Royal Mail Statutory Pension Scheme · CAS-14251-C1H8

PO-28397

Ombudsman’s Determination Applicant Mr S

Scheme Royal Mail Statutory Pension Scheme (the RMSPS)

Respondent The Cabinet Office (In its capacity as “the Manager”)

Complaint Summary

Summary of the Ombudsman’s Determination and reasons

Detailed Determination Material facts

4. The sequence of events is not in dispute, so I have only set out the key points. I acknowledge there were other exchanges of information between all the parties.

1 PO-28397 The administration of the RMSPS

5. The RMSPS was previously administered by Pensions Service Centre (PSC) on behalf of the Cabinet Office. For the majority of the period relevant to this complaint, it had specific administrative responsibilities, including paying pension benefits in accordance with the regulations governing the RMSPS. In 2018, PSC was replaced as the administrators of the RMSPS. The Cabinet Office has confirmed that there is no party other than the Cabinet Office with a direct interest in the case.

The specific facts relating to Mr S

6. In February 1978, Mr S joined the Post Office Staff Superannuation Scheme (the POSSS), which was a final salary defined benefit (DB) arrangement. A pension record was created for him under member number 0201** (Pension Record One).

7. In March 1991, Mr S opted out of pensionable service under the POSSS. His pension benefits were deferred and were payable from age 60, his normal retirement age (NRA).

8. In 1994, the then Securities and Investment Board (SIB) ordered a review of mis-sold personal pensions (the Pensions Review). The Pensions Review concerned the sales of personal pension policies between 29 April 1988 and 30 June 1994. Following reinstatement of membership in the occupational pension scheme (the OPS), a member would be treated as having been an active member of that scheme during the reinstated period. The reinstated service effectively linked the member’s earlier service to their current service in the OPS.

9. In January 1996, Mr S re-joined the POSSS for future accrual, as part of what the Cabinet Office has referred to as the pension amnesty campaign (the Pension Amnesty). A new record was created with member number 2800** (Pension Record Two) which, initially, covered his pensionable service from 1 January 1996.

10. However, as well as re-joining the POSSS, Mr S’ intention was to reinstate his pensionable service retrospectively in respect of the period March 1991 to 31 December 1995. This required a payment of redress from Pearl Assurance, the relevant personal pension provider.

11. On 18 November 1997, PSC wrote to Mr S in connection with a payment of redress it had received from Pearl Assurance (the November Letter). It stated that:

“SIB Personal Pensions Review - Reinstatement of missing service

I am pleased to inform you that we have now received a compensation payment of £32,030.88 [the Redress] from Pearl Assurance.

This amount has reinstated your POPS service for the period from 27/02/1978 to 31/12/1995 and represents the total reckonable service missing as a result of your earlier decision to opt out of the POPS.

2 PO-28397 Should you be unhappy with the result of the review conducted by Pearl Assurance you should contact them directly” [original emphasis in bold].

13. The Cabinet Office has explained that, on receipt of the Redress payment, Pension Record Two was amended to reflect that Mr S was deemed to have continuous pensionable service from February 1978. The Cabinet Office has also explained that Mr S’ deferred record, under Pension Record One, should have been deleted at that point in time. The failure to delete Pension Record One resulted in Mr S having two separate records with a duplication of pensionable service from February 1978 to March 1991.

14. The Cabinet Office has informed TPO that Mr S subsequently received annual benefit statements in respect of his revised pensionable service under Pension Record Two. The Cabinet Office initially said that he also received annual benefit statements showing the current value of his deferred benefits under Pension Record One. It has since clarified its submission on this point. Namely:

“[Contrary to Mr S’ submissions to TPO, in which he indicated that for several years before his retirement he received information about two different pension arrangements; specifically, the RMSPS and the RMPP]. He could not have been receiving information from both the RMSPS and the RMPP for several years, because the RMSPS did not exist until 2012...[the Cabinet Office has] not been able to determine whether he requested or received any deferred benefit statements during this period1”.

15. The Cabinet Office has provided TPO with details of the pension figures that were displayed in the annual benefit statements issued to Mr S in respect of the period 2003 to 2012 (See Appendix 1). The Cabinet Office is unable to provide any data in respect of the period 1995 to 2002.

16. The Cabinet Office has also provided TPO with copies of generic annual benefit statements in respect of scheme years from 1997 to 20112. These are in respect of the successor scheme of the POSSS: the CPP and RMPP (as defined in paragraph 25 below).

