In a recent determination by the Deputy Pension Ombudsman (Clift (PO-2066)), it was held trustees were time barred from recovering pension overpayments erroneously made to a scheme member. The overpayments did not come to light until 10 years after payments commenced.

The member, Mr Clift, was a member of an industry-wide scheme. He took early retirement on the grounds of ill health in April 1999 and was at that time also awarded a tax free lump sum of £8,478.47.

In June 1999 the scheme trustees discovered that an incorrect date had been used to calculate part of Mr Clift’s salary which resulted in an overpayment. The trustees recouped part of the overpayment via reduced pension payments but decided not to recover the overpaid part of his lump sum (amounting to £3,876) on the basis that he had paid for alterations to his home shortly following receipt of the lump sum (he had, in effect, spent the money).

In August 2011, the trustees discovered that a further overpayment had been made to Mr Clift, relating to the calculation of his overtime earnings. The trustees asked Mr Clift to repay the overpayment, which amounted to £2,796, by way of a 60 month payment plan.

Having exhausted the scheme’s internal dispute resolution procedure (IDRP), Mr Clift referred the matter to the Pension Ombudsman who partially upheld Mr Clift’s complaint.

Two defences to the trustees’ claim for the overpayment were considered: firstly, a defence based on limitation and, secondly, a defence based on “change of position”.


There is a six-year limitation period under the Limitation Act 1980 for bringing claims to recover overpayments. The general rule is that this period is calculated from the date the overpayment is made. An exception to the rule is where there has been deliberate concealment, fraud or mistake - in such case, the period can run from the date the claimant discovered the overpayment, or could reasonably have been expected to have discovered it (section 32(1) of the Limitation Act 1980).

The Deputy Pension Ombudsman (DPO) considered that a reasonably diligent trustee would have realised that a strict reading of the scheme rules would have revealed the discrepancy either in (a) 1998 when Mr Clift’s benefits were first calculated or (b) in June 1999 when the first overpayment had been identified.

Change of position

The DPO declined to accept Mr Clift’s defence of “change of position” with regard to the overpaid monthly pension payments. Mr Clift argued that he had an increased monthly expenditure because of the monthly pension payments he received. The DPO did not accept that Mr Clift spent more than he would have otherwise done had he received the correct, lesser, monthly pension payment.

However, the DPO did accept that Mr Clift had altered his position following receipt of the lump sum element which was overpaid (being £587). The trustees had been wrong to seek to recover this element of the overpayment because Mr Clift had, in effect, spent the money.


The DPO also considered whether section 91(1)(b) of the Pensions Act 1995 had been contravened. This provides that an entitlement to an occupational pension cannot be charged or subjected to a lien unless certain exceptions are met. The exceptions did not apply if the amount was disputed and in the absence of a court or arbitral award requiring or allowing a charge or lien.

The DPO held that, in starting to recover the overpayment from Mr Clift by reducing his monthly payments without consent and whilst the IDRP process was still underway, the trustees had contravened Section 91. Accordingly, their action amounted to maladministration.

Lessons to be learned

This case highlights the difficulties trustees can face when seeking to deal with overpayments. It emphasises the importance of establishing the applicable limitation period and in taking prompt action before a claim is time barred.

It also serves as a note of caution when trustees seek to recover overpayments by reducing pensions in payment. Such action may amount to maladministration if it is done without the member’s consent and whilst the matter is subject to an IDRP complaint.