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Pension administrator error

argoal
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Pension administrator error

#173073

Postby argoal » October 11th, 2018, 4:57 pm

A friend of mine retired at 55 2.5 years ago and took the maximum tax free lump sum and his occupational DC pension at the time of retirement.

The pension under administration was made up of three elements - two based on the company’s pension scheme and a transferred in pension.

As he was retiring early he was quoted and received a reduced pension plus the tax free lump sum.

Last week the pension administrator wrote to him telling saying that for the last 2.5 years his pension had been overpaid by a significant amount (hundreds per month) and his future payments would be reduced by around 10% per month.

The administrator was not looking to claw back the overpayments that had previously been made.

He is obviously not too happy about the situation and is fortunate that the reduction in pension is not life changing for him and his wife.

He has responded to the administrator that he is not accepting the correction as he considers the pension offer and acceptance as a contract that should be honoured by the administrator.

As things stand situation has created a number of problems not of his making.

1. He would probably have worked a bit longer and contributed more to his pension if he had known that the pension promised was not correct and would later be adjusted. After 2.5 is not really possible to return to work to make up the difference.
2. He probably has a tax bill to pay as it appears that he was paid more than the 25% tax free lump sum based on the new calculation and has a taxable liability on the extra money.
3. His lifestyle and spending plans are compromised by the reduction in the pension.
4. The overpayment of his lump sum may have reduced the corrected value of the pension.

At the moment there is no detail from the administrator of how the original calculation was made and how the current one is calculated.

The case is likely to go to the ombudsman for adjudication as the administrator is not willing to bend and is not providing sufficient justification of their actions or evidence that they have now got thing right.

Technically, assuming the new calculation is correct, he has received more that he should have for 2.5 years.

But the administrator has made a huge error and created a non trivial set of problems for my friend.

Does anyone know how the ombudsman views cases like this?
Does the offer and acceptance of the pension/lump sum constitute a contract between the parties?
Is he likely to be entitled to compensation for the error?

He doesn’t really know where he stands on this and any insight into how the ombudsman process works in practice would be useful for him.

mearnsfool
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Re: Pension administrator error

#173115

Postby mearnsfool » October 11th, 2018, 7:27 pm

This is not a matter for an online forum it’s a matter for the ombudsman to consider all documentary evidence and make a ruling based on the law.

It is not a matter for people to comment on without access to all documentation.

parallellines
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Re: Pension administrator error

#173133

Postby parallellines » October 11th, 2018, 8:47 pm

While agreeing with mearnsfool, there's a good basic summary , and the opportunity to seek further help outside of the formal ombudsman process, here:

https://www.pensionsadvisoryservice.org ... erpayments

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Re: Pension administrator error

#173151

Postby scrumpyjack » October 11th, 2018, 10:22 pm

Given what the Pension Advisory Service website says about overpayments you might also consider the risk that the administrator might withdraw the offer not to seek repayment of previous overpayments. Seek advice and don't be too aggressive with the administrator in the meantime?

argoal
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Re: Pension administrator error

#173156

Postby argoal » October 11th, 2018, 10:57 pm

Thanks all for the sage advice.

You are right that this is not really a discussion board topic but may have touched or will touch some people here.

Personally, I think it is surprising that, based on the Pension Advisory Service webpage, the administrator isn’t likely to be held responsible for their mistakes. The risk of the consequences of error fall 100% with the customer.

I did find a judgement that appears relevant.

https://www.pensions-ombudsman.org.uk/wp-content/uploads/PO-4152.pdf

The case was lost but the ruling is interesting and appears to rest on the basis that Mr E said that he decided to retire based on the percentage reduction of the pension. As the calculayptee pension was being reduced by the same percentage there was no loss.

If Mr E had stated that he had instead based his retirement decision on the value of pension and lump sum received, then it is implied that outcome might have been different.


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