Aegon Demands Repayment of Pension Funds After Initial Error

A pension provider has been criticized for its insensitive handling of a grieving family's affairs after an administrative error led to a demand for repayment of over £25,000.

Aegon, a pension provider, initially divided a £130,000 pension pot belonging to a deceased client among his family members. The distribution, made in October and November of the previous year, saw the client's mother receive 40 percent, his uncle receive 40 percent, and the client's son (referred to as S.S.) receive 20 percent. However, this distribution did not align with the deceased's stated wishes, which were for the uncle and son to each receive 40 percent, and the mother 20 percent.

When the family attempted to rectify the distribution with Aegon, the company initially stated that the amounts paid were correct according to documents on file. This led to months of distress for the family, particularly for S.S.'s mother, who is in poor health. The situation was further complicated by tax considerations; any direct transfer of the overpaid funds from the mother to the son could be considered a gift, potentially subject to a 40 percent inheritance tax if she died within seven years. The mother placed the funds in a fixed-term savings account to earn interest while she awaited resolution.

Persistent investigation by the family, including a subject access request under data protection law, prompted Aegon to review its records more thoroughly. In January of the current year, the company uncovered a more recent Death Benefit Nomination document that had been archived and was not initially visible. This document confirmed the deceased's wishes for the 40 percent allocation to his mother, and 40 percent each to his uncle and son.

Following this discovery, Aegon sent a letter to the mother demanding she repay £25,933 within 21 days, threatening recovery action if she failed to comply. S.S. stated that he planned to give his mother the full amount he had received to cover the repayment, but the demand caused significant stress.

Upon intervention from This is Money's consumer champion, Helen Crane, Aegon investigated the complaint further. The company acknowledged that the archived Death Benefit Nomination was missed due to a computer system upgrade, leading to the claim being processed with incomplete information. Aegon has since agreed to write off the £25,932.54 overpayment, permanently closing the debt recovery case. The mother will not be required to repay any funds, and S.S. has now received his full entitlement, bringing his total to £51,866.

An Aegon spokesperson apologized for the errors, stating that the company had followed instructions from an outdated nomination form. The company confirmed that the correct payments have now been made to the beneficiaries and that compensation has been offered and accepted. S.S. expressed ongoing concern about the potential for other bereaved families' records to have been lost during the system upgrade.

This situation highlights the complexities of pension distribution after death, particularly when beneficiaries are not a surviving spouse. The notes also mention that pensions will become subject to inheritance tax in April 2027, potentially adding further complexity for grieving families.