Over-load of overpayments cases?

Overpayments determinations from the Pensions Ombudsman “(TPO”) seem to have been coming thick and fast in the past year. 

We’ve looked in detail previously at the implications of the CMG Court of Appeal decision for recoupment as a remedy in overpayments cases (see our previous post here). 

This time, we’re focussing on the April 2024 TPO determination in the complaint by Mr E relating to the BIC UK Pension Scheme (the “BIC determination”), and then considering the subsequent determinations in two recent complaints relating to public service pension schemes.

The BIC determination

Readers may remember the 2019 Court of Appeal decision in the case of Burgess v BIC.  Briefly, the case related to a historic amendment to the rate of pension increases for pension in excess of GMP.  It was held that the purported amendment, which had sought to increase the rate of escalation, was ineffective and therefore a number of members had been overpaid benefits for a significant number of years. 

Mr E was one such member; as a result of the failed amendment his pension had been overpaid to the tune of some £90,000 over a period of 24 years.  The trustees sought to recover the overpaid benefits through recoupment from future pension payments, and Mr E complained to the Pensions Ombudsman.

Mr E’s original complaint was made on the basis of general unfairness but during the proceedings TPO invited him to “expand his complaint to cover the various potential defences to recovery of the overpayments on grounds of repayment and recoupment”, although he said that the basic complaint of the recovery being unfair was, in his view, already wide enough to cover these defences. 

The determination considered the Trustees’ ability to recover overpayments both by way of repayment of monies paid by mistake (under the principles of unjust enrichment), and by way of equitable recoupment from future pension instalments. 

The Trustees’ primary focus was to recoup the overpayments through reducing future pension payments – they were not seeking repayments of the overpaid amounts from the member.  In the course of the proceedings the Trustees also confirmed that in the event of the member’s death they would not seek repayments of any remaining overpayments from the member’s estate.  TPO therefore did not have to reach a conclusion on the repayment claim in this determination. 

In relation to the claim for the equitable recoupment the Trustees sought, TPO asked himself two questions:

  • is it equitable, under general principles, to permit recoupment in the circumstances?
  • is a defence of laches (the equitable equivalent of limitation) available?

In relation to the first question, TPO considered the defences of change of position and estoppel (defences to a claim for repayment but not recoupment).  He said that whilst they were not available as “specific, free-standing defences” to a claim to recover overpayments through equitable recoupment, the principles underlying those defences were relevant because “equitability” still underlies their application.  On this basis, TPO therefore made a detailed examination of the defences of change of position and estoppel (by convention or representation) and whether they applied on the facts:

  • in relation to the principles underlying a “change of position” defence, he said that whilst usually this is considered in the context of repayments of past overpayments, the principle can apply in “anticipation” of receiving future pension payments too, provided that it can be demonstrated that: the member was acting in good faith; relied on the expectation to their detriment; and the overpayment caused the change of position;
  • in relation to an estoppel by representation based “defence”, 
    • the lack of protective wording on monthly payslips or benefit statements (e.g. that the payments were made subject to pension scheme rules) meant they were “unambiguous” representations as to the amount of pension Mr E could expect to receive;
    • in any event, payment of Mr E’s pension in and of itself amounted to an implied representation that he was entitled to those payments because trustees have an obligation to pay the correct benefits.  TPO said that “if the relationship between payer and payee is such that there is a legal obligation on the payer to ascertain the payee’s entitlement correctly, payment may give rise to an implied representation that the money was due”; and
  • in relation to applying analogous principles to estoppel by convention, this did not provide a defence to a recoupment claim.

In relation to the laches defence to a claim for equitable recoupment, TPO rejected the Trustees’ argument that time did not start to run until the legal position on whether there had been an overpayment had been conclusively determined by the Court of Appeal.  His view was that time had begun to run at the point the Trustees first became aware of the possible overpayment in late 2011.  High Court proceedings were not commenced by the Trustees until March 2017 – TPO concluded that the matter could have been resolved much earlier “if the Trustees had pursued the matter with the level of diligence I would have expected […] given the importance of the issue to the membership.”  In his view it was “unconscionable” for the Trustees to be permitted to assert their right to recovery of the overpayments that had built up in the period from February 2013  – being the date of a member announcement explaining there had been a potential overpayment but failing to properly explain that further overpayments were still building up (and may need to be paid back) – until August 2019.

Ultimately Mr E’s complaint was partially upheld.  Only an amount equal to those overpayments made since August 2019 (being the date TPO issued a preliminary decision in this complaint) could be recouped - £6,554 (much lower than the initial proposed recoupment of £90,000).  TPO also made an award of £1,000 for serious distress & inconvenience caused to Mr E by the Trustees’ maladministration.

