Back pension, interest and tax?

[Slarti]

A friend has just been informed that her company pension was miscalculated because they failed to equalise male and female pensions, so she is owed a chunk of money.

But this raises 2 questions.

1) as this underpayment has been going on for 15 years, should she be entitled to interest?

2) the pension fund says that they will take tax through the payroll, this worries her as there could be enough money involved to throw her into higher tax bracket. Plus she says, they can only reclaim tax for 4 years, according to HMRC. My thought would be that as the money is being paid now, the tax on it is now, not what was happening 10 or 15 years ago, but what do I know?

Thoughts please
Slarti

[XFool]

Sounds like one for the pension administrator.

[PinkDalek]

2) the pension fund says that they will take tax through the payroll, this worries her as there could be enough money involved to throw her into higher tax bracket. Plus she says, they can only reclaim tax for 4 years, according to HMRC. My thought would be that as the money is being paid now, the tax on it is now, not what was happening 10 or 15 years ago, but what do I know?

HMRC's views https://www.gov.uk/hmrc-internal-manual ... l/eim74103

Arrears of pension

If a pension provider discovers a long-standing underpayment of pension, the underpayment is calculated and paid in a single sum. The provider is required to operate PAYE on the lump sum, which may give rise to higher rate liability for a pensioner who is usually a basic rate taxpayer. The pensioner should contact the tax office and supply a schedule showing the years to which underpayments are attributable. HMRC will spread the payments back over the relevant years and recalculate liability. Underpayments in the earlier years may be set-off against the resulting over-payment in the year of the lump-sum payment.

The Pension provider should provide the detail per tax year.

[Slarti]

[quote="PinkDalek"HMRC's views https://www.gov.uk/hmrc-internal-manual ... l/eim74103


The Pension provider should provide the detail per tax year.[/quote]


Perfect!

Thanks
Slarti