17. The generic POSSS annual benefit statements as at 31 March 1997, displays the following information on pensionable service:-

1 1991 to 2012. 2 Except for the 2003 scheme year. The Cabinet Office has confirmed that the 2003 version would have

been the same as the 2002 version. Similarly, the 2012 version would have been the same as the 2011 version.

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“…any reckonable service resulting from a transfer from a previous pension arrangement completed by 31 March 1998.

Reckonable Service at 31 March 1998…is your total reckonable service, together with any transferred-in service and any additional years you may have bought through Addplan”.

19. Under the subheading: How we work out your retirement benefits, the 1998 Notes explain that:

“Your benefit is based on your reckonable service and your pensionable pay…”3

20. The generic POSSS annual benefit statement as at 31 March 1999, displays the following information on pensionable service:-

21. The POSSS merged with the Post Office Pension Scheme (the POPS) to form the Post Office Pension Plan (the POPP) with effect from 1 April 2000.

22. Section A and B of the POPP covered former POSSS members. Section C covered former members of the POPS.

3 The notes accompanying the generic POSSS annual benefit statement as at 31 March 1999, also

includes the above statement.

4 PO-28397 23. The generic POPP annual benefit statement as at 31 March 2000, in respect of Section B members, includes the following information on pensionable service:-

24. The notes accompanying the generic annual benefit statement as at 31 March 2000 (the 2000 Notes) explain that the POSSS and the POPS had merged to form the POPP. It also explains that transferred in reckonable service is any reckonable service resulting from a transfer from a previous pension scheme, which was completed by 31 March 2000. Aggregate service is any earlier service which has been included by 31 March 2000. It contains the following statement regarding reckonable potential service at age 60:

“this is your service to normal retiring age which is used to calculate your benefits…it also includes transferred-in reckonable service and any additional service you have purchased through Addplan”.

4 The notes on the statement explain that this only applies if the member joined before December 1971.

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27. The generic RMPP annual benefit statement for members of Sections A and B, as at 31 March 2008, displays the following information on pensionable service:-

30. The generic RMPP annual benefit statement for members of Sections A and B as at 31 March 2010, displays the following information on pensionable service:-

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31. On 1 April 2010, the NRA under the CARE scheme increased from 60 to 65. However, members retained the right to claim pension benefits they had built up prior to this date from age 60. So, a portion of Mr S’ pension accrual had an NRA of 60.

32. The generic RMPP annual benefit statement for members of Sections A and B, in respect of the 2011 plan year, displays the following information on pensionable service:-

33. On 31 March 2012, liability for pension benefits that had built up in the RMPP were transferred to the RMSPS.

34. TPO understands that the pension benefits Mr S accrued after 31 March 2012 remained in the RMPP. Consequently, he had pension benefits in both the RMSPS and the RMPP.

35. In August 2012, members were sent an updated member guide. The cover letter explained that it had been updated to reflect the fact that, from 31 March 2012, benefits built up in the RMPP had been transferred to the RMSPS. The cover letter also explained that:

“The main change is that when you decide to take your benefits, part of them will be paid by the RMSPS and part of them by the RMPP”.

5 This is displayed on the penultimate row. The final row of data is ineligible.

7 PO-28397 36. On 14 January 2013, Mr S wrote to PSC and requested an illustration of the pension options available to him on early retirement. He had attained age 55 and was in active service at the time.

37. The Cabinet Office has advised TPO that Mr S also requested early retirement options in respect of his deferred benefits.

Option Annual Pension Lump Sum

1. Standard Benefits £10,991 £35,543

2. Maximum Lump Sum £9,561 £63,746

3. Maximum Pension £12,250 N/A

39. On the first page of the 2013 Retirement Illustration 2800**, PSC highlighted that the provisional estimate of retirement benefits comprised of the following:-

40. The 2013 Retirement Illustration 2800** quoted the member number under Pension Record Two and contained the following warning (the Disclaimer):

“Pensions Service Centre provides this information in its capacity as administrators of both the Royal Mail Pension Plan (the Plan) and the Royal Mail Statutory Pension Scheme (the Statutory Scheme). It has no authority to bind the Trustees of, or any employer participating in, the Plan, or the managers of the Statutory Scheme to provide benefits in excess of those provided under the rules of the relevant scheme. As such, any overpayment of benefits would have to be repaid either to the Plan or to the Statutory Scheme (as appropriate)”.

