Teachers Pension Scheme · CAS-37350-K2Y4

CAS-37350-K2Y4

Ombudsman’s Determination Applicant Mrs N

Scheme Teachers' Pension Scheme (the Scheme)

Respondents Teachers' Pensions (TP) North Yorkshire County Council (NYCC)

Outcome

Complaint summary

Background information, including submissions from the parties and timeline of events The sequence of events is not in dispute, so I have only set out the salient points. I acknowledge there were other exchanges of information between all the parties.

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“Please note: This is an ‘Interim’ award of pension and lump sum only. We are waiting for confirmation of service details from your employer.”

TP said that on 5 March 2018, following further investigations, NYCC confirmed that all of Mrs N’s employment with NYCC was part time and not pensionable under the Scheme.

• a reduction in her pensionable service from 12 years and 219 days to 11 years and 219 days;

2 CAS-37350-K2Y4 • a reduction in her average salary for pension purposes from £33,116.13 to £8,456.93;

• a change in the method of the calculation of her average salary; and

• a change to the best average salary period that affected the amount of increases payable.

She had relied on TP and NYCC to provide correct information. She could not reasonably be expected to know that her retirement benefits were incorrect as she did not have access to the underlying data.

“I am pleased to confirm that your pension benefits have been calculated and made ready for payment.”

Reducing her pension in August 2018 without prior notification, was inappropriate and could have resulted in her being unable to meet her outgoings.

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The Representative contacted TP using the telephone number provided in TP’s letter of 4 September 2018. However, the advisor who answered the call was unable to provide further information and had to email the relevant case worker. Furthermore, when Mrs N requested a telephone call on 11 September 2018, the person who contacted Mrs N could not progress the matter.

Mrs N has a limitation defence to TP’s claim for recovery of the overpayments.

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In April 2016, the Government introduced a new single tier state pension for individuals who reach their state pension age after 6 April 2016. Pension schemes that were contracted out of the state second pension had a two-year window to check that they were paying the correct amount of guaranteed minimum pension (GMP). Where overpayments of retirement benefits were identified in connection with this exercise, the DfE did not seek recovery in most cases. However, the pension would be reduced to the correct level going forward. Managers of other public service schemes adopted a similar approach to the DfE.

TP does not have discretion to write off the overpayments of Mrs N’s retirement benefits.

It was Mrs N’s decision to appoint solicitors in connection with this matter. TP does not agree that it should reimburse her legal costs.

It was willing to recover the overpayments over a period of three years. If this would cause Mrs N financial hardship, she could complete a Statement of Income and Expenditure (SoIE) form; it would then consider whether a longer period of recovery would be appropriate.

It acknowledged that it had taken TP over four years to correct Mrs N’s retirement benefits. However, it was unfortunate that Mrs N did not notice the error at the time and query it with TP. It would have been apparent to her that her benefits had been calculated using an average salary far in excess of any pensionable salary she had earned in connection with the Scheme.

It had to recover the overpayments in line with the Guidelines. 5 CAS-37350-K2Y4 It would ask TP to consider whether it should make a distress and inconvenience payment and reconsider Mrs N’s request that it reimburse her legal costs.

The Scheme’s IDRP was designed to be used by a layperson; it did not consider that legal support was required in this case.

The Pensions Ombudsman’s position on overpayment cases – public service schemes

• their pension should not be corrected going forward; and/or

• all or part of the past overpayments should not be recovered.

• they had been given inaccurate statements as to their pension entitlement on which it was reasonable for the applicant to rely; and

• they had suffered a loss as a result of their reliance on those statements.

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• repayment - making a claim for repayment directly from the member on the grounds of unjust enrichment;

• set-off - recovering the overpayments by deduction from future payments of pension under the principles of equitable set-off; and/or

• a statutory right of recovery or statutory set-off if the regulations of the applicable Public Service Scheme provide for this. Not all schemes have such a right of recovery, and the wording of these regulations differ.

• change of position;

• estoppel (which can apply in relation to past overpayments);

• good consideration (effectively a contractual defence);

• the length of time since the overpayment was made (limitation); and

• hardship.

