Pensions Ombudsman confirms no obligation to refund excess employer contributions following error

The determination concerned a complaint brought by a member of a self-invested personal pension (SIPP) who sought a refund of a £180,000 employer contribution after it triggered a significant annual allowance tax charge.

The complaint arose after an employer contribution of £180,000 was paid into the member’s SIPP in June 2023. The member believed that sufficient annual allowance could be carried forward from previous tax years to avoid an additional surcharge. However, in September 2023, the member's accountant advised that only £60,000 could have been contributed without triggering an annual allowance charge.

The member promptly contacted the pension provider and was directed to HM Revenue and Customs (HMRC) and Pensionwise. The member stated that he was informed that "a genuine contribution error" refund can be made at a scheme administrators’ discretion. The member later contacted the provider and argued that the overpayment had arisen from a “genuine error” and should therefore be refunded.

The provider did not uphold the member's complaint, maintaining that HMRC rules did not permit a refund of excess employer contributions in these circumstances. The provider also argued that the “genuine error” provisions did not extend to misunderstandings or miscalculations of pension tax rules, and the provider had not made any errors. The provider noted that responsibility for ensuring contributions remained within applicable tax limits rested with the member. In response, the member claimed that he had not taken specific advice from his accountant and had made a genuine error. He requested that the provider either return the contribution or compensate him for the additional tax liability of £12,000 that he had incurred. The provider informed the member that it was not able to uphold his complaint. The complaint was escalated to the PO.

In considering the complaint, the PO noted that the core issue was that the member had acted on what he believed to be financial advice when making the contribution in his capacity as an employer. The PO acknowledged that the member acted quickly once he became aware of the issue and made several attempts to address the alleged overpayment, however the PO concluded that the provider's actions were appropriate in the circumstances.

The PO's determination turned on the fact that the SIPP was governed by its terms and conditions, the scheme rules, HMRC guidance and applicable law including the Finance Act 2004. The provider was required to operate the SIPP in accordance with those provisions. The relevant provisions placed responsibility on the member for ensuring contributions remained within any tax allowances, and any resulting tax liabilities.

The PO examined three potential grounds through which a refund might have been available to the member:

Firstly, the statutory cooling-off period which allowed members to cancel certain contributions within 30-days of making them, did not apply in this case because the payment was an employer contribution rather than a personal contribution. In any event, the applicable timeframe had passed.

Secondly, the PO agreed with the provider in its finding that the statutory rules governing refunds of excess contributions did not apply to employer contributions.

Thirdly, and most significantly, the PO agreed with the provider that the member had not made a “genuine error” consistent with HMRC guidance. Although the member had misunderstood the operation of the carry forward rules for the annual allowance, the contribution itself had been made intentionally. The fact that the member did not anticipate the resulting tax implications did not convert the contribution into a genuine error capable of being refunded.

The PO concluded that any repayment of the employer contribution of £180,000 would have constituted an unauthorised payment under HMRC guidance, and the provider could not be required to make such a payment.

While expressing sympathy for the member’s position, the PO found that there was no entitlement to a refund under the SIPP terms, HMRC guidance or the Finance Act 2004. The PO found no evidence that the provider was responsible for the additional tax charge of £12,000 and did not uphold the complaint.

The determination provides a useful reminder of the narrow circumstances in which employer contributions can be cancelled. A contribution made intentionally on the basis of a misunderstanding of the annual allowance or carry forward rules is unlikely to qualify as a genuine error for HMRC purposes. The case also underlines the important distinction between employer and member contributions. Employer contributions benefit from fewer potential options for repayment – for example, because they fall outside the scope of the statutory cooling-off period.

For providers, the decision reinforces the importance of how scheme documentation allocates responsibility for contribution limits and tax implications. For employers and members, it serves as a reminder that the tax treatment of pension contributions should be carefully checked before substantial payments are made, as opportunities to reverse those contributions may be limited once any funds have been paid into the scheme.