8 PO-28397 41. On 16 January 2013, PSC has said that it also provided Mr S with retirement options in respect of the deferred benefits that were recorded under Pension Record One (the 2013 Retirement Illustration 0201**).

42. On 21 January 2013, Mr S returned completed retirement paperwork in respect of Pension Record Two and indicated that he wanted to draw his total pension benefits.

43. On 25 January 2013, PSC provided Mr S with a copy of the 2013 Retirement Illustration 0201**. The following pension benefits were quoted under option 2:-

46. PSC has advised TPO that on the same day, Mr S telephoned its helpline (the Pensions Helpline) to enquire whether the options detailed in the 2013 Retirement Illustration 0201** were in respect of his deferred benefits. PSC advised him that they were.

47. On 31 January 2013, PSC has said that Mr S informed the Pensions Helpline that he had not received his retirement options in respect of Pension Record Two. PSC said that he was informed that it was issued on 28 January 2013, and that he would need to complete the retirement paperwork.

48. On 1 February 2013, Mr S returned completed retirement paperwork in respect of Pension Record Two.

49. On 19 February 2013, PSC provided Mr S with a revised statement of retirement options payable from March 2013 in respect of the Royal Mail Statutory Pension Scheme and the Royal Mail Pension Plan (The revised 2013 Retirement Illustration 2800**). PSC quoted the member number under Pension Record Two.

50. Mr S elected to draw his “NRA 60 Benefits” and “NRA 65 Benefits”. He selected option 2: a reduced pension and maximum tax-free lump sum, by exchanging part of his pension for an additional tax-free lump sum. The relevant figures are detailed below:

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52. On 21 February 2013, Mr S returned completed retirement paperwork in respect of Pension Record One. He elected to take “Option 2”.

53. On 28 February 2013, PSC wrote to Mr S and enclosed a statement (Statement 0201**) confirming his benefits payable from the RMSPS. PSC said that the lump sum would be credited to his account on 5 March 2013, and the first pension payment would be credited on 28 March 2013. Statement 0201** included the Disclaimer and displayed the following information:-

54. On 18 March 2013, PSC wrote to Mr S and enclosed statements confirming his benefits in respect of the Royal Mail Statutory Pension Scheme and the Royal Mail Pension Plan (Statements 2800**). PSC quoted the member number under Pension Record Two and advised that the following benefits would be settled:-

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58. On 17 July 2014, Mr S purchased a second car for his household for £10,300 (the Second Car).

60. On 22 September 2017, Mr S purchased a Breitling BW Heritage Chrono watch for £3,830 (the Watch). He has said that this was purchased to celebrate his change of role from Delivery Manager to Postman6.

6 The date he purchased the watch indicates that this career move took place during 2017.

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62. PSC said that it would write to Mr S again shortly to provide a breakdown of the overpayments and to confirm the repayment options available to him.

63. On 2 May 2018, Mr S was invited to make representations to PSC if he wanted to dispute whether the past overpayments should be recovered (the May Letter). PSC referred to the possible defences against recovery described in HM Treasury’s Managing Public Money guidelines7 (the Guidelines). PSC did not say how much he had been overpaid. The May Letter said that the reason for the overpayments had been explained in the February Letter.

64. On 2 May 2018, Mr S was offered the option to repay the total amount of the overpayment as a one-off instalment or through monthly instalments. He was also given the option of recovery from future instalments of his pension over the same period the overpayments had accrued, or over a longer period if required. PSC explained that for a claim of financial hardship to succeed, Mr S would need to provide documentary evidence of his monthly income and expenditure.

7 https://assets.publishing.service.gov.uk/media/65c4a3773f634b001242c6b7/Managing_Public_Money_-

_May_2023_2.pdf. 12 PO-28397

66. On 25 May 2018, Mr S complained under the internal dispute resolution procedure (the IDRP) and made similar submissions. Although he accepted at the time that the pension under Pension Record One could not be reinstated, he requested that the total amount of the overpayment be written off.

67. On 31 May 2018, PSC acknowledged Mr S’ complaint. It said that it would reply in full within 10 working days.

68. On 15 June 2018, PSC notified Mr S that its investigation into his complaint was taking longer than it had anticipated. In the event that a response under Stage One of the IDRP could not be issued within two months, it would provide an interim reply.

