Principal Civil Service Pension Scheme · CAS-71331-S0R8

CAS-71331-S0R8

Ombudsman’s Determination Applicant Mr L

Scheme Principal Civil Service Pension Scheme (the Scheme)

Respondents Cabinet Office (the Manager) MyCSP (the Administrator)

Outcome

Complaint summary

Background information, including submissions from the parties

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Cabinet Office, MyCSP CAS-71331-S0R8

• A description of public service pension increases. Increases were normally only paid to pensioners aged over 55 and were based on the rise in retail prices as measured by the Retail Prices Index. If a member started to receive their pension prior to age 55, the amount of increase to their pension at age 55 would take into account all increases since their pension began.

• An example of a member who had retired four years prior to qualifying for increases and then received a cumulative increase to their pension of 12% when they qualified for increases.

• A review of his records had identified an error in his pension from March 2013 to March 2016. It apologised on behalf of Capita.

• From age 55, his pension was due to increase by the Pension Increase that was due from 23 October 2010 to 9 April 2012, the last Pension Increase date prior to

2 CAS-71331-S0R8 his fifty-fifth birthday. The Pension Increase was 6.83% and his revised pension should have been £23,254.85 before tax.

• His pension was then incorrectly doubled and he was paid a pension of £46,509.70 per annum before tax.

• His correct pension now was £24,701.05 per annum before tax.

• He had been overpaid by £53,125.38 after tax.

• It offered a recovery plan of deducting £1,435.83 per month for 36 months and a final payment of £1,435.50 from his pension (equitable set-off).

• The April 2016 Letter had caused him distress, concern, and sleepless nights.

• He suspected the error had come to light after he had asked the Administrator and the Employer about his pension, Life Time Allowance and contributions to the Nuvos Section of the Scheme.

• He was surprised by the pension increase in 2013, so he had telephoned Capita. He was told that a high uplift was expected when he reached age 55. He recalled receiving a “print-out/statement” which said that now he had reached 55 “all increases due were now to be included”, but he was not aware of this when he first retired. He discussed the situation at the time with an accountant friend who suggested that a substantial uplift to his pension would be correct. Mr L says that he did not disclose the actual amount of his pension increase to his friend.

• When he retired, his intention was to look after his young child and carry out house renovations. He had subsequently had another child.

• He intended to return to work before he had been away from his field of work for too long. However, he worked locally in a flexible low paid part time job which allowed him to be the main carer of his children. He chose not to obtain a better paid job earlier in the year as he relied on his pension income. He believed that as he had been away from professional employment for over six years, it would be difficult for him to find appropriate employment.

• His wife had not taken professional qualifications or sought higher paid employment because his pension income had been sufficient.

• He and his family had recently been on a more expensive holiday than they normally would have, and they now had to put on hold moving to a larger house.

3 CAS-71331-S0R8 • He was satisfied that he had made appropriate decisions based on the income he was receiving at the time.

• He would have been aware from Scheme documentation that he was not entitled to receive the higher pension.

• It had told the Manager that there was a good prospect of recovering the entire overpayment from him.

• It asked for his proposal to repay the debt.

• If it did not hear from him by 5 September 2018, it would advise the Manager to issue County Court proceedings against him. The Manager reserved the right to request the award of interest and reimbursement of legal fees.

• It enclosed a Statement of Means form for him to complete.

• The Administrator telephoned Mr L and said that as his case had already been referred to the Manager, he could proceed directly to stage two of the Scheme’s

4 CAS-71331-S0R8 IDRP. The Administrator confirmed this in writing to Mr L and sent him an IDRP form.

• Mr L received a hand delivered summons from the County Court Money Claims Centre, Liverpool, listing him as a defendant to recover the overpayment.

• While Scheme documentation did not indicate that he was being overpaid, he accepted that he was overpaid but did not accept that he was aware of the overpayments or that he should have reasonably expected to have known about it.

• He queried the large pension increase on several occasions with Capita by telephone but he does not remember the exact dates. After receiving information from Capita and others, he was satisfied that a large increase, accrued over several years, could be expected when he reached age 55.

• He had not been previously made aware of the pension increases, and it was not mentioned at a retirement seminar he attended in 2010.

• If he had known about the overpayment, his actions and lifestyle decisions would have been different. For example, he would have obtained more financial and investment advice. Receiving the higher pension had resulted in him carrying out the following actions that he otherwise would not have done so:

o investing in a number of high risk investments which subsequently caused him to suffer losses;

o taking his family on a holiday to Portugal; and

o not accepting the offer of working additional hours.

• On many occasions he had experienced difficulties in getting through to the Administrator by telephone and promised call backs had not taken place. He asked for recordings of the telephone calls with Capita in 2013.