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Adjudicator’s Opinion

Legal Issues arising in this particular case

2 In England and Wales this will normally be the County Court. 3 Pensions Ombudsman v (1) CMG Pension Trustees Limited and (2) CGI IT UK Limited [2023] EWCA Civ 1258 (CA) 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. 4 Pensions Ombudsman v (1) CMG Pension Trustees Limited and (2) CGI IT UK Limited at paragraph 56.

8 CAS-37350-K2Y4 • Mrs N has accepted that her pension should be reduced to the correct level provided for in the Regulations going forward;

• Mrs N has disputed whether the past overpayments should be recovered, and, to the extent that Mrs N has to repay the overpayments, considers that a longer period of recovery is appropriate;

• Mrs N has argued that, as a consequence of the negligent misstatement by TP, which she relied on in good faith, she has sustained a financial loss; and

• Mrs N has argued that she has sustained non-financial injustice (distress and inconvenience) as a consequence of maladministration by TP and NYCC.

• repayment on grounds of unjust enrichment;

• setting off the overpayments against future pension payments on grounds of equitable set-off; or

• recovering or setting off the past overpayments against future payments of pension under any recovery or set-off power set out in the Regulations.

• change of position;

• estoppel;

• limitation (and laches);

• contract; and

• hardship.

Future pension payments

9 CAS-37350-K2Y4 Negligent misstatement claim

• the trustees or manager owed the person, to whom the negligent misstatement was allegedly made, a duty of care. (Generally, trustees of trust based schemes and managers of Public Sector Schemes owe a duty of care to beneficiaries);

• there was a breach of the duty of care (that is the information provided was not correct and could not be made by someone exercising reasonable care);

• the person to whom the information was provided reasonably relied on the representation and has suffered loss (the “but for” test is satisfied); and

• the loss suffered was not too remote (it was of the kind falling within the scope of the duty of care).5

• did the appellant rely on the statements;

• was the reliance reasonable; and

• would the appellant have acted differently if they had been told the correct position.6

5 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] 6 Corsham v Police Commissioners for Essex [2019] 074 PBLR (042); [p2019] EWHC 1776 (Ch), Morgan J at paragraph 173 10 CAS-37350-K2Y4

Past overpayments

Equitable set-off

Change of position

• good faith - the recipient of the overpayment must be acting in good faith;

• detriment - their circumstances must have changed detrimentally as a result of the overpayment or in anticipation of receiving it. Generally, this meant that the money must have been spent, and the expenditure cannot be legally or practically reversed, or any asset bought with the overpayment cannot be easily sold; and

7 Geldof v Simon Carves Ltd [2010] EWCA Civ 667 at [20] to [43]

11 CAS-37350-K2Y4 • causation - there must be a causal link between the change of position and receipt of the overpayment (as a minimum it is necessary to show at least that “but for” the mistake the applicant would not have acted as they did).

Good faith

Detriment

8 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. 9 See for example Abouh Ramah v Abacha [2006] EWHC Civ 1492 Armstrong DLW GmBH v Winningham Networks Ltd [2012] EWHC 10 (Ch) at [110]. 12 CAS-37350-K2Y4

Causation

Tax-free lump sum and ongoing overpayments of pension

10 See Scottish Equitable v Derby [2000] PLR 1 (CA) at [33]. 11 Phillips v Collins v Davis [2000] 3 All ER case (cited with approval in Scottish Equitable Derby). 12 National Westminster Bank plc v Somer International UK Limited [2002] 13 Scottish Equitable v Derby [2001] 3 All ER 818, Harrison J at paragraphs [37]-[41]

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Estoppel

• estoppel by representation which can apply where one party has made a false statement or representation to the other; and

• estoppel by convention, which can apply where both parties have been dealing with each other on a common understanding of fact which turns out to be false.

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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.”

Conclusion

14 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] 15 CAS-37350-K2Y4

15 Burgess v BIC UK [2018] 054 PBLR (040), Arnold J at [165] and CMG Pension Trustees v CGI IT UK [2022] 093 PBLR (056), Leech J at [145] 16 CMG Pension Trustees v CGI IT UK [2022] 093 PBLR (056), Leech J at [102] 17 CMG Pension Trustees v CGI IT UK [2022] 093 PBLR (056), Leech J at [172]. This issue is discussed in TPO’s factsheet on this issue which is available on TPO’s website. 16 CAS-37350-K2Y4

Distress and inconvenience

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In relation to the Limitation Act 1980 (the Limitation Act), the judge in Webber v Dept of Education [July 2016] stated that the cut-off date for limitation purposes for the recovery of overpayments should be the date on which TPO receives the respondent’s reply to the complaint. So, TP’s claim to recover the overpayments is time barred.

