Overpaid final salary pension – what do I do?

BaconMacon

Hi guys

 

I have just received a letter saying that my final salary pension has been overpaid. It says they want to reduce my pension to the correct level going forwards (which is okay), but also “recoup” the historic overpayments by reducing my future pension payments until it’s been repaid. I don’t think that’s fair - what do I do?

 

Really grateful for any advice.

Brie

You could try to negotiate with how you repay the overpayment amount but they may not agree it. 

Basically as I understand it you can't be allowed to have an advantage compared to other members of the scheme.  It's why when there's a late notice of death they ask for repayment and when there is an error you can't have compensation.  

dunstonh

 I don’t think that’s fair - what do I do?

What do you think is fair?

They have a right to recoup any overpayment.  It works both ways. i.e. if they didn't pay you enough, would you expect them to see they will only correct it going forward?  You have no legal entitlement to keep money you were not entitled to  (bar a small number of unusual caveats)

Typically, you would expect them to offer a similar period to pay the money back compared to how long they have been overpaying you.  e.g. if overpaid for 2 years, then you get 2 years to pay them back.   Sometimes, they will accept a lump sum payment that is lower than the actual amount if its been going on for a long time.   

As it stands, how much is involved and how long a period have they overpaid you?
Do you have the capital to make a lump sum refund?
How long are they currently giving you to pay it back?

kipperman

Sadly whether it is "fair" or not won't come into it and it is highly likely that they have every right to recoup the overpayment. What you might be able to do is negotiate the amount by which the overpayment is corrected by each month to at least be in a tolerable situation.

Marcon

BaconMacon said:

Hi guys

 

I have just received a letter saying that my final salary pension has been overpaid. It says they want to reduce my pension to the correct level going forwards (which is okay), but also “recoup” the historic overpayments by reducing my future pension payments until it’s been repaid. I don’t think that’s fair - what do I do?

I can imagine it's very unwelcome - but the general rule is that trustees have a right to recoup overpaid benefits, unless the individual concerned can demonstrate that on the basis of the payments received, they have irrevocably changed their financial position to their detriment. That's a high bar to clear.

What sort of amounts/periods of time are involved?

Pat38493

dunstonh said:

 I don’t think that’s fair - what do I do?

What do you think is fair?

They have a right to recoup any overpayment.  It works both ways. i.e. if they didn't pay you enough, would you expect them to see they will only correct it going forward?  You have no legal entitlement to keep money you were not entitled to  (bar a small number of unusual caveats)

Typically, you would expect them to offer a similar period to pay the money back compared to how long they have been overpaying you.  e.g. if overpaid for 2 years, then you get 2 years to pay them back.   Sometimes, they will accept a lump sum payment that is lower than the actual amount if its been going on for a long time.   

As it stands, how much is involved and how long a period have they overpaid you?
Do you have the capital to make a lump sum refund?
How long are they currently giving you to pay it back?

Unfortunately this is the current legal situation, but as discussed on other threads, DB pension providers / admins are extremely opaque (some would say downright obstructive) about how they explain the details of why and how these type of things happened.

This could leave members with the impression that they are under an incentive to look for overpayments, but to turn a blind eye to underpayments, or at least not actively look for them.  Whether this is true or not may not matter so much - the appearance of it is there.

As discussed on other threads this is an area where there should really be some kind of regulatory or legal reform to force them to make the details of this transparent to members.  We have even seen posts where pension admins refused to reveal early retirement factors, implying that they were somehow confidential!

Hoenir

Pat38493 said:

dunstonh said:

 I don’t think that’s fair - what do I do?

What do you think is fair?

They have a right to recoup any overpayment.  It works both ways. i.e. if they didn't pay you enough, would you expect them to see they will only correct it going forward?  You have no legal entitlement to keep money you were not entitled to  (bar a small number of unusual caveats)

Typically, you would expect them to offer a similar period to pay the money back compared to how long they have been overpaying you.  e.g. if overpaid for 2 years, then you get 2 years to pay them back.   Sometimes, they will accept a lump sum payment that is lower than the actual amount if its been going on for a long time.   

As it stands, how much is involved and how long a period have they overpaid you?
Do you have the capital to make a lump sum refund?
How long are they currently giving you to pay it back?

Unfortunately this is the current legal situation, but as discussed on other threads, DB pension providers / admins are extremely opaque (some would say downright obstructive) about how they explain the details of why and how these type of things happened.

If employees never made a mistake at their place of work the world would be a perfect place. 

leosayer

I would start by asking them to explain the cause of the overpayment, how they identified it, why it wasn't spotted before and how can they be sure that the recalculated amount is correct.

If the repayment will cause you any particular hardship then you should tell them. 

njkmr

I started to draw a small deferred pension when I was 51. It was overpaid by a few hundred pounds just , and they wrote to me after a few months explaining this and that the future payments would be reduced going forward. However they did say they would not be reclaiming the couple of hundred pounds due to it being their mistake.
If you have been overpaid considerably more they are likely to want it back.

Pat38493

Hoenir said:

Pat38493 said:

dunstonh said:

 I don’t think that’s fair - what do I do?

What do you think is fair?

They have a right to recoup any overpayment.  It works both ways. i.e. if they didn't pay you enough, would you expect them to see they will only correct it going forward?  You have no legal entitlement to keep money you were not entitled to  (bar a small number of unusual caveats)

Typically, you would expect them to offer a similar period to pay the money back compared to how long they have been overpaying you.  e.g. if overpaid for 2 years, then you get 2 years to pay them back.   Sometimes, they will accept a lump sum payment that is lower than the actual amount if its been going on for a long time.   

As it stands, how much is involved and how long a period have they overpaid you?
Do you have the capital to make a lump sum refund?
How long are they currently giving you to pay it back?

Unfortunately this is the current legal situation, but as discussed on other threads, DB pension providers / admins are extremely opaque (some would say downright obstructive) about how they explain the details of why and how these type of things happened.

If employees never made a mistake at their place of work the world would be a perfect place. 

Right, but I am not really referring to individual mistakes - we see enough threads here (and from my own experience as discussed on other threads) that many of them are very reluctant to disclose the details of how calculations are made.  I even asked this in a Q&A with the Meaningful Money guy who is an IFA, and his answer was that even as IFAs they often can't get clear answers about how calculations are made and sometimes estimates seem to have an element of "made up on the spot" about them in the sense that they seem to change early retirement factors and whatnot regularly, and are reluctant to answer any questions about it.

As I've said before, if a bank refused to disclose how their interest payments are calculations are made, and just said you'll have to trust us that it's correct, they would quite rightly get into hot water about it.

In other words my comment is not directed against individuals in those organisations - I'm sure they are doing their best - it's more that it feels like there is a policy of trying to keep things as secret as possible.

BikingBud

Marcon said:

BaconMacon said:

Hi guys

 

I have just received a letter saying that my final salary pension has been overpaid. It says they want to reduce my pension to the correct level going forwards (which is okay), but also “recoup” the historic overpayments by reducing my future pension payments until it’s been repaid. I don’t think that’s fair - what do I do?

I can imagine it's very unwelcome - but the general rule is that trustees have a right to recoup overpaid benefits, unless the individual concerned can demonstrate that on the basis of the payments received, they have irrevocably changed their financial position to their detriment. That's a high bar to clear.

What sort of amounts/periods of time are involved?

Be interesting how far this could go. 

Would purchasing a house, for yourself or for you children with mortgage affordability based upon DB pension be unpicked?

Would they force you to sell the Aston Martin?

Or just cut back on the Bolle?