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What Am I Entitled to If My UK Pension Scheme or Provider Makes a Mistake?

Our guide provides an overview of your entitlement should a mistake occur and who might be able to help you secure a fair outcome for free. We also explain common UK pension mistakes, how to avoid them, what to do if your pension scheme or provider makes a mistake and how to reduce the chances of a mistake impacting your financial plans.
Updated 7 March 2023
Summary:
  • ​Whilst most UK occupational and private pensions will permit a transfer to a New Zealand QROPS, for many people, the best likely beneficial financial outcome will be to leave the benefits in the UK, at least for now, possibly for one's retirement.
  • But what can be done if the pension arrangement subsequently tells you they've made a mistake and the pension or fund value you expected will be smaller than you thought?
  • You may need some help if this eventuates, and your financial adviser and or legal adviser might be able to point you in the right direction and make enquiries of the pension scheme provider, but this may cost and some aspects you can do yourself.
  • If you remain dissatisfied with the outcome of the pension arrangement, there are free, unbiased services in the UK that should be able to help.
  • Our view is simple - there is no need to appoint a 'no win, no fee' legal team who may expect to share in any monetary compensation paid to you. 

In this guide, we outline the general principles relating to mistakes; we cover the following:
Know This First:
  • This guide isn't intended to frighten people into making an erroneous decision to transfer their pension benefits to New Zealand or put any doubt in their minds as regards the security of their UK pension plan because an error is likely to happen, far from it, given the volume of transactions, assets involved.
  • In several memberships, the occurrence of an error is very much the exception rather than the norm.
  • We suggest you take an interest in your pension plan and get to understand it; this is particularly easy for many members of occupational pension schemes where online portals and information is readily available.
  • If there is a problem or mistake, free help is available to bring about the 'correct' outcome; however, you may need to be a little patient, as free ombudsman services have limited resources and are very popular options amongst the general public, but they have 'teeth'. They can decide what pension schemes/providers will accede to.

Know This: This guide is based on the experiences of a previously regulated UK financial adviser with a special license to provide complex pensions advice. As such, it is based upon that individual's views; we do not warrant that your outcome will necessarily fully reflect the contents of this guide nor can it commit a pension scheme or ombudsperson service to come to a decision purely based upon the contents of this guide.

Basics of Pension Mistakes

What is the Correct Outcome Reconciled to?

The scheme rules or policy document will determine how each individual's entitlement should be calculated. Ensure you have a copy of the scheme members' booklet (note many schemes offer a member online portal with access to information and forms). For personal plans, look for your policy document. If you don't have the original, ask your provider to provide a copy and keep it safe.

What are you Entitled to if a Mistake is Made?

Ordinarily, you are only entitled to the benefits provided for under the terms of membership of your pension scheme/plan. What this means is if the pension provider does make a mistake, you aren't entitled to the incorrect benefits.

However, if you have relied upon the information and made financial decisions which have left you financially worse off, you may be entitled to some compensation. But if you haven't relied upon the information, and the 'loss' felt is more about disappointment, then no financial compensation is due, However, you may be entitled to a payment that reflects any distress and inconvenience this episode has caused you.

Are There Any Exceptions?

Not normally; however, several legal precedents could bring about a different outcome. These are outside the scope of this guide, but a legal team or, as we will outline later, two services offered by organisations in the UK will consider them.

What if You Have Relied Upon the Information to Make Financial Decisions?

  • If the information supplied by the pension scheme has led you to make a financial decision you wouldn't have made otherwise (such as buying a recreational boat that previously you had shown no interest in buying because you couldn't afford it) or paying for a cruise rather than your usual two-week break at Waipatiki Beach Holiday Park, you may be entitled to some compensation. However, several factors come into play, not least was it reasonable for you to rely on the information received.
  • This is an important point; if (for example) you received a transfer value last year for £X, and this year the transfer value is £X plus a significant increase, it should trigger a question to the pension scheme. In such a situation, it wouldn't be unreasonable to expect you to check the pension scheme provider's figures to make sure they're correct.
  • The concept here isn't dissimilar to the scenario where you deposit a cheque for $600, but it shows up in your bank account as $6,000; you would check with your bank before spending it. Similarly, if you see a significant increase in your revalued preserved pension between last year's annual statement and the latest one, this should trigger an enquiry from you.
  • 'Playing' the naïve pension scheme/plan member is unlikely to win you any favours or advantages. On the contrary, it may be judged that you should have spotted and queried the error before entering into an irreversible transaction.
  • It is also important that if an error comes to light, you do whatever you can to reduce the impact of the loss. For example, if only a deposit has been paid for the (in our examples) cruise or the recreational motor boat, then it is important, if it is clear a mistake has been made, that you don't follow through and pay the remainder owing.
  • Compensation in such circumstances is usually limited to restoring the individual's financial loss, but even here, there are limits on reasonableness as to what is needed to restore one's position.

What Should You do to Reduce the Chances of a Mistake Happening or Impacting Your Financial Plans?

  1. Inspect any documents you receive from your pension scheme, don't file them away with just a cursory glance. Get to understand the terms used and if you are uncertain, contact the pension scheme or pension plan provider and ask them to clarify anything you are uncertain about.
  2. Query any sudden changes in benefits that can't be easily explained. For example, a preserved pension benefit statement that has increased over the past year by the UK inflation rate is likely due to the protection offered under the scheme rules. However, if the split of pension benefits contained within a defined benefit scheme membership statement suddenly includes an additional annual pension that wasn't in last year's statement, this should be queried with the scheme administrators.
  3. Query any significant increase in transfer or fund value quoted. There may be a rational explanation, but you are giving the pension provider a chance to check their output and increasing your ability to rely upon what has been quoted.

