When can overpaid pension contributions be recovered from a pension scheme?

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Published by a ��Ӱ�� Pensions expert

Published on: 22 August 2017

Once an employer or member has paid contributions into a scheme, they cannot generally get a refund, at least not without triggering the tax penalties associated with unauthorised payments. This is because such refunds will usually be treated as unauthorised payments. There are however a few exceptions:

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for member contributions:
1. ◦
  where the scheme in question is an occupational pension scheme and the refund qualifies as a short service refund lump sum. For more information, see Practice Note: Refunds of member contributions—requirements for a short service refund lump sum
2. ◦
  where the refund qualifies as a refund of excess contributions lump sum (whatever the type of registered pension scheme making the refund). For more information, see Practice Note: Refunds of member contributions—Refund of excess contribution lump sums
3. ◦
  where the refund is made in exercise by the member of a right to a statutory cooling off period in respect of a registered pension scheme (ie where the member changes their mind about joining a pension scheme after paying

Jurisdiction(s):

United Kingdom

Key definition:

Short service refund lump sum definition

What does Short service refund lump sum mean?

A lump sum benefit paid to a member of an occupational pension scheme because they have stopped accruing benefits under the scheme and have less than two years of pensionable service under the scheme, and which meets the conditions the Finance Act 2004, para 5, Sch 29. It is the new term for a refund of employee contributions.

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