Overpaid Armed Forces pension for 12 years, do I have to pay it all back?

CedricsDad

I've just received a letter stating there's been an error in calculating my Forces Pension since Aug 2012, I was overpaid £3000 per annum, with a tax free lump sum overpayment of £9000.  Equinity Paymaster will apparently contact me with details on how to pay it back. (I've calculated it's around £45 000.)

Is there any grounds to refuse/appeal this given I had no idea I had been overpaid and have been happily living (and spending) this pension for the past 12 years.  It does appear 

excessive for the system to request payments for overpayments going back so long?

Dazed_and_C0nfused

CedricsDad said:

I've just received a letter stating there's been an error in calculating my Forces Pension since Aug 2012, I was overpaid £3000 per annum, with a tax free lump sum overpayment of £9000.  Equinity Paymaster will apparently contact me with details on how to pay it back. (I've calculated it's around £45 000.)

Is there any grounds to refuse/appeal this given I had no idea I had been overpaid and have been happily living (and spending) this pension for the past 12 years.  It does appear 

excessive for the system to request payments for overpayments going back so long?

If you had been underpaid £3,000/year for the past 12 years plus £9k TFLS how many of those 12 years would you be happy accepting to finalise things?

2, 4, 6?

fwor

Unfortunately, as I understand it, money paid to you in error never becomes yours.

However, it's certainly true that this error will cause you significant inconvenience, so it's reasonable to expect that the administrators should pay you compensation for any direct costs you incur. They will also (obviously) have to allow you to repay over a reasonable length of time - for that sum, I would expect it to be a long time!

molerat

Do you have to pay it back - it is not yours so yes

but

Can you appeal - yes

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-problems/dealing-with-mistakes-and-overpayments-with-your-pension

Have they stated how the overpayment occurred as that is not an insignificant amount ?

You could argue that you will pay it back over the period it was paid - 12 years.  You could also argue that anything paid over 6 years ago is statute barred from recovery. Edit: It seem the High Court has ruled that DB pensions are excluded from the statute of limitations.

Marcon

CedricsDad said:

I've just received a letter stating there's been an error in calculating my Forces Pension since Aug 2012, I was overpaid £3000 per annum, with a tax free lump sum overpayment of £9000.  Equinity Paymaster will apparently contact me with details on how to pay it back. (I've calculated it's around £45 000.)

Is there any grounds to refuse/appeal this given I had no idea I had been overpaid and have been happily living (and spending) this pension for the past 12 years.  It does appear 

excessive for the system to request payments for overpayments going back so long?

See https://www.pensions-ombudsman.org.uk/faq/question-14

af1963

If you had been underpaid £3,000/year for the past 12 years plus £9k TFLS how many of those 12 years would you be happy accepting to finalise things?

2, 4, 6?

Not really comparable though, is it ?  Legally, they may be allowed to pursue repayment twelve years later, but ethically it's not the same as recipients expecting underpayments to be corrected.

It's an error made by the administrators, who are being paid to get these things right, and they should really cover the costs if they don't, for errors in either direction. Otherwise, they can pocket their administration fees and have no incentive to get the calculations right. 

Kim_13

Surely they can’t ask for any amount that he paid in tax on that money - otherwise effectively he’s paid tax on money he hadn’t earned, given he’s having to pay it back. Presumably as far as HMRC are concerned he was paid that amount so no tax has been overpaid (and he couldn’t reclaim going back that long anyway.)

molerat

Kim_13 said:

Surely they can’t ask for any amount that he paid in tax on that money - otherwise effectively he’s paid tax on money he hadn’t earned, given he’s having to pay it back. Presumably as far as HMRC are concerned he was paid that amount so no tax has been overpaid (and he couldn’t reclaim going back that long anyway.)

One of the usual methods of recovery will be by a reduction in gross pension payments going forward so the tax will sort itself out.

Brie

molerat said:

Do you have to pay it back - it is not yours so yes

but

Can you appeal - yes

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-problems/dealing-with-mistakes-and-overpayments-with-your-pension

Have they stated how the overpayment occurred as that is not an insignificant amount ?

You could argue that you will pay it back over the period it was paid - 12 years.  You could also argue that anything paid over 6 years ago is statute barred from recovery.

I didn't think that pensions were included in this sort of thing.

My understanding is that it doesn't really matter that an error was made.  The problem is that the pension fund is down a substantial amount of money which means that other participants in the fund could potentially lose out.  So the money has to be paid back no matter what.

But as also stated elsewhere they should come to a reasonable agreement of a reduction in future payments, likely over the same length of time as the error existed so that it isn't too great a hardship for the recipient.  No interest would be charged and tax would sort itself.  

molerat

The problem is that the pension fund is down a substantial amount of money which means that other participants in the fund could potentially lose out.

There is no pension fund, AFPS is a non funded government backed scheme and is paid from the defence budget.

Grumpy_chap

molerat said:

One of the usual methods of recovery will be by a reduction in gross pension payments going forward so the tax will sort itself out.

Assuming, of course, that all the overpayments and the recovery payments are within the same tax band and rates are unchanged over the period.

CedricsDad said:

I've just received a letter stating there's been an error in calculating my Forces Pension since Aug 2012, I was overpaid £3000 per annum, with a tax free lump sum overpayment of £9000.  Equinity Paymaster will apparently contact me with details on how to pay it back. (I've calculated it's around £45 000.)

Is there any grounds to refuse/appeal this given I had no idea I had been overpaid and have been happily living (and spending) this pension for the past 12 years.  It does appear 

excessive for the system to request payments for overpayments going back so long?

Did the letter give any explanation as to how the error occurred?

Did you, or could you, have been expected to have been aware of the error? 
I have no knowledge of what the communications would have been at the start of the pension being paid, but if the communications included reference to the basis for the payments being made, would / could / should you have been able to verify that information?
The sort of thing that might have been included would be Cedric, employed by HM Forces period starting xxx to ending yyy resulting in zzz years service accrued and final salary at termination £££.  If this basic data supporting the calculation was presented and incorrect, it might well have been reasonable that the recipient flagged the error rather than accepting the over-payments.
I am sure if there was a statement that gave too low years service or too low final salary, the recipient would alert the under-calculation of pension payments.