The Pensions Ombudsman has recently upheld a scheme’s right to recover overpayments in a case where the member’s pension unexpectedly almost doubled. The Ombudsman was not satisfied that the member had acted in good faith. This meant that the member could not have a successful “change of position” defence to the scheme’s overpayments claim. We take a look at the decision and its wider implications.
The Pensions Ombudsman (TPO) has upheld a scheme’s right to recover overpayments in a case where the member’s pension unexpectedly almost doubled (CAS- 71331-S0R8). TPO found that there was insufficient evidence that the member acted in good faith. This inevitably meant that the member’s “change of position” defence to the overpayments claim failed, as good faith is an essential element to such a defence.
The member, Mr L, started to receive a pension of £21,768 pa from the Principal Civil Service Pension Scheme (PCSPS) at the age of 52. The scheme provided pension increases based on RPI. If a member started to receive a pension before age 55, pension increases would not be paid until the member reached age 55, but the increase to the member’s pension at age 55 would be a cumulative increase figure based on RPI increases since the pension started.
On reaching age 55, Mr L’s pension more than doubled to £46.510 pa. Mr L said that he had telephoned the scheme administrators on several occasions to check that the amount was correct and was told that the increase was due to him having reached age 55. Neither Mr L nor the scheme manager had recordings or written notes of the conversations.
TPO did not dispute that Mr L had made the telephone calls, but concluded that there was insufficient evidence on which to conclude that Mr L had acted in good faith. Given that Mr L’s pension had more than doubled in such a short period of time, TPO said he would have expected Mr to have sought “proper verification”, such as in writing, to confirm that his pension was correct.
This case illustrates that where there is an apparently obvious reason for a member to suspect that an overpayment has occurred, TPO will require compelling evidence before accepting that the member received the payments in good faith. In such circumstances TPO is likely to expect the member to raise the matter in writing with the scheme administrator.
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