Recoupment of overpayment – The case study of Dr E

Dr E was transferred, under the Transfer of Undertakings (Protection of Employment) Regulations 2006, into the QinetiQ Pension Scheme (the Scheme) in July 2001. His former pension arrangement was contracted out of the then State Earnings Related Pension Scheme (SERPS). As a consequence of being contracted out of SERPS, the Scheme was required to provide Dr E with a pension that was broadly equivalent to the SERPS pension being given up. That equivalent amount is known as the Guaranteed Minimum Pension (GMP).

Dr E was entitled to periodic increases of any part of his pension in payment under the Scheme which related to: GMPs accrued between 6 April 1988 and 5 April 1997 (inclusive); or pension in excess of the GMP. Dr E was not entitled to increases in respect of any GMP accrued before 6 April 1988. Under statute, GMPs only become payable on reaching State Pension Age.

Dr E retired at age 60 in 2004, before reaching State Pension Age, so he received increases in respect of all of his pension payable at that time as all of it was in excess of any GMP.

Dr E reached his State Pension Age in 2009. Normally at this stage, his pension would have been split into a GMP tranche and a tranche relating to his pension in excess of the GMP, to ensure that the GMP and excess pension elements increased at their respective rates. However, due to an administrative error in 2004, the new administrators were not informed that Dr E’s GMP had become payable, so Dr E’s whole pension continued to increase. This led to an overpayment of £2,664 between July 2009 and September 2016.

Dr E complained to the Scheme. The trustee partially upheld the complaint. It offered Dr E £250 in recognition of his distress and inconvenience and suggested a payment plan, to recoup the overpayment from his pension at a rate of £37 per month.

Amongst his arguments against the recovery, Dr E said that a time limit should apply which would prevent the trustee from recovering the overpayment. In other words, that a limitation defence, as provided for under Section 5 of the Limitation Act 1980 (the Act) should apply, so the trustee could only recover overpayments made within (broadly) the previous six years. He was of the opinion that the BIC judgment [1], under which the judge had found that section 5 of the Act did not apply where overpayments were recovered by recoupment, should not apply, as his case should be considered against the interpretation of the law at the time he made the complaint, which was before the BIC judgment.

The Ombudsman did not uphold the complaint. He did not agree with Dr E’s change of position defence as it was likely that Dr E would have made the same decision if he had known the correct position. Furthermore, the BIC judgment did not amend the Act; instead it provided clarification as to the interpretation and application of the existing legislation. He also commented in detail as to comments made by the judge, in the BIC judgment, on the Pensions Ombudsman’s position as a ‘competent court’ for determining disputes concerning attempts to recoup overpayments. These details can be found in full in our fact sheet – ‘Recoupment in overpayment cases: the Pensions Ombudsman is a ‘competent court’’.[2]

[1] Burgess & Ors v BIC UK Limited [2018] EWHC 785 (Ch)

[2] https:/ www.pensions-ombudsman.org.uk/wp-content/uploads/Recoupment-in-Overpayment-case-.pdf  

Related determinations

• QinetiQ Pension Scheme (PO-16856)