Professor B Kenny v Teachers’ Pensions [28034/5]
Professor Kenny (K) was a member of the Teachers’ Pension Scheme. He applied for early retirement in 1997 and was quoted an early retirement pension of approximately £8k per year, but did not take it. He retired on 30 July 2001 with a normal retirement pension of £12,994. He received a Statement of Teacher’s Pension Award form dated 30 July 2001 confirming this amount.
Due to an administrative error both the early retirement and normal retirement pensions were put into payment, giving K an annual pension of £25,474. When the error was discovered in July 2007, one of the pensions was stopped immediately. The overpayment of pension amounted to £40,616 and K was asked to put forward a proposal to Teachers’ Pensions (TP) for how he would repay this.
K argued that he had spent £7k on college courses and on private medical treatment in retirement but did not submit a formal defence against recovery of the overpayment. In March 2009, TP started to deduct £220 per month from K’s pension. K complained to the Pensions Ombudsman and then died, leaving his executor to continue his complaint.
The Pensions Ombudsman dismissed the complaint. Although the error was maladministration on the part of TP, TP was entitled to recover the overpaid amount unless K had a defence against recovery of some or all of the amount. One possible defence was a “change of position” defence, but to invoke this K had to have changed his position in good faith. The Pensions Ombudsman concluded that the discrepancy in this case was so great (64%) that K could not rely on this defence: K had either been aware of the error in his pension or should have been.
HMRC requires trustees and administrators to take all reasonable steps to recover overpayments of pensions. Not to do so amounts to an unauthorised payment from the scheme. This in turn incurs additional tax charges on both the individual and the scheme. Although the overpayment was caused by TP’s maladministration, the Pensions Ombudsman supported the action to recover it. It is also worth remembering that the “change of position” defence will not succeed in cases where the member ought reasonably to have known that he was receiving an overpayment of benefit.