• At times the Administrator had been slow to respond to his letters. This led him to believe that there was no longer a debt. He was concerned that he did not receive

5 CAS-71331-S0R8 two letters from the Administrator. The Administrator had acknowledged that its record about one of the letters being sent to him was incorrect.

• He queried why he had received the County Court summons after being told that he could disregard the Solicitor’s letter. It appeared that the County Court summons had not yet been cancelled.

• He did not feel that he had been listened to or believed.

• The halving of his pension and the requirement to pay back the overpayment was “unfair and unwarranted”. He offered to repay 25% of the overpayments.

• The position regarding overpayments was set out in the document, ‘Managing Public Money’. All overpayments were recoverable regardless of how they happened or who caused them, unless money was received in good faith and the applicant could make defence against recovery. It did not agree that he satisfied the good faith test.

• It did not doubt that he queried the pension increase with Capita at the time. But, without any records, it was impossible to verify exactly what had been said. From the information he provided, it appeared more likely than not, that whatever Capita told him, was basic information about pension increases that occur at age 55.

6 CAS-71331-S0R8 • He said that he was told that a high uplift was expected at age 55. Had he contacted them repeatedly and discussed his pension in any depth, it was difficult to conclude that this would not have alerted Capita to the 113% increase in his pension. This was considerably more than a high uplift.

• It was clear from his letter on 1 May 2016 that he received the Booklet. He recalled that it said when he turned 55, all increases would be due. The Booklet explained Pension Increase calculations and how they were applied. It referred to the example member of someone who took their benefits for a similar period to Mr L before Pension Increases applied, who received an increase of 12%. It could not accept that it was reasonable for him to believe that the 113% increase was due to annual pension increases from when he retired. His pension more than doubling was cause for him to know that there was a mistake and it was not unreasonable to expect him to pursue the matter more insistently than he did.

• It awarded him £1,000 for the original pension error and £500 for the Administrator’s delay in referring his case to the Manager in February 2017.

Summary of Mr L’s position

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Summary of the Manager’s position

Adjudicator’s Opinion

49.1 Mr L accepted that his pension should be reduced to the correct level but disputed whether the past overpayments should be recovered. He also said that he had sustained financial and non-financial injustice (distress and inconvenience) as a consequence of the maladministration.

49.2 The Manager had indicated that it was seeking recovery by setting off the overpayments against future pension payments on grounds of equitable set- off. It was necessary to consider the Manager’s right of recovery under those grounds. To reach a view on whether equitable set-off was available, the Adjudicator needed to consider whether Mr L had any valid defences in law to recovery of the overpayments on grounds of unjust enrichment or otherwise, as follows:

• change of position;

• estoppel;

• limitation; and

• hardship.

8 CAS-71331-S0R8 Change of position - good faith

49.3 To succeed in a change of position defence, the recipient of an overpayment must be able to show that he acted in (i) ‘good faith’, (ii) that their circumstances have changed to their detriment as a result of the overpayment and (iii) that there is a causal link between the change of position and the overpayment.

49.4 The first test relates to acting in good faith. For the recipient of the overpayment to show that he/she has acted in good faith, it is generally necessary for him to demonstrate that he did not have actual or “Nelsonian knowledge” that he was being overpaid. If the recipient had good reason to believe that he was being overpaid but did not check the position with the manager this would amount to bad faith.

49.5 The Pensions Ombudsman is an evidence based ombudsman. In order to determine whether Mr L had grounds to use change of position as a defence, the Adjudicator needed to see sufficient evidence to support his argument that he had acted in good faith and made reasonable enquiries to check that his pension was correct.

49.6 When Mr L became aware of the possibility that his pension had been increased incorrectly, he telephoned Capita on several occasions. He says that Capita gave him reassurances that his pension was correct. Unfortunately, there were no recordings or written notes of the telephone calls, so the Adjudicator could not be certain about the level of detail Mr L went into during the calls. For example, whether he specifically said how much his pension had increased by or whether he simply referred to it as having been uplifted. It was also unknown whether Capita specifically checked Mr L’s pension during the calls by accessing his records.

49.7 Mr L recalled receiving a document that said pension increases were due because he had reached age 55. As this was around 2.5 years after his pension had been put into payment, it would be unreasonable to believe that this relatively short period for inflation was the only reason for the more than doubling of his pension. In this situation, a reasonable initial reaction would be for Mr L to contact Capita, possibly by telephone, which he did. The Adjudicator did not receive sufficient evidence to determine that the calls alone represented Mr L making reasonable enquiries about his pension. As he was told during the calls that his pension was correct and given the potential consequences of receiving a pension considerably higher than he should have received, a reasonable subsequent action would have been for Mr L to follow up his enquiries with Capita in writing. If he had done so, it was more likely than not that his pension would either have been checked and corrected sooner, or he would have obtained evidence to support his defence of good faith in the matter.

