Overpayments: case 3

Mr G decided to combine several policies into a new plan with one provider. He was going to take some of his pension pot as a lump sum and then take income from the new plan.

The total value was about £81,500 and he was paid five cash sums as various policies were transferred into the new plan.

A year after the last of these he was told the monthly income payments he could have. Mr G decided to sell his business and retire. He also gave £25,000 each to his three children.

Three years after that the administrator wrote to Mr G telling him it had come to light that, at the time of the transfer, there had been overpayments of around £35,000.

If he chose to repay the money it would be reinvested. If he did not repay it he might be liable to a tax charge as the overpaid monies could be considered unauthorised payments by Her Majesty’s Revenue and Customs (HMRC).

Mr G said he should not have to repay the money. He said the overpayments had arisen solely as a result of errors by the administrator that he could not have known about.

He added that it had taken years for him to be contacted. And in the meantime he had used the money including making gifts for deposits on houses purchased by his children.

The administrator offered him a payment of £500 to reflect their poor service, but they said he should have questioned the lump sum payments he had originally received.

We were satisfied that Mr G did not know he had been overpaid and had changed his financial position thinking the money was his to use. In particular he had decided, after looking into his finances, to give money away that he could not require be repaid to him.

We directed that Mr G’s pension fund be recalculated as if the payments had not been made and also that, the administrator should pay any tax due to HMRC if the payments led to a tax charge.