The 'pensions lifeboat' wants me to give back £24,000

He had used it to pay the tuition fees for his grandson at Gresham’s School in Holt, Norfolk. Benjamin’s school fees had been covered by the Army until his father stopped serving as a soldier in 2007. Mr Smith’s pension payments arrived at the ideal moment – and have since helped Benjamin, now 20, go on to study at Bristol University, where he reads French.

Mr Smith challenged the Financial Assistance Scheme but it was unyielding.

“It has been extremely worrying,” he said. “I have put on hold many of the things I’d like to do, places I should like to go, just in case I have to take this to court and it proves costly. After losing a wife of more than 50 years, it is difficult to adjust one’s budget.”

He contacted Telegraph Money and our investigations found that many other pensioners were also being asked to pay back thousands of pounds to the bungling lifeboat scheme.

Mr Smith’s bill had arisen from a series of errors, none of which was his fault, and none of which he could have been expected to spot.

Having been established in 2004, the Financial Assistance Scheme’s main aim was to “pay out as quickly as possible”, a spokesman said. It relied on information provided by pension schemes and company administrators. In Mr Smith’s case, it said, his former employer had supplied the wrong data. Such errors are now coming to light in droves.

Then the assistance scheme made a second oversight. In 2008, just as it was arranging its own payouts, Mr Smith’s former employer struck an insurance deal to cover the pension liabilities. Mr Smith was from then paid £6,370 a year from Legal & General, backdated to 2006.

The assistance scheme said it did not know the payment was so high. The £3,827 would have been deemed unnecessary if it had.

It came to its attention in 2012, when it erred again. The scheme advised Mr Smith that his payments would cease. He was encouraged to voice any concerns. So Mr Smith wrote: “I would ask you, in all the circumstances, to waive any requirement for any repayment.”

He received no reply, which appeared to indicate that the matter was closed. Then, in April 2014, the bombshell letter arrived: “You will remember that we wrote to you on March 15 2012,” it said. The delay was caused because “we had to liaise with HM Revenue & Customs”, the letter explained. “You are therefore not being asked to repay the tax paid on the overpayment. We are only seeking to recover £24,051.”

Mr Smith, by then 75, was incredulous. “I could rightly expect, not having heard anything for two years, that my understanding that the payments would be written off was correct,” he said.

“I didn’t go seeking any of this – the offer of additional pension came completely out of the blue and I accepted it, with thanks, in good faith.”

A spokesman for the Financial Assistance Scheme said such cases were “not as rare as we’d like”. “We would like to apologise to Mr Smith as we have not handled his case as well as we should have. While we continue to investigate the circumstances of the overpayment, we will write to him further to ensure that the options for writing off the overpayment can be explored more quickly.

“The payments were made to Mr Smith from the Financial Assistance Scheme on the basis of information provided to us in 2008. This information was wrong and therefore the payments should not have been made. Given this is public money, however, we do have an obligation to consider the options for recovery, but there are clear published grounds on which we are able to consider waiving an overpayment.”

How to fight a demand to repay

Anyone paid too much by the Financial Assistance Scheme lifeboat will be asked to repay. After all, this is taxpayers’ money. However, exceptions are made if it is “unfair”. Each case is considered on its own merits. “We expect that these will mostly be exceptional cases,” the body said. One reason is hardship. You must provide evidence of the detrimental impact of repaying the money, submitting details of income and spending.

Another reason is “change of position”. This applies if you relied on the payments to buy things out of the ordinary – a car or holiday, for example – or made financial commitments. You must provide evidence of a “strong connection” between the payments and the commitments and show you acted in good faith. There is a useful guide at pensionprotectionfund.org.uk . Type “information for scheme members” into the search bar. Alternatively, call 0845 604 4585.

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