If trustees realise they have overpaid pension, they should give early consideration to taking legal steps to protect their right of recovery.
In particular, they should do this where overpayment is substantial, has continued for a long time or is the subject of an IDRP complaint or negotiations that look likely to be protracted.
A principle known as "limitation" means legal action to enforce rights must normally start within a certain time (the limitation period) of the event that has led to the possibility of action.
In a recent case, overpayment (total £36,000) continued for eight years, stopping in 2009. On the facts, a six year limitation period ended two years later in 2011.
In principle the scheme could recover for the six years up to 2011 but in practice this meant it could only recover for the last four years of overpayment, 2006 to 2009. It lost two years of potential recovery.
The scheme did not act to protect itself from limitation when it realised the error. One way would have been to make a standstill agreement with the member that time would be taken to have stopped running for limitation purposes.
A member will often agree because the alternative is for the scheme to initiate legal action, a step known as "issuing proceedings", which puts the member at risk over future legal costs.
Having issued proceedings, the scheme would have been able to recover for the six years up to that point.
The law on limitation has developed around disputes in Court. This case (Webber v Dept for Education) has clarified some aspects of the way the concept applies when there is a dispute before the Pensions Ombudsman (the PO).
It has also led the PO to consider whether the legislation about its procedures interacts satisfactorily with the law on limitation in overpayment cases. It may be the PO will ask the Government to change the law.