15 May 2007
Fresh guidance from HM Revenue & Customs says that unless
schemes act to claw back any inadvertent payouts over £250
they will be treated as "unauthorised payments", which attract a
tax charge of up to 55 per cent for the member and up to 40 per
cent for the scheme.
HMRC says schemes must get back any overpayments regardless of
the circumstances.
It says: "Due to a genuine error, a pension payable under a
registered pension scheme could be paid inadvertently.
"There would be an unauthorised member payment if, despite the
error being spotted, it is decided the repayment of inadvertently
overpaid pension instalments will not be pursued or the scheme does
attempt recovery but is unsuccessful and eventually decides to
write off the overpayment."
HMRC adds that trustees have no excuse if the decision is taken
on the grounds of excessive administration or out of sensitivity -
if the payment was made to a deceased member's dependant, for
example.
However, it says schemes do not need to report any unauthorised
payments less then £250.
