Ruling allows divorcee to keep £100,000 pension overpayment

Scottish WidowsA divorced mother who was given almost £100,000 too much by a pensions company following a valuation error has been told by the Pensions Ombudsman that she should be keep the money.

Natalie McNicholas received £311,500 in her pension fund when the couple divorced. However, Scottish Widows, her husband's pension provider, later said that the amount was incorrect and that mistakes had been made when evaluating Mr McNicholas's pension. It said she should, instead, only have received £213,850.

The firm's solicitors consequently contacted Mrs McNicholas and requested that she return the money, some £97,650, and said court proceedings would be started against her and her own pension provider, Legal & General, if she failed to do so. According to Mrs McNicholas, the insurer had threatened to seek repayment of the money paid in error as well as its legal costs and court fees.

The case was referred to the Pensions Ombudsman, Tony King, who said that the overpayment had been a case of "maladministration." He said Scottish Widows should not pursue its claims against Mrs McNicholas, and ordered the insurer to pay compensation of £250 "in respect of the distress and anxiety caused to her," according to the FT Adviser.

The lawyers acting for Mrs McNicholas said in the Telegraph: "This is a classic case of David v Goliath. The ombudsman has seen clearly that the error was Scottish Widows', and it involved money inextricably woven into divorce settlement calculations which cannot be revisited. Both sides in that divorce settlement had every reason to assume the information given by Scottish Widows, and the money subsequently paid over, were accurately calculated."

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Although the error was with the insurer, it was legally entitled to reclaim the money overpaid. However, a Scottish Widows spokesman said: "We accept the Pensions Ombudsman's decision into this isolated case and are very sorry for any distress and inconvenience caused."

Tom McPhail, head of pensions research at Hargreaves Landsdown, said: "Anybody going through a divorce should assume they need independent advice from a pensions professional."

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