Scheme ordered to pay member £1000 for maladministration in overpayments case

The Pensions Ombudsman (TPO) has ordered Teachers' Pensions (TP) to pay a member £1000 in respect of the serious distress and inconvenience the member sustained in consequence of the way in which TP dealt with recovery of an overpayment to the member (Mrs L CAS-26661-R4X7).  The TPO Adjudicator found that TP had committed maladministration by:

• not notifying the member, Mrs L, until July 2018 that she had received an overpayment and that TP would be seeking recovery.  Mrs L had been in receipt of her pension since 2010.  Following a query by Mrs L about her pensionable service figure, in April 2018 Mrs L's employer had provided TP with a pensionable service figure which revealed a discrepancy with TP's records;
• not properly considering whether Mrs L had any legal defences to recovery of the overpayment;
• not discussing a recovery plan with Mrs L before commencing deductions from her pension in order to recover the overpayment; and
• commencing recovery of the overpayment without an order of a "competent court" in breach of section 91 of the Pensions Act 1995.

Our thoughts

This was a case where the total amount of the overpayments was relatively modest.  The lump sum had been overpaid by just over £700, the overpayment being less than 5% of the total lump sum, and the monthly overpayment figure for the pension had never exceeded £20.  This case illustrates that even in a case where the amount of the overpayment is relatively small, it is important for trustees to ensure that they follow a proper procedure in relation to the potential recovery of the overpayment.  A failure to do so could lead to an Ombudsman award for distress and inconvenience even in a case where the trustees are entitled to recover the overpayment.

Member awarded £1500 for distress and inconvenience in overpayments case

In another case involving the Teachers' Pension Scheme (Mr N CAS-44368-C3K1), the Ombudsman has ordered Teachers' Pensions (TP) to pay the member, Mr N, a total of £1500 for distress and inconvenience after he was overpaid by over £22,000 over a period of approximately 14 years.  The error occurred because Mr N received an "abated" (reduced) pension when he returned to work after first starting to draw his pension.  The abated pension should have stopped when his main pension started after he ceased working, but TP paid Mr N the total of the two.  This meant that his initial annual pension was £10,894 rather than £9199.

When the error was discovered in 2019 following a GMP review, TP wrote to Mr N in the following terms:

“I am writing to inform you that, unfortunately, an overpayment of your retirement benefits amounting to £22,097.691 net has occurred. When you applied for your benefits based on a 1l [sic] your service payable from 17 September 2005, your premature pension benefits should have ceased. Unfortunately, this did not happen therefore your pension has been overpaid. Teachers’ Pensions are obliged to recover all overpayments incorrectly paid from public funds for whatever the reason the overpayment occurred and as such I must ask you to repay the amount of £22,097.69.”

The Ombudsman found that Mr N had "Nelsonian knowledge" of the overpayment, ie that he would have been "aware that something might not be quite right", but did not investigate the position.  This meant that it was not open to him to bring a defence to the overpayment claim based on having changed his position.  However, the Ombudsman considered that an award of £1000 for distress and inconvenience was nevertheless appropriate given the length of time it had taken TP to identify the mistake and the level of distress this caused.  The Ombudsman made a further award of £500 for the "content and tone" of the early correspondence with Mr N, notably the lack of empathy and lack of apology for the original mistake and the failure to explore available defences to recovery early enough in the process. 

Our thoughts

This case illustrates that when dealing with overpayments cases, it is important to get the tone right in correspondence with members, particularly when a large overpayment has built up over many years.  The Ombudsman may also be critical of trustees who do not explore early on whether a member has a possible defence to an overpayment claim.