In the case of Webber v Department for Education, the High Court had to consider the cut-off date for limitation purposes where a claim to recover overpaid pension was not brought through court proceedings; instead, the scheme had demanded payment and the member brought a complaint to the Pensions Ombudsman about the scheme's attempts to recover the overpayment.
The court held the cut-off date was the date the Pensions Ombudsman received the scheme's response to the complaint.
This judgment is the latest in a series of Ombudsman determinations and court cases arising out of substantial overpayments of pension made by the Teachers Pension Scheme to Mr Webber.
Mr Webber was overpaid pension in every tax year from 2002/2003 to 2008/2009. In 2009, the scheme discovered the mistake and in November 2009 wrote to Mr Webber requiring repayment.
The Limitation Act provides that a claim for recovery of overpayment must be made within 6 years of the overpayment or, if later, the date from which the person making the overpayment ought reasonably to have realised that it was an overpayment. In this case the court held that the scheme ought to have known from the outset that pension was being overpaid, so the standard 6 year time limit applied to each instalment of overpaid pension.
If the scheme had brought court proceedings to recover the overpayments, the "cut-off date" would have been the date the claim form was issued. In other words, the scheme would have been able to recover overpayments back 6 years from that date. In the Webber case, the scheme had not brought court proceedings; the matter had been the subject of a Pensions Ombudsman determination, as Mr Webber had made a complaint about the scheme's attempts to recover overpayments. The court therefore had to decide what date was the cut-off date in such circumstances.
The Pensions Ombudsman had held that the cut-off date should be November 2009 when the scheme demanded repayment. That would have allowed the scheme to recover overpayments back to November 2003, which would have been a significant portion of the overpayments. However, the High Court found that the cut-off date was the (significantly later) date that the Ombudsman received the scheme's response to Mr Webber's complaint about the scheme's attempts to recover the overpayment.
Where a past overpayment of pension is discovered, trustees should be mindful (a) that there is a six year limitation period on reclaiming overpayments; and (b) that if they could "with reasonable diligence" have discovered the overpayment from an earlier date, the six year limitation period may already have started to run from that earlier date, potentially limiting how far back they can reclaim overpayments. Commencing court proceedings for recovery of overpayments will allow back payments for 6 years from the date the claim form is issued. Where there are no court proceedings but the matter comes before the Pensions Ombudsman, it seems that the cut-off date will be the date the trustee response is received by the Ombudsman which could reduce recovery. Where the member has brought an Ombudsman complaint, trustees could issue a claim and then apply for proceedings to be stayed in order to bring the date forward and achieve greater clarity.