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I've never heard of this happening before but wonder if anyone with more knowledge then me has?
If a company you left over 5 years ago continued paying their share of contributions into the pension pot unknown to the ex-employee for that time are they entitled to demand a refund of it all? I know if it was salary then of course it should be returned but don't know about pension contributions? Asking for a friend.
Joe
I would say definitely the company gets the money back. Its a mistake after all but they probably are not entitled to any appreciation just the initial capital.
The former employee is unlikely to be able to get the cash out of the pension fund though even if it was paid in error so it’s not that straight forward.
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The how to get it out? Bit perplexed me too to be honest. Thanks though so far.
Tell them he’ll start paying them back when the pension is in drawdown.
25% drawdown limit could impact what he wants to do with the pension for himself.Quote:
Originally Posted by IAmATeaf
The company needs to do the legwork in getting the contributions refunded. If the contributions were auto invested it further complicates things. The terms should not be unfavourable for the friend.
My view is, if you aren't entitled to it, then you won't be able to keep it.
I'd be asking the company to liaise direct with the pension fund.
One of my sons sits on the Board of Trustees of a large pension fund and I asked him this question.
His answer is that there is no answer. The monies were paid in by mistake and some Pension funds will fight to get it refunded and some will just put it down to experience and let it lie.
There is no way of knowing what approach they will adopt.
Thanks for the advice everyone, I will pass it on!
Joe
I suspect it depends on how much money we’re talking...
As has been said, the issue with pensions is the lack of access to the funds in most cases.
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Has the employer asked the pension provider to return the incorrectly paid contributions?
It’s possible, I would think, to be able to do this for part of the period and then write the rest off to experience.
After all, it appears to be the employers fault
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Have they actually asked tour friend to pay it back or have they said they are going to try and get it repaid from his fund?
If the former then it could suggest that they may have already tried to get the money refunded and failed maybe?
Once I was overpaid at work.
I’d agreed to a 20% pay cut due to the company under performing but I was paid a bonus of 20% for wirking abroad .( I had inititially refused the paycut and this was suggested by management so on paper they could say to the shareholders everyone had agreed the oaycut).
Three months later I check my wage slips and I’ve been overpaid by about £6k a year pro rata.
So I own up to my manager . Next pay day I’m still overpaid. I tell my manager again.
He admits that its an error but the salary department want to keep it quiet and redoing the paperwork will be a lot of hassle so just keep it and don’t worry.
So I took a 20% paycut and became 6k a year better off.
I've asked him and he's been contacted by the fund holder for 'permission' to refund? They've said they can refund 12 months worth without permission but require authorisation for the remaining 4 years.Quote:
Originally Posted by Tahiti
He's not the type to brag about cash but I pushed him and it's about a SS Daytona's much 😃
Joe
It possibly depends on the Scheme rules but can contributions be made for someone who is not an employee? Are they therefore, actually contributions at all, or rather simply bank payments made in error? I'd say the latter.Quote:
Originally Posted by Tahiti
Not sure whether that changes the ultimate answer. I would be amazed if any scheme, having had the circumstances explained, would not return the erroneous payments.
The employer shouldn't be claiming tax relief on the payments, I'm pretty sure!
That would make sense on the face of it.
Being a pension, it’s obviously not the same as cash in the bank, but there are plenty of different pension types and potential implications.
If it were me, I’d want to give it back unless there was a particularly difficult departure from the employer, or it was invested and the funds have done badly (ie I was adversely affected).
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For me, a reasonable employer would cover any loss and allow any gain to be retained.Quote:
Originally Posted by Tahiti
Agreed.Quote:
Originally Posted by David_D
They're an ex-employer and 5 years contributions could be a tidy sum.Quote:
Originally Posted by David_D
They aren’t contributions - just payments made to the pension scheme in error. The amount’s not relevant to the facts. If there is a loss because the funds invested have performed badly, that’s not the former employee’s fault so he shouldn’t suffer it. Equally any gain was not one the company was anticipating to earn and it would be some compensation for inconveniencing the ex-employee.Quote:
Originally Posted by Kingstepper
Now what the legal position is, I have no idea!!
Whatever they’re called, the amount is relevant as to whether the ex-employer might right them off as was suggested.Quote:
Originally Posted by David_D
He’s not suggesting the contributions themselves should be written off - merely the gain or loss on those contributions after they were in the fund.Quote:
Originally Posted by Kingstepper
Assume the employer made £5,000 of contributions in the 5 years:
Scenario A: £5k paid in and it is now worth £5,500 - the employer gets their £5k back and the employee keeps the £500 gain
Scenario B: same £5k paid in but it’s now worth £4,500; the employer gets the £4,500 back and has to “write off” the £500 loss (which if in the last five years is almost certainly down to the incompetence of the pension fund manager!)
Fair enough, I misunderstood!Quote:
Originally Posted by tertius