Overpaid final salary pension – what do I do?

Marcon

BikingBud said:

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. 

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

2. Would they force you to sell the Aston Martin?

3. Or just cut back on the Bolle?

1. If the mortgage has already been obtained and put to use, how would the mortgage provider even know?
2. and 3. The clue is in the words 'irrevocably changed...'

BikingBud

Pat38493 said:

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.

And this becomes ever more problematic as schemes change their rules and leave "grandfather" rights in place, differing accrual rates, differing inflation rates, differing actuarial deduction rates, differing commutation rates potentially all affected by mid-year pay increases.

Before you even get to trying to apply those you need a PhD in excel and lots of information that many of us just do not keep.

How should or can we make the best financial decisions when the basic information is not readily available and the modelling tools are not up to date? We cannot undertake our due diligence!

Somebody

Sorry to hear that, OP.  

As a general question, how does the tax work if you paid tax on the previous amounts paid? 

Gross amounts paid previously would be reported on a P60 to HMRC.  I assume there is no going back so logically the clawback would appear as a negative offset on future gross amounts payable on each payslip?