Not upheld: administrative error in pension withdrawal processing complaint against Phoenix Life Limited trading as Standard Life
Financial Ombudsman decision DRN-6039502 of 2026-04-23T00:00:00+00:00. administrative error in pension withdrawal processing complaint against Phoenix Life Limited trading as Standard Life. Outcome: Not upheld.
Decision detail
| Reference | DRN-6039502 |
|---|---|
| Decision date | 2026-04-23T00:00:00+00:00 |
| Firm | Phoenix Life Limited trading as Standard Life |
| Product | Pension |
| Claim type | administrative error in pension withdrawal processing |
| Outcome | Not upheld |
| Remedy | Standard Life is required to: (1) pay £500 compensation for distress and inconvenience; (2) reinstate the pension plan if Ms M repays approximately £35,000, with the plan restored to the position it would have been in had the error not occurred, including investment growth that would have accrued. |
Summary
Ms M requested a 25% tax-free cash withdrawal (approximately £20,000) from her two pension plans with Standard Life in September 2022. Due to an administrative error, Standard Life processed a full encashment instead, paying Ms M £55,000 after tax (an overpayment of £35,000). Ms M did not notice the error until April 2025, when her financial adviser contacted Standard Life. Ms M was going through a divorce and experiencing mental health difficulties at the time. Standard Life upheld her complaint and offered £500 compensation plus reinstatement of the pension if she repaid the £35,000. The ombudsman found the offer fair, applying the legal principle of mitigation of loss, concluding that Ms M should reasonably have noticed the overpayment given she knew the expected amount, received confirmation letters, and had access to banking information.
The Ombudsman's reasoning
The ombudsman applied the legal principle of mitigation of loss, which requires a wronged party to take reasonable steps to minimise their loss. The ombudsman found that Ms M should reasonably have known she was overpaid because: (1) she knew she was expecting approximately £20,000; (2) she received £55,000 instead, a 75% increase unlikely to occur in less than a month; (3) she received letters clearly showing the overpayment and large tax bill; (4) she had chased Standard Life for the payment a week before, indicating she was monitoring her account; (5) the call recording showed she had a good understanding of her pension values and what to expect; and (6) most people have access to online banking or monthly statements. While the ombudsman acknowledged Ms M's difficult personal circumstances (divorce, mental health issues), these did not reasonably explain failure to notice such a large unexpected payment. The ombudsman rejected the argument that Standard Life should make good all losses without requiring repayment, citing potential HMRC implications.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| Phoenix Life Limited trading as Standard Life, all decisions | 7 | 14% |
| Pension, all decisions | 15,409 | 47% |
Source
Read the original decision on the Financial Ombudsman Service website