.g. when they first should have known, which is very vague and not often used as there are very few circumstances where this is the case)

And, whilst poor administration may cause a complaint see a small gesture of goodwill apology, unfortunately if no financial loss has occured it wont see much else.

Millsandovis

I don’t think it actually is a lump sum death benefit. I mentioned lump sum but not benefit. Sorry for any confusion. I think they have paid out what my parent did not claim as I said in the opening post.  After checking emails this was their explanation at the time:


 ‘Under the rules I can confirm that as the late PARENT did not claim their benefits at normal retirement date of 2014. The lump sum we have arranged is therefore an arrears of pension from RETIREMENT to DEATH and is taxable under HMRC.’

The amount they taxed was also 37% not the 45% it would be if it was the 2 year rule. So emergency tax code because the account was dormant for 2 years due to death? 

Millsandovis

Tommyjw said:

How old was your parent when they died? Over 75?

If so, that would be the reason the lump sum would be taxable. Shouldnt imagine the administrator would have treated it as the two year rule as mentioned, as the two year starts when they are first told about the death (or e.g. when they first should have known, which is very vague and not often used as there are very few circumstances where this is the case)

And, whilst poor administration may cause a complaint see a small gesture of goodwill apology, unfortunately if no financial loss has occured it wont see much else.

They were 65. If it as I think it is and the estate is due a 7k refund since the payment in October 2022, that’s a financial ‘loss’ is it not? 

Marcon

Millsandovis said:

Marcon said:

Millsandovis said:

Hi, hope this is the right board but please feel free to move to the tax board or similar if I’m wrong! 

I lost a parent in 2020 and am executor and sole beneficiary for their estate. They had two pensions that I dealt with at the time and completed all the necessary steps around IHT, property and the like without a hiccup. I was their carer and sole child so knew of career path and knew they’d had just two long terms jobs so two pensions made the most sense. 

Fast forward 2 years and my parent (same address, still here) received a pension plan letter from a different provider in 2022. After reaching out to them they confirmed there was another pension and there was a lump sum payable to the estate. 

This lump sum was heavily taxed (40%) and when I queried this they said it was because the ‘pension had not been claimed’ so was in arrears and therefore taxable. I asked for a p60/p45 at the time to confirm the tax paid. 

They also said I could receive a dependents pension if I was financially dependent on the deceased. Due to being a sole carer and putting my career on hold with my parent paying all the bills I was and set out my story to the provider. The only stipulation on the initial letter was that I was financially dependent. 

What, if any are my next steps? The payroll manager has said she had referred the dependents pension decision back to the pension operations team but I am of a mind to make an official complaint about this but not sure where to turn. 

Thanks! 

This sounds like a defined benefit pension scheme. 

Dependents' pensions are almost invariably discretionary for anyone of your age, so the fact another scheme is paying you some sort of pension isn't a guide to what this scheme will do; the rules could be different, as could the decision process.

Millsandovis said:

Fast forward 2 years and my parent (same address, still here) received a pension plan letter from a different provider in 2022. After reaching out to them they confirmed there was another pension and there was a lump sum payable to the estate. 

Was this provider notified of your parent's death? From your post, it suggests not because you didn't think there was a 'third' pension. As the lump sum wasn't paid within two years of the death, it becomes taxable (and you can't reclaim the tax, nor can the estate).

I appreciate you feel hard done by, but I'm not sure the scheme has actually done anything wrong. If you still feel you have grounds for complaint, I suspect the most efficient way to tackle them (if I'm right that it's a defined benefit scheme with a board of trustees, albeit the administration is outsourced to a third party) is to use something called the Internal Dispute Resolution Procedure. Ask the administrators for a copy of the IDRP, or check if there's a website where you can download - it will be scheme-specific.

Try to keep your complaint as concise, factual and unemotional as you can manage. Less is definitely more in this sort of situation, although that is invariably easier said than done. 

When you say can’t reclaim the tax, do you mean there will be no tax rebate? 

I thought the 2 years was from when they found out, not the death 

I was working from the 'should have known' (ie 'been told') standpoint - but as you've kindly clarified, this isn't actually a lump sum so much as a lump of many years of pension payments.

That being so, I'd go the IDRP route in the hope you won't be given the run around much longer.

Millsandovis

Marcon said:

Millsandovis said:

Marcon said:

Millsandovis said:

Hi, hope this is the right board but please feel free to move to the tax board or similar if I’m wrong! 

I lost a parent in 2020 and am executor and sole beneficiary for their estate. They had two pensions that I dealt with at the time and completed all the necessary steps around IHT, property and the like without a hiccup. I was their carer and sole child so knew of career path and knew they’d had just two long terms jobs so two pensions made the most sense. 

Fast forward 2 years and my parent (same address, still here) received a pension plan letter from a different provider in 2022. After reaching out to them they confirmed there was another pension and there was a lump sum payable to the estate. 

This lump sum was heavily taxed (40%) and when I queried this they said it was because the ‘pension had not been claimed’ so was in arrears and therefore taxable. I asked for a p60/p45 at the time to confirm the tax paid. 

They also said I could receive a dependents pension if I was financially dependent on the deceased. Due to being a sole carer and putting my career on hold with my parent paying all the bills I was and set out my story to the provider. The only stipulation on the initial letter was that I was financially dependent. 

What, if any are my next steps? The payroll manager has said she had referred the dependents pension decision back to the pension operations team but I am of a mind to make an official complaint about this but not sure where to turn. 

Thanks! 

This sounds like a defined benefit pension scheme. 

Dependents' pensions are almost invariably discretionary for anyone of your age, so the fact another scheme is paying you some sort of pension isn't a guide to what this scheme will do; the rules could be different, as could the decision process.

Millsandovis said:

Fast forward 2 years and my parent (same address, still here) received a pension plan letter from a different provider in 2022. After reaching out to them they confirmed there was another pension and there was a lump sum payable to the estate. 

Was this provider notified of your parent's death? From your post, it suggests not because you didn't think there was a 'third' pension. As the lump sum wasn't paid within two years of the death, it becomes taxable (and you can't reclaim the tax, nor can the estate).

I appreciate you feel hard done by, but I'm not sure the scheme has actually done anything wrong. If you still feel you have grounds for complaint, I suspect the most efficient way to tackle them (if I'm right that it's a defined benefit scheme with a board of trustees, albeit the administration is outsourced to a third party) is to use something called the Internal Dispute Resolution Procedure. Ask the administrators for a copy of the IDRP, or check if there's a website where you can download - it will be scheme-specific.

Try to keep your complaint as concise, factual and unemotional as you can manage. Less is definitely more in this sort of situation, although that is invariably easier said than done. 

When you say can’t reclaim the tax, do you mean there will be no tax rebate? 

I thought the 2 years was from when they found out, not the death 

I was working from the 'should have known' (ie 'been told') standpoint - but as you've kindly clarified, this isn't actually a lump sum so much as a lump of many years of pension payments.

That being so, I'd go the IDRP route in the hope you won't be given the run around much longer.

Thanks for clarification and yes I think they’re just massively confusing matters dealing with it the way they have. Thanks so much for the IDRP shout as well, I’ll give that some research.