69. On 21 June 2018, PSC issued a response under Stage One of the IDRP (the Stage One Response) and apologised for failing to correctly amend Pension Record One. PSC enclosed a timeline summarising the background to Mr S’ complaint (the Timeline). Briefly, it stated that:-

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77. Mr S has explained to TPO that he made the transfers of £50,000 and £5,000 towards their savings for when they had stopped working. Mr S has said that part of the money was then used to purchase the Second Car, the Watch, and for the damp proofing.

Summary of Mr S’ position

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81. Change of position: gifts to family, purchase of the Second Car and the Watch

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Summary of the Cabinet Office’s position

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The Preliminary Decision

Mr S’ further submissions

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8 An Additional Voluntary Contributions (AVCs) plan with Equitable Life.

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The Cabinet Office’s further submissions

93. The Cabinet Office has noted the reduction in Mrs S’ monthly salary. The Updated Income and Expenditure show a wide margin between household income and expenditure. However, the Cabinet Office will accept a longer recovery period; it does not want members of the RMSPS to experience hardship.

Legal defences to recovery

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Hardship

The Pensions Ombudsman’s position on overpayment cases

95. Members of statutory occupational pension schemes (Statutory Schemes) who have been told that they are entitled to a higher level of pension benefits than they are entitled to under the scheme regulations often argue that:

97. In some circumstances, an applicant may be able to demonstrate that:

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9 Paragraph 7(3) of Part I of the RMSPS, as set out in Schedule 1 to the Postal Services Act 2011

(Transfer of Accrued Pension Rights) Order 2012, SI 2012/687.

10 In England and Wales this will normally be the County Court.

11 CMG Pension Trustees Limited v CGI IT UK Limited [2022] EWHC 2130 (Ch) at paragraphs 153-160.

However, it was announced in the King’s speech in July 2024 that the law will be changed so that TPO will be treated as a competent court for the purposes of section 91 of the 1995 Act. Once the new legislation is in force this will reverse this aspect of the CMG decision.

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104. The PO’s view is that generally a period of recovery at least equal to the period over which the overpayment arose is appropriate. There may be circumstances where a shorter period is appropriate, for example where the applicant has invested a lump sum or paid it into a bank account. But there may also be circumstances where a longer period of recovery is appropriate, for example where the proposed period of recovery will cause a member hardship. The PO will, where the complaint cannot be resolved without the PO issuing a Determination, generally specify the rate and amount of recovery in his directions so that the competent court can authorise the commencement of the recovery process by the managers of the scheme at this rate.

105. In cases where the PO determines that there has been maladministration in making the overpayments, the PO has power to make a reasonable award for any non- financial injustice (distress and inconvenience) sustained in consequence of the maladministration.

Conclusions Legal Issues arising in this particular case

12 Pensions Ombudsman v (1) CMG Pension Trustees Limited and (2) CGI IT UK Limited at paragraph 56.

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Future pension payments

13 In Westminster CC v Heywood (No 1) [1998] Ch 377, at 392G - 393F it was confirmed that a local

authority cannot, under the guise of a settlement agreement, enter into a binding commitment which it has no power to make. In East Sussex CC v Jacobs [2004] OPLR 243, at sections 16–17, and Secretary of State for Scotland v Turner [2003] SC 525, at section 36, it was held that the Ombudsman has no power to order public authorities to make pension payments that they have no lawful power to make. See also the obiter comments in Police and Crime Commissioner v Butterworth (unreported), 10 November 2016, (EWHC (Ch)) at [35] and [36]. 25 PO-28397 Negligent misstatement claim

114. Mr S has argued that, as a consequence of being given inaccurate information about his pension entitlement, he made irreversible financial decisions and has sustained loss as a result. In particular:-

14 See Hagen v ICI Chemicals [2001] 64 PBLR for a useful discussion of how the principles apply

in negligent misstatement cases from [77] to [140]. 15 Corsham v Police Commissioners for Essex [2019] 074 PBLR (042); [2019] EWHC 1776 (Ch), Morgan J at

paragraph 173.

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120. I conclude that there has been a breach of the duty of care as the information was not correct and would not have been made by someone exercising reasonable care.

122. On the balance of probability, I find that Mr S would have appreciated that a mistake may have been made, but failed to raise appropriate queries at the time. I have set out my reasons for making this finding in more detail in paragraph 125 to 180 below.

