‘Pension company said I would inherit £250k more than I received’

Dear Gary Rycroft

QMy sister died unexpectedly last year and had not left a will or any instructions to her pension company. She was still working so on her death there was a lump sum payable from her work pension. My sister was not married and did not have children so under the intestacy rules her estate passes to me as her closest relative (our parents are long dead) and the pension company agreed to do the same.

The pension company initially wrote to me to say the amount I would get would be £274,990 but then put £27,490 in my account plus a small amount of interest. I queried this and they said they were very sorry but an extra digit was put in the figure in their initial letter in error and the correct figure has been paid. I feel very disappointed and also am concerned about whether I can trust what they say.

If they have made one mistake could they make another? The situation is distressing me, and I feel I should be given more than just an apology. Is the initial letter I got from them legally binding? If so they owe me £250,000

And even if it is not binding, can I have compensation for the payment I got being £250,000 less than promised. – Caroline via email

Dear Caroline,

ADuring a bereavement we need businesses to deal with us efficiently and with sympathy and certainly not provide misleading or wrong information. In this case, I am sure we can all see how it is possible for an extra digit to creep into a letter (and with your email you sent me a copy of the letter so I can see for myself that it did happen) but I do understand for you this is a matter of great significance.

The letter you received contained a mistake, but a mistake is not legally binding. Mistakes happen. It is frustrating when they do, but if it is an honest mistake, it is a principle of justice that the party making a mistake is not usually bound by it, which I am glad about, given I have made honest mistakes myself and no doubt will again.

Here the communication you received from the pension company was not intended as a contract between you and them, rather it was merely a report of what you could expect. It was therefore not intended to create a legally binding arrangement.

Your sister was the customer of the pension company, and you might be standing in her shoes now as her “personal representative”, under the intestacy rules, and as a beneficiary, but their only duty to you is to pay you out what is owed, which they have now done.

Even if you had a contractual relationship with the pension company, if a mistake is made in a contract, it can make the contract “voidable” which means it is not enforceable anyway. As such, I do not see a way for you to force payment of an extra £250,000 from the pension company. While I feel sorry for what has happened, you need to accept there is no legal remedy.

To put your mind at rest you should ask them to “show their workings out” as to how the figure was arrived at. You can also ask for a full schedule of contributions made to the pension over the years so you can sense-check what you got. The situation can be different if a mistaken payment is actually made, that is, the wrong amount is paid over in error. A recipient of an overpayment may have an argument to retain some or all overpayment depending on the amount and length of time to the mistake being recognised.

The legal principle here is based on the beneficiary relying on the higher figure paid and spending it with the outcome of potential financial detriment to the beneficiary of the windfall if the error is corrected. As ever, all cases turn on the factual circumstances and quality of the evidence available.

In your case, I can see what has happened has made an already sad situation worse and you may wish to point this out to the pension company and invite them to offer you a token gesture of goodwill as compensation.

If they decline, you can escalate it as a formal complaint and ultimately refer it to the Financial Ombudsman Service. The FOS will allow complaints on behalf of a deceased person that would have been an eligible complainant, by those authorised in law to do so (in this case you as personal representative and beneficiary under your sister’s intestacy). Your complaint would be about customer service and how you felt, rather than any legal claim. The ombudsman will look at these issues, rather than just assess the legal merits of a case.

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Gary Rycroft is a solicitor at Joseph A Jones & Co. His column is published twice a month online.

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