Pension administrator error
Posted: 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.
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.