Pension overpayment

When you start drawing your pension it’s important to check your pension statements regularly to ensure you’re not being paid the wrong amount. If you notice a mistake or pension overpayment, you should report it to your pension provider or the Pension Service straight away.

What is pension overpayment?

Pension overpayment can occur when you accidentally receive a higher pension income than has been agreed. While receiving a pension overpayment is rare, you should always read your pension statements to check you’re receiving the correct amount.

If you have a workplace or private pension, pension overpayment could happen as the result of an error caused by the scheme trustees or administrators, an employer or other pension provider. If you receive the State Pension, pension overpayment can happen if your circumstances change once you’ve already begun drawing your pension.

If you have an annuity or final salary pension and are due to receive a fixed amount, a miscalculation could result in an overpayment of pension contributions. However, pension overpayment is highly unlikely to occur if you are withdrawing your pension flexibly via drawdown, as you will be in control of how much you withdraw and how often.

You can also receive a pension overpayment if your circumstances change once you begin drawing your State Pension, for example if you return to work.

What to do when pension overpayment occurs

The sooner you notice and report an overpayment, the more options you will have, however it is likely you’ll have to repay any amount that has been overpaid. Once you notify your pension provider of the error, they will explore pension overpayment recoupment.

Usually pension overpayment is repaid by making deductions from future pension instalments, however another arrangement may be possible. There are some limitations that may affect how much a pension provider can recover, depending on how long ago the overpayment was made and the circumstances.

If you have suffered financial loss or stress as a result of an overpayment you may be entitled to claim compensation or receive a reduction in the amount you have to repay.

In instances where the State Pension has been overpaid you should consult the HMRC errors and mistakes guidance and contact the Pension Service. If you need further guidance and support visit the Pensions Ombudsman website for more information.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

Last edited: 06-04-2024

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