Who Can Help Me if Things Go Wrong?

  • As outlined above, your usual financial adviser may be willing to help, and so too your usual legal adviser; however, both may seek to charge for their time.
  • You can, of course, register your complaint with the organisation. For personal arrangements perhaps offered by a UK insurance company, you can easily register a complaint, most companies now have online portals for you to do this, and there are time limits placed on them by the Financial Conduct Authority (the UK financial services regulator) to look into your complaint and offer their findings (and how they plan to resolve the problem).
  • If your complaint concerns an occupational pension scheme, write to the administrator to register your dissatisfaction and ask for a copy of their internal dispute resolution process (or IDRP). If the administrators cannot resolve matters to your satisfaction, then you can either invoke the IDRP, which will result in the trustees of the scheme becoming involved, or you can contact The Pensions Ombudsman Service for help.

If you are unhappy with the pension provider's response, you can approach two Ombudsman services in the UK. Their services are confidential and free:
  1. The Pensions Ombudsman Service can investigate all matters relating to pension scheme/plan complaints
  2. The Financial Ombudsman Service can investigate issues relating to personal pension schemes only.

Each ombudsperson service imposes time limits; if you exceed the time limit, they aren't normally able to help you. The clock starts ticking from the date you first became aware of the issue or reasonably ought to have become aware, so it is important to have a plan of action. However, you must try to resolve the issue first with the pension provider; neither ombudsman will get involved until you have given the host a chance to put things right and you have a letter stating what they plan to do about it.

What if I'm not happy with the ombudsman's decision?
If you are unhappy with the ombudsman's decision, you may be able to appeal the decision. The process for doing so will depend on which ombudsperson service you used.

What can be claimed to recognise and compensate for the stress?

Pension schemes and pension providers are aware that their errors may well have caused some distress and inconvenience; indeed, in the case of personal arrangements, one would usually expect the personal pension scheme provider to use the most favourable prices and perhaps offer interest for late payment of benefits or transfer value where service standards haven't met their own internal expectations.

In addition, the pension provider may offer a sum of money to reflect the unnecessary distress and inconvenience they have caused. But this will likely depend upon the severity of the case and how many opportunities the pension provider took to get things right. Ultimately we all make mistakes, and if a mistake is corrected promptly, perhaps all one should reasonably expect is a written apology.

Frequently Asked Questions

How long do I have to make a complaint about a pension mistake?

You should make a complaint as soon as you become aware of the mistake. The ombudsman services impose time limits in the UK, and if you exceed the time limit, they may be unable to help you.

Can I claim for financial losses caused by a pension mistake?

You may be entitled to compensation if you have suffered financial losses due to a pension mistake and can demonstrate that you relied on the incorrect information provided. However, the compensation is usually limited to restoring your financial position to what it would have been had the mistake not occurred.

Can I transfer my UK pension to a New Zealand QROPS if there has been a mistake?

You may still be able to transfer your UK pension to a New Zealand QROPS, but it is important to consider the potential financial implications before doing so. For example, if there has been a mistake, leaving your pension in the UK may be beneficial until the mistake has been resolved.

Will I have to pay for help if there has been a pension mistake?

Your financial or legal adviser may charge for their time if you seek their help, but there are also free, unbiased services in the UK that can assist you in resolving the issue. These include The Pensions Ombudsman Service and the Financial Ombudsman Service.

What should I do if I suspect a mistake has been made with my pension?

If you suspect a mistake has been made, contact your pension provider or scheme administrator to raise your concerns. They should investigate and respond. If you remain dissatisfied with the outcome, you can escalate your complaint to the ombudsman services.

How can I reduce the risk of a pension mistake?

To reduce the risk of a pension mistake, it is important to inspect any documents you receive from your pension scheme and get to understand the terms used. If you are uncertain, contact the pension scheme or provider and ask them to clarify. Additionally, you should query any sudden changes in benefits that can't be easily explained and any significant increase in the transfer or fund value quoted.

Can I claim my financial adviser if there has been a pension mistake?

If you believe your financial adviser has provided you with incorrect advice that has resulted in a pension mistake, you may be able to claim them. However, you will need to demonstrate that the advice given was unsuitable for your needs and that you suffered financial losses.

Will my pension scheme/provider pay compensation automatically if they make a mistake?

Your pension scheme or provider may not automatically pay compensation if they make a mistake. Instead, you must raise your concerns with them and provide evidence of the mistake and any financial losses incurred. The pension scheme or provider will then investigate and provide a response, which may include compensation if they accept that a mistake was made.

Can I claim a historical pension mistake?

If you have discovered a historical pension mistake, you may still be able to make a claim, but the process can be more complicated. You will need to provide evidence of the mistake and any financial losses incurred, and the pension scheme or provider may contest the claim if it occurred a long time ago.

Can I transfer my pension if there is an ongoing dispute?

If there is an ongoing dispute with your pension scheme or provider, transferring your pension may not be advisable until the dispute is resolved. Transferring your pension could complicate the situation and lead to further financial losses.

Can I claim a pension mistake if I have already retired?

Yes, and the process for doing so is the same as if you were still working and paying into your pension scheme.

Can I make a claim against my employer for a pension mistake?

If your employer is responsible for administering your pension scheme and makes a mistake, you can claim them. However, if a third-party provider administers your pension scheme, your claim should be directed at them.
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