Why schemes are asking pensioners for their cash back

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How to make sense of GMP clawback

So far, so good: the process of making sure everything is correct lies with both HMRC and the scheme. 

Yet the scheme is ultimately responsible for carrying out the reconciliations, updating their records and keeping accurate documentation.

As Mr Lawson comments, it is also the scheme's responsibility not just to ensure GMP records are "correct and match those held by HMRC", but also to maintain a correct record of the GMP.

The fact this has not happened, and therefore many pensioners will be asked to repay money they may already have spent, is, according to Phil McGovern, managing director of MPA Financial Management, "pretty scandalous".

He comments: "It is pretty scandalous in many ways, as it is not the pensioners who have done any wrong, but a combination of scheme administrators and government."

Next steps

Because of the scale of the reconciliation process so far, HMRC recently extended the period for queries to be answered from December 2018 to March 2019. Yet despite this, schemes are concerned about whose job it is to inform affected individuals, with HMRC passing this responsibility onto the scheme itself.

Ms Paddon explains: "Under previous guidance, many schemes have already undertaken the calculations to reconcile GMPs on the understanding that all affected individuals (under State Pension Age as 6 April 2016) would be automatically written to by HMRC.

"However HMRC has now announced that it will not issue statements to individuals as planned. HMRC now believes individuals have or will have access to this information through other means, such as the existing state pension scheme forecast and the on/off proposals of the pensions dashboard.”

So schemes must bear an additional responsibility in informing all potentially affected individuals, while HMRC takes a back seat and waits for schemes to finish their reconciliation, and then to decide whether to take the hit themselves or send out begging letters to unsuspecting pensioners. 

It remains to be seen at the end of the year the full scale and cost of the exercise, not just the time/cost on schemes involved in carrying out the reconciliation but also the volume of money that will have to be clawed back from some individuals or repaid to others. 

Will this be the end of the matter? Not according to Ms Altmann, who warns the same lack of attention that caused the GMP issues is being repeated in the defined contribution world of auto-enrolment.