The civil service pension scheme recently reported that overpayments of £22 million were made to pensioners over many years.
The overpayments were uncovered as a result of work on reconciling scheme data on Guaranteed Minimum Pension (GMP) with HMRC records.
All pension schemes are expected to carry out GMP reconciliation work so it is possible that hundreds of thousands more overpayments will be uncovered in other schemes.
Public sector pension schemes decided to write off these overpayments. However private sector pension schemes may try to pursue repayment from members.
The chances are that your pension has been calculated correctly and you will not be affected by these issues. This blog outlines the steps you can consider taking in the, hopefully unlikely, event you are contacted by your pension scheme with a demand for repayment of overpaid pension.
(1) Verify that it was really your pension scheme that contacted you.
Unfortunately there are many criminals targeting pension scheme members. Fraudsters can make their communications seem genuine. Refer to guidance from the Pension Regulator on spotting pension predators:
(2) Get a full explanation of how the overpayment arose.
It is important to understand how the error arose and whose fault it was initially. It is also important to get confirmation that the error has been fixed properly. Ask the scheme for a full explanation of how the error arose and confirmation that the latest figures are correct.
(3) Is the scheme a public sector pension scheme?
If you are a member of a public sector pension scheme then you should be covered by the decision of public sector scheme managers not to pursue these overpayments. The scheme administrators do not always get things right first time so you should write back to the scheme and refer to this decision. If that does not do the trick, contact Prospect and we will intervene.
(4) How old are the overpayments?
In England, Wales and Northern Ireland schemes cannot recover overpayments that are more than 6 years old. In Scotland the time limit is 5 years. This may result in the scheme having to write off a least a portion of the overpayment.
(5) Can you challenge a decision to pursue repayment?
In these situations it should be possible for members to argue that (a) the problem was the scheme’s fault and (b) there is no possible way they could have been aware of the issue. If the member has changed their financial position in a way they cannot undo (eg by spending the money on a holiday or on a generally improved standard of living over a period of time), it might be possible to argue that some or all of the overpayment should be written off by the scheme. Please contact Prospect if you would like assistance making these points to your scheme.
As well as potential demands for repayments, schemes may also propose reducing the amount of pension paid in the future to a level that allows for the corrected data on GMP.
Pension schemes have a duty to pay the correct amount of pension due under the rules and, in general legal terms, it is not usually possible to rely on an error in our favour. Whether a scheme can reduce the amount of pension in the future will depend on the circumstances of each case but, unless you can show that you made irreversible decisions on the basis of the incorrect information provided by the scheme, it may be allowed. You can contact Prospect for advice on how to respond if your pension scheme says they will reduce the amount of pension paid in the future.