Scottish Public Pensions Agency overpayment policy: FOI release

Information requested

1. Will overpaid contributions during the remedy period be automatically refunded, or will there be other options offered?

2. If refunded, what are the tax implications of this? Will the marginal rate applicable to each year’s overpayment be used to calculate tax due, and will this be calculated for me prior to refund, and communicated to HMRC?

3. Will any refunded contributions be subject to interest payments reflecting the time since they were overpaid?

4. Will any further compensation be paid as redress for the discrimination I have faced as a result of these changes?

Response

1. The employer or the SPPA will pay amounts by way of compensation to eligible members in respect of overpaid contributions. The employer will administer corrections for Active members whilst the SPPA will administer corrections for deferred and retired members. The SPPA will be responsible for calculating and communicating the amount owed to or by members and the options available to them. The options available are; to receive compensation as a tax exempt one-off payment, or to defer this until retirement. A decision may be required by the member and suitable information confirmed by the employer or the SPPA to enable payment to be made.

2. HMT provisions allows the ‘Power to pay compensation’, these payments are tax-exempt per regulations made under s11 FA 2022. Compensation is the primary mechanism provided within the legislation allowing the remediation of any losses incurred by members due to overpayment. We will calculate the amount of tax relief to deduct from the gross difference in contributions using theu members pensionable pay, contributions and relevant income tax bands for each relevant year.

3. Yes. Interest is payable to members at the rate of 8% p.a. simple. This is calculated on the total net contributions and will be included in the total value of compensation due.

4. Other than the compensatable loss and additional 8% p.a. simple interest, no further compensation is provided for in the regulations.

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