Pension overpayments—beginners’ guide
Produced in partnership with Wyn Derbyshire of gunnercooke LLP
Pension overpayments—beginners’ guide

The following Pensions practice note Produced in partnership with Wyn Derbyshire of gunnercooke LLP provides comprehensive and up to date legal information covering:

  • Pension overpayments—beginners’ guide
  • Why do pension overpayments occur?
  • What is the role of the trustees?
  • What is the role of the employer?
  • What is the usual position of a member who has been overpaid?
  • What are possible methods of recovering overpayments?
  • Asking member to agree to repayment
  • Bringing claim for restitution
  • Equitable recoupment
  • Bringing a claim against professional advisers
  • More...

This guide is primarily aimed at trainees, newly qualified lawyers and other persons who are new to or unfamiliar with pensions law.

THIS PRACTICE NOTE APPLIES TO TRUST-BASED OCCUPATIONAL PENSION SCHEMES

Why do pension overpayments occur?

Pension overpayments from occupational pension schemes generally arise either as a result of:

  1. incorrect calculations of pensions due, or

  2. incorrect information having been provided to the pension scheme, which is then used to form the factual basis upon which the pension calculations are subsequently carried out

However, regardless of the cause of the error, the overpayment of benefits can cause considerable difficulties and distress for the trustees of the relevant pension scheme, its sponsoring employer and, naturally, the members concerned, each of whom will have their own views on the matter.

What is the role of the trustees?

Members often assume that trustees have a choice over whether or not they recover or stop an overpayment, whereas in reality the flexibility not to pursue an overpayment is fairly limited.

Subject to the successful application of defences that might be advanced to defeat a repayment claim, as discussed further below, members are only entitled to receive the pension benefits to which they have an entitlement under their scheme’s rules and trustees of an occupational pension scheme have a duty to ensure the correct payment of those benefits.

An overpayment of a pension (or even under-payment) could be

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