Defined Benefit  

Thousands face demands for pension cash back

According to Sir Steve, the trustees are in a difficult position when it becomes apparent that this has happened.

He said: "The trustees aren't allowed to pay money that they shouldn't pay. It will increase the margins, the deficits and it will have an impact on other members."

Sir Steve said this situation will leave people in "total shock".

He said: "Once you start getting your company pension and your state pension, you don't imagine someone is going to come along and say: 'Oh sorry, we did the numbers wrong.'

"It is bad enough that you are going to get less each week going forward, but then to be asked for thousands of pounds is dreadful.

"At the very least, they [pension schemes] should apply an affordability test [to determine if the members] can actually afford to pay this back."

He suggested HM Revenue & Customs will also have to accept some of the blame in some of these cases.

But a spokesperson at the taxman said: "Over or under payment of an occupational pension is not a matter for HMRC.

"Pension scheme administrators are responsible for the quality of their records, including data on contracting-out.

"HMRC is currently offering a free, voluntary service to help pension scheme administrators ensure they have the right information."

According to Alistair Cunningham, financial planning director at Wingate Financial Planning, the contracted out pension could be essential income for these pensioners.

However, he said if these schemes don't claw the money back it will be other scheme members or employers who pay for it.

He said: "Anyone who was in a final salary scheme 20 years ago might have those benefits, so it might be a quite common issue."