TPO specified a rate of recoupment of £200 per month (contrasted with the £307 per month - 50% of the member’s corrected monthly pension – that the Trustees had originally sought).  This was subject to the proviso that “if at a future date Mr E can demonstrate, to the satisfaction of the Trustees, that his financial circumstances have deteriorated and the recovery of the overpayments at £200 a calendar month is unaffordable, the Trustees should consider whether it is still equitable to recoup the overpayments at that rate”.

TPO’s approach

It is worth remembering that determinations by TPO are of course not binding – they do not set a precedent to be followed in subsequent cases.  Nonetheless, in this lengthy determination TPO, Dominic Harris, very much appears to set out his stall regarding his approach to future overpayments cases. 

The approach is pragmatic, recognising that members bringing complaints before TPO are often not represented and lack the legal knowledge to advance specific defences, often making complaints on the general basis of “unfairness”.  Mr Harris addresses this and emphasises that it is “good practice” for trustees and scheme managers to “explore whether a defence may be available to an overpaid member during the scheme’s own dispute resolution process”. Where that hasn’t happened in relation to a particular defence, he says TPO should make “generous allowance” for the fact that the member is unrepresented and can invite an applicant to add to their complaint and / or suggest new defences (although is not bound to do so).

Subsequent overpayments determinations 

Following the BIC determination (and also earlier TPO determinations regarding overpayments in the context of public service pension schemes), TPO has partly upheld two similar complaints which concerned the Teachers' Pensions Scheme’s (“TPS”) decision to recover overpaid retirement benefits.

Both of these determinations were issued by TPO within 5 days of the BIC determination and it is clear from reading them that they have followed the same reasoning and examination of available defences as BIC.

The first determination relates to a complaint by Mrs L about a £2,500 overpayment made by Teachers Pensions (“TP”) which TP sought to recoup.  The error arose as a result of a discrepancy in the record of Mrs L’s pensionable service, which was noticed by the member after her pension had been in payment for 7 years.  In reaching a conclusion, the adjudicator’s opinion (which was accepted by the parties) examined the possible defences against repayment and / or recoupment of the overpaid pension, as well as the position post CMG in relation to recouping overpayments where there is a dispute.  It was found that Mrs L did not have a valid defence to the claim for recovery – a conclusion that seems to have been reached in part due to the relatively small size of the overpayment in relation to Mrs L’s overall pension, meaning it was difficult to conclude that she had relied on it to her detriment.

In Mrs L’s case, therefore, TPO determined that the overpayments could be recovered by way of equitable set off (similar to equitable recoupment but recoupment could not apply as this public sector scheme is not a trust).  An award of £1,000 for serious distress and inconvenience was also made to Mrs L because of TP’s maladministration. 

The second determination relates to a complaint made by Mr N about an overpayment made by TP as a result of incorrect application of abatement rules when Mr N started work again (after having drawn his early retirement pension) and later re-retired.  It is an interesting case study because repayment as a lump sum is time barred in part due to the application of a limitation defence to the claim for recovery of the overpayment on the basis of unjust enrichment. However, TPO said that TP was able to recover the remainder by way of equitable set off – laches did not apply.


There are some important takeaways from these recent overpayments cases for pension scheme trustees, pension managers and their administrators, including:

  • TPO expects trustees and managers to act promptly when an issue is identified – undue delay can lead to a recoupment / set off claim being barred by operation of the doctrine of laches;
  • during periods of uncertainty, such as ongoing litigation, it is important that member communications are clear – in particular, where benefits are continuing to be paid at the more generous rate, it should be made clear that potential overpayments are continuing to build up and they may need to be repaid;
  • it would be wise to review communications such as payslips and benefit statements, and even P60s, for pensioners, to check whether they include protective wording, to the effect that payment is subject to the rules of the scheme;
  • where a member complains about recovery of an overpayment, TPO expects the trustees / scheme managers to consider the defences that may be able to that member at the IDRP stage and to make them aware of those defences;
  • the rate of recoupment must be equitable, as well as the decision to recoup itself.  The rate can and should be revisited where the members’ financial circumstances deteriorate.

Of course, post the Court of Appeal decision in CMG, the Trustees will need to apply to the county court to enforce any TPO determination that recoupment should be applied to a member’s pension.  Where recoupment is disputed by the member, CMG says that applying it without a court order from the county court is a breach of s91(6) of the Pensions Act 1995 – a TPO determination will not suffice. As was demonstrated in the determination relating to Mr N and the Teachers’ Pension Scheme, recovery without a court order may lead to an award for serious distress and inconvenience.