Past overpayments

Repayment claim

16 Lipkin Gorman (a firm) v Karpale [1991] 2 AC 548 as per Lord Goff at paragraph [580C]. Lord Goff set

out this principle in general terms and the courts have subsequently developed principles about where such a defence applies.

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Change of position

130. Unlike the position in relation to an estoppel defence, it is not necessary for the member to receive an unequivocal representation of entitlement to the overstated benefit for a change of position defence to be available. It is easier to demonstrate a change of position defence than an estoppel defence.

Good faith

131.

with the manager this would amount to bad faith17. However, just because a reasonable person might have realised that they were being overpaid, does not mean that the recipient of the overpayment was acting in bad faith if they did not realise18. Mere carelessness or negligence is not enough to establish bad faith.

17 See Webber v Department for Education, Teacher's Pensions [2012] EWHC 4225 (Ch) and Webber v

Department of Education which applied the earlier test in Niru Battery Manufacturing Co v Milestone Trading Ltd [2002] EWHC 1425 (Comm) in a pensions context. 18 See for example Abouh Ramah v Abacha [2006] EWHC Civ 1492, Armstrong DLW GmBH v Winningham

Networks Ltd [2012] EWHC 10 (Ch) at [110]. 28 PO-28397

Detriment

133. Detriment can normally be demonstrated by the fact that the recipient has spent the money on items they would not otherwise have bought but for the overpayments. However, it is also possible to demonstrate detriment in other ways. For example, by making gifts in some circumstances.

136. As a change of position defence is not limited to cases where funds have been spent on specific identifiable items of expenditure, it may not be right for the court (or for that matter the PO) to apply too demanding a standard of proof when an honest defendant says they have spent an overpayment on improving their lifestyle but cannot produce too detailed accounting 21.

Causation

Conclusion in relation to good faith

The November Letter

138. The November Letter advised that Mr S’ missing service, in “the POPS”, had been reinstated following receipt of the Redress payment. The issue for me to consider is

19 See Scottish Equitable v Derby [2000] PLR 1 (CA) at [33].

20 Philip Collins v Davis [2000] 3 All ER case (cited with approval in Scottish Equitable v Derby). 21 National Westminster Bank plc v Somer International UK Limited [2002]. 22 Scottish Equitable v Derby [2001] 3 All ER 818, Harrison J at paragraphs [37]-[41].

29 PO-28397 whether the November Letter would have put Mr S on notice that he would now have only one pension record, under the POSSS, that recorded continuous pensionable service from February 1978.

139. The difficulty I have in applying the test is that only Mr S knows what he believed at the time. The burden of proof is on Mr S to demonstrate that he acted in good faith in 2013, when he applied to draw the pension benefits that were recorded under Pension Record One and subsequently accepted payment of those benefits. However, in assessing whether he acted in good faith, I can look at the surrounding evidence and Mr S’ submissions. The November Letter says:

“SIB Personal Pensions Review - Reinstatement of missing service

I am pleased to inform you that we have now received a compensation payment of £32,030.88 from Pearl Assurance.

This amount has reinstated your POPS service for the period from 27/02/1978 to 31/12/1995 and represents the total reckonable service missing as a result of your earlier decision to opt out of the POPS”.

The retirement illustrations

145. The retirement illustrations do not refer to the period of reckonable service that the retirement options relate to. However, by this point, Mr S would have been aware that 30 PO-28397 he had two pension records. This is clear because he also enquired about drawing his separate deferred benefits. So, I need to understand why he thought it was correct to have two separate pension benefits under the RMSPS. If he did not think there was a reasonable explanation for this, he would have been acting in ‘bad faith’ if he failed to check the position.

Complexity of scheme benefits

146. A relevant factor in a member’s understanding of their own pension position is the complexity of those benefits.

150. The transfer from Pearl Assurance in November 1997 in connection with the Pension Amnesty, added an additional layer of complexity to Mr S’ benefits. Given this was a personal decision, involving an election by Mr S to rejoin the POSSS and reinstate his service, rather than a scheme-wide benefit change, he would have been aware of the implications of the arrangement he was entering into.

