Pension Compensation - taxable?

[sald]

Hello

I have a pension via my company. I made an innocent change on their app (which I thought was part of pension tool scenario calculator). Unknowingly to me, more than 50% of my pension was moved overnight into other funds - I was given no direct notification. I discovered a year later when my pension took a significant dip and after investigation found out that what I thought was part of the scenario calculator was not and had made a switch of funds that had made big losses. I spoke with the pension regulator who said there were inadequate controls and told me the complaints process I should follow. After, following the complaints process the reject the complaint twice.

I then sought other mediation. I lost over £100k and the eventually agreed to give me circa 50% as a settlement. The agreement states that there had been a dispute and whilst not accepting responsibility they will give the settlement due to the dispute. I have been advised to take it.

They will pay it to me direct. Is this taxable? I have read various articles that say mis sold pensions, admin errors etc compensation/settlements are in general "capital gains" but not taxable upto 500k but to take advice as every scenario may be different.

Obviously, my settlement is a lot less than what was in my pension pot. And even if I were (under ordinary circumstances) withdraw the equivalent amount that I lost - even at the higher rate of tax it would be more than my settlement amount. I feel its unfair if I had to pay tax on it.

I have searched high and low to get an expert who can examine the case and give a professional opinion that I can use infront of hmrc but not found anyone.

I would grateful for any initial feedback and for recommendations of a tax specialist in this area.

Many thanks.

[Taxstat]

Based on the details you've shared, this sounds like a potential 'negligible value' claim situation where the compensation may not be taxable. However, tax treatment can be complex and depends on the specific circumstances.

I'd strongly recommend speaking with a specialist tax advisor - perhaps someone from the CIOT (Chartered Institute of Taxation) who understands pension compensation scenarios. They can review your specific settlement agreement and give definitive guidance.

The fact the settlement explicitly mentions a 'dispute' and 'not accepting responsibility' could be important for tax purposes. A professional will know exactly how to interpret this for HMRC.

Good luck resolving this - £100k is a significant amount to have potentially lost through an app interface issue.