Pension provider complaint

Pat38493

Millsandovis said:

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? 

In the first post you indicated that the tax paid was on a pension that you did not know existed until 2 years later?  I sem to recall that there is a rule that if the pension is not transferred by the trustees to the nominee within 2 years of the date of death, it becomes taxable regardless of the age at death.  Could this actually be an alternate explanation to it being a DB pension?

That doesn’t necessarily mean that the tax you were charged was truly due as it would depend on your tax position, but it may explain why the provider deducted the tax in the first place and you would then have to sort it out later - this is what they probably meant by “in arrears”.

Also just to be sure - am I reading it correct that one of your parents is still alive and at the same address?  If so who inherited the 3rd pension - you or your surviving parent?

Millsandovis

Pat38493 said:

Millsandovis said:

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? 

In the first post you indicated that the tax paid was on a pension that you did not know existed until 2 years later?  I sem to recall that there is a rule that if the pension is not transferred by the trustees to the nominee within 2 years of the date of death, it becomes taxable regardless of the age at death.  Could this actually be an alternate explanation to it being a DB pension?

That doesn’t necessarily mean that the tax you were charged was truly due as it would depend on your tax position, but it may explain why the provider deducted the tax in the first place and you would then have to sort it out later - this is what they probably meant by “in arrears”.

Also just to be sure - am I reading it correct that one of your parents is still alive and at the same address?  If so who inherited the 3rd pension - you or your surviving parent?

I’m fairly certain it’s within 2 years of them being told and if that was the case the amount would have been taxed 45% and this amount was nearer 40% so I’m surmising it is an emergency tax code. It’s not a lump sum benefit either it’s a lump sum of the pension my parent did not claim hence the arrears. If that translates to something in legal/pension talk that I am missing then that would explain my confusion. 

The issue is that they have confirmed they haven’t notified HMRC of the tax they have taken, there’s no record of it on my parent’s tax file or on mine. 

And no, both my parents are dead. I’ve said I am beneficiary for all 3 pensions. 

Tommyjw

Millsandovis said:

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? 

I see thanks for the update!. I suppose thats where it may get a little unsure as i have not touched this context before in real life but recognise it from some previous study, although it doesnt make fun reading i think this page holds the relevant info and mostly the regulation 16 part

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm062800#IDA0ELRG?trk=article-ssr-frontend-pulse_little-text-block

And interestingly whilst trying to search a bit more and googling the regulation 16 for some more friendly explanations, i found this page from last year referencing the same scenario
https://www.linkedin.com/pulse/can-you-pay-arrears-pension-after-death-dave-king#:~:text=In terms of the taxation,arrears are actually paid (see

Which, in summary, says the arrears are to be taxable, emergency rate likely applied, therefore tax rebate likely due which of course needs to go through HMRC and if not possible (due to administrator error of not reporting correctly) is an issue. I would agree with going through the complaint therefore, i am just unsure (once the issue has all been fiuxed) what redress is likely if you would then, finally after delays, be in the correct financial position, other than a goodwill gesture which is normally in the £100's

Millsandovis

Yeah it’s certainly an interesting situation and would be a good case study! I’ve spoken to HMRC who have said the tax liability is fully my parent’s (the statement of earnings had their NI number on etc) so there’s no danger of my tax situation influencing anything. 

I know it is just one person but the man I spoke to on HMRC chat did seem fully in my corner and was not impressed by the company’s dereliction of duty in regards to reporting their tax responsibilities. 

I just wanted to see how serious this was by the company not reporting to HMRC. Apologies if the back story and lump sum mention muddied the waters somewhat 

Millsandovis

For anyone wondering on an update on this: turns out after some investigation on their end they actually weren’t meant to tax it at all. They paid out the original ~£10k they took as ‘tax’ and a £250 payment to accept liability and end the matter. I probably could have argued about having to take on debt and interest that would have been accrued on the money they wrongfully took but am happy with the outcome and finally ending the matter. 

Also just to confirm something that came up in the thread, it’s the date of a company being made aware of the death in regards to the 2 year tax rules. Not the actual death. 

Cheers all who replied!