The annual benefit statements issued after the reinstatement of Mr S’ service

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Pension Record One

157. Mr S was of course properly entitled to pension benefits in both the RMSPS and RMPP. However, this was documented under Pension Record Two. His membership under both schemes did not necessarily mean that he had two different pension records. However, this confusion on the part of Mr S, is possibly as a consequence of the complex benefit structure in the RMPP and RMSPS, which I refer to in paragraph 146 to 150 above.

158. The Cabinet Office is unable to ascertain whether Mr S requested or received any annual benefit statements for Pension Record One. In the absence of any corroborating evidence, I am unable to conclude that Mr S was provided with any statements for Pension Record One following issuance of the November Letter. So, there would have been no irregularity or anomalous information for him to correct for the period he continued in active service. For example, in the form of duplicative statements. However, I accept that if this were the case, it would have suggested an overlap of his reckonable service on the pension records held by PSC. In particular, it would have strongly suggested that he had grounds at the time to query why he had a separate entitlement under Pension Record One.

Pension Record Two

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The generic annual benefit statements

33 PO-28397 The Cunningham Case

Mr S’ annual benefit statements

166. The March 2012 annual benefit statement would have been the final annual benefit statement Mr S received prior to his retirement in January 2013. The Cabinet Office has advised TPO that it would have been set out in the same format as the March 2011 generic annual benefit statement. It displays “Final Salary Service to March 2008”.

167. The evidence supports the view that Mr S received information from PSC that showed continuous reckonable service under Pension Record Two. On the balance of probability, I find that he did in fact read one or more of the annual benefit statements he received over a period of in excess of 10 years. Even under circumstances he cannot now recall; it is not reasonable that he did not read any of them. However, these annual benefits statements would not, alone, have put him on notice that something was amiss.

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The process of claiming pension benefits in 2013

“The benefits shown in the estimate comprise:

Table A: Benefits accrued up to and including 31 March 2010, which are payable in full at age 60, but are actuarially reduced as a result of early payment (these are your “NRA 60 Benefits”)

Table B: Benefits accrued on and from 1 April 2010, which are payable in full at age 65, but are actuarially reduced as a result of early payment (these are your “NRA 65 Benefits”)

Table C: All your benefits, which are actuarially reduced as a result of early 35 PO-28397 payment.”

177. The format of the 2013 Retirement Illustration 0201** was far simpler, as it covered pension accrual before the scheme changes were made from 2008. Nevertheless, it was based on a similar template as the 2013 Retirement Illustration 2800**.

178. In order to claim the pension benefits, the retirement paperwork required engagement and input from the member, in this case Mr S. On reviewing the evidence, I conclude that the Retirement Illustrations, particularly when considered alongside the annual benefit statements he had been receiving, would have alerted him to the possibility that something was not quite right.

180. Therefore, I find that at the point of drawing his pension benefits in 2013, Mr S had reason to suspect that something was amiss, but failed to raise appropriate enquiries. I do not consider that it is credible that he completed substantially the same retirement process, when claiming pension benefits under Pension Record One, without contemplating why he had two separate pensions and that PSC may have made an administrative error. Ultimately, in my view, he had ‘Nelsonian knowledge’ and should have checked the correct position with PSC.

181. Consequently, I find that Mr S does not have a change of position defence in relation to recovery of any of the overpayments.

Estoppel

182. Broadly, an estoppel defence legally prevents (or ‘estops’) a party from departing from a statement or promise that it has previously made to another party. In this case, it

36 PO-28397 would prevent the Manager from going back on what it informed Mr S regarding his benefit entitlement and recovering the overpayments. There are two types of estoppel that may be relevant here, namely:

183. Generally, if an applicant is not acting in good faith for the purposes of a change of position defence they will also not have an estoppel defence to recovery of an overpayment. In relation to estoppel by representation, in these circumstances it will generally not be reasonable for a member to rely on any representation as to their entitlement to a pension if they had actual or Nelsonian knowledge that they were being overpaid but failed to check the position with the manager.

184. In relation to any estoppel by convention defence, the defence will also fail as there will be no common understanding of the fact of the overpayment if one of the parties knows or has Nelsonian knowledge that they have been overpaid. So, an estoppel by convention defence is also not available here.

Limitation

187. However, this six-year time limit can be extended where an overpayment is made on grounds of mistake. Section 32(1) of the Limitation Act provides that the period of limitation shall not begin to run until the “plaintiff [the person seeking to recover the overpayment] has discovered the…mistake (as the case may be) or could with reasonable diligence have discovered it”.

