Baroness Ros Altmann, former pensions minister and chairwoman of fintech firm Pensionsync, commented: "If a client is in financial trouble and has not got the money to pay back, then they should appeal against the demand for repayment and claim they should be allowed not to pay it back."
Kay Ingram, director of public policy for LEBC, is in full agreement with this. "The member should challenge any request for repayment.
"While trustees have a legal right to reclaim overpayment, they also owe members a duty of care and are required to check that payments are correct when they make them, and to carry out regular audits."
She suggests:
- Members should ask for an explanation of how the mistake arose and whose fault it was.
- They should ask when it was discovered.
- If it was the scheme's error, and it has taken more than six years to notify the member of the mistake, the scheme may not have a legal right to claim a refund of the overpayment.
However, even if the scheme administrators agree to waive the clawback, the scheme could adjust future payments to the correct amount, so this is worth factoring into any ongoing financial advice.
Arranging payment plans
Keeley Paddon, head of technical for the SimplyBiz Group, says it is worthwhile having a discussion with the scheme administrators over how payments can be made and when.
She explains: “Where errors are being uncovered, we know that some schemes are being sympathetic. In addition though, the Ombudsman is also seeing cases now where individuals may have transferred out which complicates the matter even more. We would envisage that some form of staggered payment plan would be on the table.”
This would be particularly helpful for those pensioners who might be facing bills running into the thousands, although as Mr McGovern warns "HMRC are not so easy to deal with", as the taxman will look at your client's total income and, regardless of any personal financial conditions, will often state the money has to be repaid in total by a certain date.
Sir Steve Webb, director of policy for Royal London, agrees. "If a scheme insists on asking for repayment of overpayments, they should at the least do so on an affordable basis.
"They will often issue an expenditure form, which clients will need to complete, on the basis of which they will come up with a repayment schedule.
"Advisers can certainly help to make sure that clients include any of their outgoings and only agree an affordable repayment schedule."
Again, it would also be worth pushing the scheme to absorb any costs before agreeing to a payment plan.
Ms Altmann adds the fact the mistakes were made by schemes, or by HMRC, or by a combination of the two, so "certainly none of the problem was the fault of the pensioners".
"That makes a reasonable case for arguing the overpayments should be absorbed by the scheme, not the individual," she adds.
