Where a member has received overpayments of pension, the usual defence to an action from the trustees for recovery of those overpayments is the member’s change of position. The established defence is available where a member has so changed his position that it would be inequitable in all the circumstances to require him to make restitution to the scheme.
In Kenny, the member had received a quotation for an annual pension of £12,994.57 from the Teachers’ Pension Scheme but on retiring a few months later received monthly payments equivalent to an annual pension of £21,336 - about 64 per cent more than the quotation. Kenny claimed that he should not be required to repay the overpayment as it was due to an error by the scheme and he had spent the money on college courses, private healthcare and other expenditure.
The Pensions Ombudsman held that, in these circumstances, even a person who was no pensions expert “should have been aware that something was amiss”. It was held that change of position was not an effective defence where the scale of overpayment was so great that the member should have been aware an error had been made and therefore could not claim to have changed his position “in good faith”.
Comment: The Ombudsman’s decision appears sensible in a case such as this where the overpayment was so obvious. However, it is possible a court could disagree if it took the view that there should be an objective evaluation of the fairness of imposing restitution, rather than a subjective assessment of the member’s actions.