23 Arjo Wiggins v Henry Thomas Ralph [2009] 079 PBLR at [26].

37 PO-28397 188. Time stops running for limitation period purposes (the Cut-off Date) when TPO receives the manager’s formal response to the member's complaint24. Separate limitation periods can apply in relation to any lump sum overpayment and each instalment of overpaid pension.

189. In relation to Pension Record One, the tax free lump sum and the first instalment of pension was paid in March 2013. The Cut-off Date was 14 February 2019. Given that all the overpayments were made within six years of the Cut-off Date, there is no possibility of a limitation defence arising in this case.

Contract

Hardship

“Public sector organisations may waive recovery of overpayments where it is demonstrated that recovery would cause hardship. But hardship should not be confused with inconvenience. Where the recipient has no entitlement, repayment does not in itself amount to hardship, especially if the overpayment was discovered quickly. Acceptable pleas of hardship should be supported by reasonable evidence that the recovery action proposed by the paying organisation would be detrimental to the welfare of the debtor or the debtor's family. Hardship is not necessarily limited to financial hardship; public sector organisations may waive recovery of overpayments where recovery would be detrimental to the mental welfare of the debtor or the debtor's family. Again, such hardship must be demonstrated by evidence.”

24 Webber v Department for Education [2016] 102 PBLR (024).

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Equitable set-off

195. It is necessary to consider whether equitable set-off is available to the Manager, enabling it to recover the overpayments by deduction from future payments. Equitable recoupment cannot apply to a Statutory Scheme as it is a trust-based remedy relating to the adjustment of accounts in a trust based scheme.

196. Where there has been an overpayment in a Statutory Scheme, it can be said that there are two cross-claims between the member and the manager of the scheme which can be offset. Specifically, the member’s pension entitlement is a statutory debt owed to him by the manager and is liable to be offset against the overpayment, which is a debt owed to the Manager by the member. So, subject to any defences to the claim which the member may have, it is inequitable that they can insist on their full entitlement under the scheme without allowing the claim for the overpayment to be satisfied25. It follows that the Manager may be able to rely on equitable set-off as the basis for recovery.

Change of position

198. A change of position defence is not available for the reasons discussed in paragraph 138 to 181 above.

Estoppel

Contract

200. A contract defence is not available for the reasons discussed in paragraph 190 to 191 above.

Limitation

25 Geldof v Simon Carves Ltd [2010] EWCA Civ 667 at [20] to [43]. 26 See Cheltenham BV v Laird [2009] EWHC 1253 (QB) and Derham, the Law of Set-off (4th edition) (2010)

at [4.51] to [4.54]. 39 PO-28397

Conclusion

Statutory set-off

“7 Payment of benefits

…

(2) Where an overpayment of pension or other benefit in respect of any person occurs under the RMSPS after the Cut-Off Date, subject to sub-paragraph (3) below the Minister for the Civil Service in his absolute discretion may recover that overpayment by reducing future instalments of pension or any other benefit owed in respect of that person.

(3) The Minister for the Civil Service will only have the power to make recovery from a person as described in sub- paragraphs (1) and (2) above to the extent that-

(a) the RMPP Trustees may have done so had that person’s benefit been retained in the RMPP; and

(b) it is permitted under the Surrender and Forfeiture Laws as applied to the RMSPS under Clause 19 (Surrender and Forfeiture Laws).”

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Change of position

Estoppel

Limitation

Hardship

Conclusion on recoverability of overpayments

Period of recovery of overpayments

213. Generally, I consider that a period of recovery at least equal to the period the overpayments arose is appropriate. In some circumstances it may be appropriate to depart from this period. For example, if the applicant has invested the overpayments or still holds a significant part of the overpayments in a bank account or the period of recovery proposed will cause hardship.

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Distress and inconvenience

Directions

220. Within 28 days of the date of the Determination, subject to first obtaining the approval of the County Court for the purposes of section 91(6) of the 1995 Act, the Manager may commence recovery of the total overpayment of £22,617.56 (net) directly from Mr S on grounds of unjust enrichment at the rate of £125.65 per month over a period of 179 months followed by a final payment of £126.21.

42 PO-28397 223. In the event of Mr S’ death, any balance of the overpayments that remains outstanding shall be due from his estate, unless the Manager and his personal representative(s) agree an alternative recovery plan.