9 CAS-71331-S0R8 49.8 While the Adjudicator did not disbelieve Mr L when he said that the telephone calls led him to believe that his pension was correct, this alone was insufficient evidence to support grounds for him to use good faith as a defence. This meant that Mr L did not have a change of position defence in relation to the recovery of the overpaid pension payments.

49.9 Mr L said that he took different decisions and increased his standard of living because his pension had been overpaid. The Adjudicator understood that Mr L had sufficient available assets to repay the overpayments. Even if he was able to provide sufficient evidence to support grounds of good faith as a defence, which he was not, the Adjudicator was satisfied that Mr L would have spent the same amount anyway even if his pension had not been overpaid and he still would not have a change of position defence.

Estoppel

49.10 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 they might be being overpaid but failed to adequately check the position with the Manager. Mr L did not have a defence of estoppel by representation or convention.

49.11 Unlike a claim for repayment of an overpayment on grounds of unjust enrichment, a limitation defence is not available in relation to an equitable set- off claim. As a result, as the Manager has indicated that it is seeking recovery by setting off the overpayments against future pension payments on grounds of equitable set-off, I am satisfied that a limitation defence is not available to Mr L.

49.12 However, to the extent that Mr L dies before the end of the recovery period, any claim for the remaining overpayment made by the Manager would be on the basis of repayment from the estate (rather than set off). In that situation, limitation may be of relevance.

49.13 Under section 5 of the Limitation Act 1980, the time limit for seeking recovery of past overpayments through repayment, under principles of unjust enrichment, is generally six years from the date the cause of action accrued. The date the cause of action accrued will generally be the date each overpayment of pension or lump sum was made. So, depending on the facts, it is possible that a manager may only be able to recover some of the overpayments if the member can demonstrate that a limitation defence applies.

10 CAS-71331-S0R8 49.14 However, this six-year time limit can be extended where an overpayment is made on the grounds of a mistake. Section 32(1) of the Limitation Act 1980 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”.

49.15 Time stops running for limitation period purposes (the Cut-off Date) when TPO receives the Manager’s formal response to the member's complaint.1 Separate limitation periods can apply in relation to any lump sum overpayment and each instalment of overpaid pension.

49.16 In Mr L’s case, the Cut-off Date was 22 February 2022, when TPO received the Manager’s response to his complaint. As a result, there is a limitation defence (to repayment on the basis of unjust enrichment) in respect of any overpayments made six years or more prior to 22 February 2022. Therefore, to the extent that the Manager ever seeks to recover the overpayments by way of repayment (rather than equitable set-off, as it is at the moment), this means that the Manager is unable to recover any overpayment that occurred before 22 February 2016. Any overpayment from 23 February 2016 onwards is recoverable, because the Manager had made its claim within the required limitation period.

Hardship

49.17 Mr L did not provide any evidence to suggest that the overpayments should be waived on grounds of hardship. The Manager offered him a 37-month recovery plan and he did not request a longer period.

Conclusion

49.18 Mr L did not have a valid defence against the recovery of the overpayments. All the overpayments were recoverable by the Manager under principles of equitable set-off.

Recovery period

49.19 Mr L’s pension was overpaid from March 2013 to March 2016, so, for 37 months. The total amount due from him after tax was £53,125.38. While Mr L had said that he had sufficient assets to repay the overpayments, the Administrator’s proposal set out in the April 2016 Letter to deduct £1,435.83 per month for 36 months followed by a single deduction of £1,435.50 from his pension was an appropriate recovery plan in the circumstances.

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

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49.20 The overpayments had arisen as a consequence of maladministration by the Manager. There were also delays in the responses from the Administrator and the Manager after Mr L complained on 1 May 2016. The non-financial injustice which Mr L had sustained had already been sufficiently addressed by the Manager’s offer to pay him a total of £1,500.

50.1 He provided a copy of his April 2015 payslip from the Scheme which showed that an annual pension increase had resulted in his pension increasing to £49,402.10 per annum.

50.2 He had acted in good faith and with integrity when he telephoned Capita in 2013 to check his pension. He was satisfied at the time that he was being paid the correct pension.

50.3 He was being forced to stop work in December 2025 and he was currently going through a divorce. These events had financial implications for him.

Ombudsman’s decision

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Directions

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Dominic Harris

Pensions Ombudsman 18 December 2025

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