Pension scheme trustees may well be feeling anxious this week
after two big stories hit the headlines. First there was the $50
billion fraud in the financial markets which could have knock-on
effects for several schemes as commentators have said it could be
the first of many, and secondly the news that Xafinity has been
overpaying pensions to NHS staff and ex-servicemen.
But according to Simon Laight, partner at Pinsent Masons,
trustees should remember that overpaid and incorrect pension
payments are not uncommon, even where robust systems are in place.
"Trustees, however, need to resolve errors promptly to avoid being
in breach of their trustee obligations. And they must tread
carefully if they want to recover overpayments. Reduction in a
pension can easily result in HMRC tax charges as it may be classed
as an unauthorised payment. This needs to be balanced against the
cost of legal action where irrecoverable costs may equal or exceed
the value of the recovery. A recovery project must focus on
outcomes where the benefits justify costs and therefore a mediation
and negotiation approach is often useful."
Trustees wishing to recover overpayments should also minimise
risks around copycat cases, while meeting their statutory duties to
identify and mitigate the risk of unjustified allegations of
maladministration. Good communications with affected pensioners are
also key here if trustees want to avoid claims to the Pensions
Ombudsman.
Pinsent Masons has a great deal of experience in developing and
overseeing 'overpaid pension' recover exercises. For more details,
please read our report on recovering
overpaid pensions