Dominic Harris

Pensions Ombudsman 25 March 2026

43 PO-28397 Appendix 1

Details of the pension figures displayed in Mr S’ annual benefit statements for Pension Record Two

Statement Final CSDB Total Final Salary CSDB Total 27 Salary Pension Pension Lump Lump Date Lump sum Pension 28 sum 29 sum

31 March £13,492 Not £13,492 £40,473 Not £40,473 2003 applicable applicable

31 March £13,326 Not £13,326 £39,978 Not £39,978 2004 applicable applicable

31 March £13,517 Not £13,517 £40,551 Not £40,551 2005 applicable applicable

31 March £14,076 Not £14,076 £42,228 Not £42,228 2006 applicable applicable

31 March £14,585 Not £14,585 £43,755 Not £43,755 2007 applicable applicable

31 March £11,256 Not £11,256 £33,768 Not £33,768 2008 applicable applicable

31 March £11,722 £390 £12,112 £35,116 £1,170 £36,286 2009

31 March £11,802 £805 £12,607 £35,406 £2,413 £37,819 2010

31 March £11,997 £1,267 £13,264 £35,991 £3,797 £39,788 2011

31 March £12,206 £1,750 £13,956 £36,618 £5,249 £41,867 2012

27 The Cabinet Office is unable to provide data from 1995 to 2002. Due to a change in system, it has not

been possible for Cabinet Office to obtain any information in respect of benefit statements that predate April 1995. 28 Pension accrual in respect of the CSDB, which did not start accruing until 1 April 2008. 29 Lump sum in respect of the CSDB, which did not start accruing until 1 April 2008.

44 PO-28397 Appendix 2

Financial Information

Bank Account One:

Balance on 14 August 2025 £1,475

Balance on 8 August 2025 £1,637

Money in £3,468

Money out £3,784

Balance on 9 July 2025 £1,953

Balance on 8 July 2025 £1,953

Money in £3,517

Money out £3,783

Balance on 7 June 2025 £2,219

Balance on 6 June 2025 £2,219

Money in £3,671

Money out £3,785

Balance on 9 May 2025 £2,333

Bank account - in Mr S’ sole name:

Balance on 21 July 2025 £259 Money in £0.00 Money out £58 Balance on 22 May 2025 £317

Instant Cash ISA - in Mr S’ sole name:

Balance on 23 October 2024 £6,327 Money in £9,522 Money out £15,000 Balance on 25 October 2023 £11,805

Fixed Rate ISA – in Mr S’ sole name: Maturity Date 6 March 2025 Sum invested £5,904 Start date 6 March 2023

45 PO-28397

Appendix 3

Income and Expenditure

Household Income (per month) Amount Mrs S' wages £690 Workplace Pension £939 State pension - Mr S £906 State pension - Mrs S £921 Total £3,456

Household Expenditure (per month) Amount Water £30 Council tax £180 Gas £90 Electricity £70 Buildings and contents insurance £31 Telephone and Internet services £88 Tv Licence £14 Car (spares and servicing) £100 Car (Road Tax) £17 Car (insurance) £30 Car (fuel and parking costs) £300 Food, toiletries, and cleaning products £715 Clothing and footwear £85 Dentists and opticians £86 Hairdressing £60 Newspapers and magazines £15 Sports, hobbies, and entertainment £240 Children's pocket money £60 Sundries and emergencies £500 Holidays £93 Birthdays/Christmas gifts for family £100 Total £2,904

Total income over expenditure £552

46 PO-28397 Appendix 4

Updated Income and Expenditure

Household Income (per month) Amount Mrs S' wages £345 Workplace Pension £939 State pension - Mr S £906 State pension - Mrs S £921 Total £3,111

Household Expenditure (per month) Amount Water £35 Council tax £180 Gas £90 Electricity £75 Buildings and contents insurance £36 Telephone and Internet services £98 Tv Licence £14 Car (spares and servicing) £0 Car (Road Tax) £17 Car (finance and insurance) £60 Car (fuel and parking costs) £360 Food, toiletries, and cleaning products £800 Clothing and footwear £150 Dentists and opticians £113 Hairdressing £0 Newspapers and magazines £0 Sports, hobbies, and entertainment £240 Savings for grandchildren £60 Sundries and emergencies £400 Holidays £90 Birthdays/Christmas gifts for family £0 Total £2,878

Total income over expenditure £233

47