People may contact us because they’ve been told that they have been overpaid and money should be paid back – sometimes by making deductions from future pension instalments.
If the overpayment is because their pension was wrongly calculated, then the pension provider may also say that future pension payments will be permanently reduced.
We will look at any dispute over whether there was an overpayment in the first place. If there was we will look into whether any or all of it must be repaid and if so over what period.
If a pension is going to be reduced in future we will look at whether there is any reason it should not be.
As a starting point the law says that a mistake doesn’t create an entitlement for the future and that money received in error has to be repaid. But there may be reasons that some or all of it need not be.
Who might be at fault?
It could be the scheme trustees or administrators, an insurance company or other pension provider, or an employer if they gave incorrect information to the scheme.
What we look at
In looking at whether the overpayment should be repaid we will take into account whether the person (or their advisers) should have noticed the error themselves. If they should – or did – then it is unlikely that they will be able to keep the money.
We will then see whether the person has changed their financial position in a way that they can’t undo – for example if they spent money on a holiday or gave it away.
If money was spent on a generally improved standard of living over a period of time that may also mean it can’t be repaid.
But if it’s been spent, for example, on paying off a loan or buying an asset that can be converted back to cash without loss, then the person’s financial position hasn’t changed overall and the money may have to be repaid.
If money does need to be paid back we will take into account how long the wrong payments were made for. As a rule of thumb the money shouldn’t need to be paid back over a shorter period.
For example if someone was paid the wrong pension for a year, then the overpayment could be repaid by deducting it from their pension instalments for a year.
We will look at the whole picture, including what assets the person has, so we may ask for information about savings, investments and spending patterns.
And we will think about the way that repayment was asked for, including whether any unnecessary distress was caused.
If the person is being told that their future pension will be permanently reduced because it was wrong in the past, then our approach is the same as when someone has been given inaccurate information about a future pension.
What happens if the complaint is upheld?
Typically we might tell the scheme:
- that the money cannot be recovered
- that only some has to be paid back
- that repayments should be over a different period.
Whether or not the money has to be repaid, we may tell those responsible for the scheme to pay compensation for non-financial injustice, such as distress or annoyance [see ‘Putting Things Right’].
We cannot order the person who has received the overpayment to pay it back. But if we say that it should be repaid, then the scheme could start court proceedings as a last resort.