Partially upheld: administrative error - incorrect application of tax relief to employer pension contributions complaint against Aviva Life & Pensions UK Limited

Decision detail

Summary

Mr O complained that Aviva incorrectly applied tax relief to three employer pension contributions totalling £50,000 between October 2024 and April 2025, despite his instructions stating no tax relief should be applied. When the error was identified in May 2025, Aviva deducted the £50,000 tax relief and £14,000 in associated investment growth from his pension fund. Mr O accepted the tax relief was incorrect but argued he should retain the investment growth. The ombudsman upheld the complaint in part, finding Aviva should have queried the contradictory instructions on three occasions, but upheld Aviva's position that Mr O is not entitled to the investment growth on amounts that should never have been in his pension fund. Compensation of £200 was awarded for distress and inconvenience.

The Ombudsman's reasoning

The ombudsman agreed with the investigator that Aviva should have queried Mr O's instructions, which were impossible to execute as stated (tax relief on employer contributions is not available). Although Mr O made an initial error in his instructions, Aviva had three opportunities to identify and clarify the contradiction before applying tax relief. However, the ombudsman upheld Aviva's position that Mr O is not entitled to the investment growth generated from the wrongly applied tax relief, as the principle of putting a consumer back in the position they would have been in 'but for' the error means the £50,000 and its growth should never have existed in the pension fund. The £200 compensation was deemed appropriate given the modest impact on Mr O (errors identified within 7 months, quick resolution once identified), Mr O's contributory role in the initial error, and the ombudsman's approach to distress and inconvenience awards.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website