Tax free lump sum overpayment

RecentlyRetired2024

Nine months ago, I took the tax free lump sum from my main pension and decided to retire. I have received a letter from the pension administrator notifying me that their calculations were wrong and I have been overpaid both the lump sum and monthly pension. They want me to pay back half the lump sum and my monthly pension will be reduced by 50%.
I gave up a well paid job based on the pension calculation. If I repay I will have no savings and cannot live on half pension.
Do the pension fund have the right to demand repayment? They have admitted it was their error.

Marcon

RecentlyRetired2024 said:

Nine months ago, I took the tax free lump sum from my main pension and decided to retire. I have received a letter from the pension administrator notifying me that their calculations were wrong and I have been overpaid both the lump sum and monthly pension. They want me to pay back half the lump sum and my monthly pension will be reduced by 50%.
I gave up a well paid job based on the pension calculation. If I repay I will have no savings and cannot live on half pension.
Do the pension fund have the right to demand repayment? They have admitted it was their error.

If this is a defined benefit scheme (and it sounds as if it is), they have a duty to do so, I'm afraid, although there may be some circumstances where you don't have to repay in full. See https://www.pensions-ombudsman.org.uk/faq/question-14

Assuming this is a defined benefit scheme, this seems a huge error and you may have difficulty arguing that you couldn't have known the figures were wrong, particularly if you have been receiving regular benefit statements and these were correct - is that the case?

xylophone

Presumably this is a DB Scheme as if it were standard DC, you would have known the value of 25% of your pot and queried a huge excess.

Were you an active member of the scheme nine months ago? That is to say, you were working for the sponsoring employer at that time?

Presumably you read your scheme guide before applying for a pension quote so knew roughly what you might expect.

Are you saying that the quote you accepted was roughly double what you anticipated?

Pat38493

From previous threads I have seen on this topic, it seems that you will probably have to pay the money back and there is nothing you can do about it.  50% though seems like an enormous error - I always scratch my head at how such a huge error could have made - surely they must have someone double check the numbers before starting to pay out!

Edit:  Actually it's not even 50% it's 100% if they are paying you double what they should!

Bemma

I thought I'd comment on this as a friend recently had a extremely erroneous pension statement, I raised it in the following thread:

https://forums.moneysavingexpert.com/discussion/6574173/teachers-pension-scheme-tps-errors-on-statement#latest

The annual pension was about 60% short and the PCLS was nearly 150% overestimated. My friend had zero concept that this could be incorrect! They take the statement values as absolute and have no need to read or understand where the numbers come from!!!

That's probably a complete anathema to the regulars on this board! But in the real world, possibly particularly with DB schemes, that's a reality with a very larger proportion of members.

Troytempest

Bemma said:

I thought I'd comment on this as a friend recently had a extremely erroneous pension statement, I raised it in the following thread:

https://forums.moneysavingexpert.com/discussion/6574173/teachers-pension-scheme-tps-errors-on-statement#latest

The annual pension was about 60% short and the PCLS was nearly 150% overestimated. My friend had zero concept that this could be incorrect! They take the statement values as absolute and have no need to read or understand where the numbers come from!!!

That's probably a complete anathema to the regulars on this board! But in the real world, possibly particularly with DB schemes, that's a reality with a very larger proportion of members.

I agree.

This 'issue' comes up time after time on this board.

Think it's about time these so called professionals had to take the hit for these errors.  

Cobbler_tone

I requested a 'retirement quote' on my DB scheme and will do each year, purely to reconcile it against our online portal. It is exactly what the portal says at any given time. I don't want any nasty surprises when I'm getting ready to 'press the button'.!

bjorn_toby_wilde

Troytempest said:

Bemma said:

I thought I'd comment on this as a friend recently had a extremely erroneous pension statement, I raised it in the following thread:

https://forums.moneysavingexpert.com/discussion/6574173/teachers-pension-scheme-tps-errors-on-statement#latest

The annual pension was about 60% short and the PCLS was nearly 150% overestimated. My friend had zero concept that this could be incorrect! They take the statement values as absolute and have no need to read or understand where the numbers come from!!!

That's probably a complete anathema to the regulars on this board! But in the real world, possibly particularly with DB schemes, that's a reality with a very larger proportion of members.

I agree.

This 'issue' comes up time after time on this board.

Think it's about time these so called professionals had to take the hit for these errors.  

Looking at the cases on the Pension Ombudsman’s website they hardly ever find in favour of the complainant.

It’s almost giving the trustees a licence to maladminister.

squirrelpie

My understanding is that they do have the right to reclaim overpayments, so you need to plan for the consequences. But they can't make you give it back immediately; you will have to negotiate a settlement based on what is practical. It sounds as though you will need to find another job; is there any chance that you can get your old job back, perhaps? Or otherwise find something similar.

As others have said, it seems wrong that their mistakes can have such harsh consequences for people who have done nothing wrong and there should at least be some consequences for the people who made the mistake!

Pat38493

Cobbler_tone said:

I requested a 'retirement quote' on my DB scheme and will do each year, purely to reconcile it against our online portal. It is exactly what the portal says at any given time. I don't want any nasty surprises when I'm getting ready to 'press the button'.!

Unfortunately we have seen posts on this board in the past stating that the administrators were trying to reclaim money from many (all?) pensioners on a particular DB scheme because a new incoming actuary had pointed out that their calculations had been wrong for years, and apparently this is still ok for them to claim this money back from the members.  It appears that there is no 100% guarantee that they will not come back later stating that their calculations were wrong - the best you can do is try to calculate what it should be yourself and satisfy yourself that it's in the right ballpark - e.g. obviously if your DB pension is higher than your salary, or your PCLS is commutation factor is 50 or suchlike, there is an obvious issue (I have had estimates in the past from mine with commutation of almost 40 which must have been wrong).

In other words even if they have been sending you consistent information for several years, this is still not a legal commitment.

Albermarle

I wonder what would happen if you just ignored all the letters and never responded. Or just said you have spent it and can not afford to pay it back. Presumably your monthly pension would reduce, but would they actually come after you for the refund of overpayment? I mean take you to court eventually? 
Plus some of these pension administrators are pretty incompetent and very slow at doing anything, so it could drag on for years.
Could be they might just give up and write the money off?