The Pensions Ombudsman has ordered the Principal Civil Service Pension Scheme not to seek to recover any further monies from a member who received overpayments of pension totalling more than £30,000. The scheme was also ordered to repay that part of the overpayment which it had already recovered. The overpayment arose as a result of the scheme failing to apply "abatement" rules which provided that the member's pension should be reduced if his post-retirement earnings exceeded a specified level.
In principle a scheme is entitled to recover overpayments from a member even where the member received the payments in good faith (as the Ombudsman accepted the member had done in this case). However a member may have a valid defence to overpayment if he has so changed his position in reliance on the overpayment that it would be inequitable to require him to repay. The member in this case was aged 74. He had no savings and a substantial mortgage debt. The overpayments had been made over a period of approximately 10 years, during which time the member had supported his children through sixth form and university. The Ombudsman upheld the member's "change of position defence", finding that the member appeared to have adjusted his lifestyle to match his income, spending all his pension in the belief that it was his to do with as he wanted.
A notable aspect of this case was that the scheme had allowed further overpayments to accrue even after the initial overpayment was discovered, and the Ombudsman stated that "in any event" the member should not have to repay the overpayments which accrued after the initial overpayment was discovered. How the Ombudsman would have dealt with this aspect of the case had he not upheld the member's "change of position" defence is not clear.