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"This information has been provided by your employer(s). You must ensure this record is COMPLETE and ACCURATE. Please refer any queries to the appropriate employer."

In a letter she received from TP, dated 27 October 2018, it said:

“In May 2012 your retirement benefits were calculated based on the information provided by NYCC, which we deemed to be correct. We did not have any reason to suspect that the period 1 April 2009 to 31 March 2010 was incorrectly coded as full time pensionable employment. It was only confirmed to us in June 2017 that this service was part time non-pensionable and should be removed from your record.”

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• TP caused Mrs N severe distress and inconvenience and an award of £2,000 is appropriate; and

• NYCC caused Mrs N serious distress and inconvenience and an award of £1,000 is appropriate.

• The administration of the Scheme was a partnership between it and the employers who were responsible for providing accurate service and salary details. Members also had an important part to play in checking the information they receive. In Mrs N’s case, this included the information on the benefit statements and the Statement.

• It had told Mrs N that the benefits she had initially been paid were an interim award. It was open to her to contact TP or NYCC to request an update on the correction of the position.

• While it accepted that the delay in amending Mrs N’s benefits to the correct level was unacceptable, it considered an award of £2,000 to be unduly excessive. While it stood by its original offer of £500, in order to bring the matter to a conclusion, it would accept an increase to £1,000.

Ombudsman’s decision

Limitation Act

Laches 21 CAS-37350-K2Y4

• acquiescence on the part of the claimant; or

• prejudice or detriment on behalf of the person from whom the overpayment is being reclaimed.

“The question for the court in each case is simply whether, having regard to the delay, its extent, the reasons for it and its consequences, it would be inequitable to grant the claimant the relief he seeks”

Other defences to recovery

18 Lindsay Petroleum Oil & Co v Hurd (1974) LR PC 221 at [66] as approved in Erlanger v New Sombrero Phosphate Co (1878) 3 App Cases and applied in Re Sharpe [1982] 1 Ch 154 19See Frawley v Neill [2000] CP Reports 20 The Times April 5 1999 and Schulman v Hewson [2002] EWHC 855 (Ch) at [44]. See also J J Harrison (Properties) Ltd v Harrison [2001] 1 BCLC 158 which also adopted the more modern formulation in a systematic way looking at the various factors which may or may not make it equitable to allow a laches defence. See also Patel v Shah [2005] EWCA Civ 157 where the Court of Appeal endorsed the more modern approach that laches does not require an enquiry about whether the circumstances can be fitted into a preconceived formula derived from old cases, but a broad approach should be taken to ascertain whether it is unconscionable for the party to be permitted to assert his beneficial rights 20 PO Nedlloyd BV v Arab Metals Co [2006] EWCA Civ 1717 applied in Sheffield v Sheffield [2013] EWHC 3927 (Ch) at [100], [106], [119] 22 CAS-37350-K2Y4

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The adjustment made to Mrs N’s pension

The period of recovery

TP’s telephone call of 3 September 2018 and letter of 4 September 2018

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Non-financial injustice

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Directions

• TP shall obtain an order from the County Court before recovering the net overpayments of £15,681.79 at a rate of £209.09 per month over a period of 74 months followed by a final deduction of £209.13;

• TP shall pay Mrs N £2,000, in respect of the non-financial injustice she has sustained as a consequence of its maladministration. This award includes the sum of £500 that it has already offered to Mrs N. Mrs N shall be given the option of having the award paid to her or offset against the total amount of the overpayments that TP is seeking to recover. If she selects the latter option, the figures in the first bullet point of this paragraph shall be reduced accordingly; and

• NYCC shall pay Mrs N £1,000, in respect of the non-financial injustice she has sustained as a consequence of its maladministration.

Dominic Harris

Pensions Ombudsman 5 September 2025

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