Understanding Pension Overpayments & How to Recover Them

What Happens When a Pension is Overpaid?

Pension overpayments can occur when payments to a beneficiary under a pension continue to be made after the beneficiary has passed away. This often happens when the provider has not been notified of the death in time to stop future payments. Once the overpayment is identified, the pension trustees must take steps to recover the funds from the deceased’s estate.

Why Do Pension Overpayments Happen?

Pension providers rely on notifications from family members, executors, or official records to stop making payments after a pension holder’s death. Delays in receiving notifications can result in several payments being made before the provider is informed. This may mean that payments continue several years after the pension holders death.

Common reasons for pension overpayments include:

• Delays in Notification – Family members or executors may not immediately inform the pension provider of the death.
• Administrative Processing Times – Even after notification, there can be delays in processing the request to stop payments.
• Bank Account Autopayments – If pension payments are sent via direct debit, they may continue until a formal process is completed.

How Can Pension Providers Recover Overpaid Funds?

Once an overpayment is identified, pension providers typically follow these steps:

1. Contacting the Next of Kin, Executor or Personal Representative
   The provider will reach out to the executor of the estate, personal representative of the deceased or the deceased’s next of kin to notify them of the overpayment and request repayment.
2. Reviewing the Estate’s Assets
   If the estate has sufficient assets, the overpaid amount is usually repaid from the estate’s funds.
3. Negotiating a Repayment Plan
   In cases where the estate lacks the liquidity to repay the full amount immediately, pension providers may arrange a structured repayment plan with the executor.
4. Legal Recourse
   If voluntary repayment is not possible, pension providers may consider legal action to recover the funds. However, this is usually a last resort.

Challenges in Recovering Pension Overpayments

• Limited Estate Funds – If the estate has already been distributed, recovering funds can become complex.
• Lack of Awareness – Executors or family members may be unaware that overpaid pensions must be returned.
• International Cases – If the deceased had assets in multiple jurisdictions, legal complexities can arise in recovering overpayments.

Best Practices for Pension Providers

To minimise the risk of pension overpayments, providers should:

• Establish Regular Checks – Implementing regular checks, such as using death verification services, can help identify deaths sooner.
• Enhance Communication Channels – Educating pension holders and their families about the importance of timely death notification can reduce delays.
• Streamline Recovery Processes – Clear policies on how overpayments are handled can help executors and next of kin understand their responsibilities.

Conclusion

Pension overpayments are an unfortunate but common occurrence. While pension trustees have a right to recover overpaid funds, doing so efficiently and sensitively is crucial. By implementing proactive measures and working closely with estates, providers can ensure a smoother recovery process while maintaining trust with beneficiaries and executors.

At Guildways, we help you collect overpaid funds efficiently and professionally, ensuring pension providers can reclaim what you’re owed while maintaining sensitivity in challenging circumstances. With our expertise in estate-related debt collection, we help navigate complex cases, including international estates and disputes over repayment.

25 Mar 2025