A computer error led to 7,000 Aegon income drawdown customers receiving overpayments.
The insurer will not be reclaiming any money from pensioners, but they now face the prospect of receiving significantly less income than they have become used to.
Aegon first became aware of the computer error, which failed to properly record if savers took a 25% tax-free lump sum when they retired, back in 2001.
Its staff had been manually altering individual fund values and alerting savers to the problem whenever they made a fund switch or had a policy review.
However, it estimates around 7,000 customers are still unaware of the problem and have yet to have their fund value corrected.
The firm says it will be mailing all affected customer to inform them of the situation. It says it will not clawback any overpayments, but will be reducing fund values by the appropriate amount.
Aegon says it has contacted HMRC and the FSA regarding the issue, and will cover any costs incurred by customers inadvertently breaking the GAD limit.
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