Update following the Pensions Ombudsman’s recommendations to Capita

Summary

Following a recent determination of the Pensions Ombudsman (PO) it is clear that a strict approach will be taken against companies who attempt to recover pension overpayments. 

The PO’s recommendations may not be binding because they are wider reaching than the subject of the individual’s complaint and he is not permitted to make determinations which would affect a wider category of individuals. Realistically, however, Capita would be unwise not to adhere to the recommendations as this would be seen as further maladministration and would result in an increasingly tough stance from the PO in the future. The recommendations were that Capita’s staff should have better training, have proper regard to the outcome of the two stage internal dispute resolution procedure (IDRP) and consider any valid defences the individual may have to the repayment.

BARROW (PO-2567): Facts

Mrs Barrow was receiving a widow’s pension from March 2005, which, under the rules, stopped on remarriage (save for the Guaranteed Minimum Pension). Mrs Barrow remarried in January 2008 and wrote to Capita informing them of this, however, the widow’s pension continued to be paid until October 2012 when she contacted them in relation to another issue and they realised their error. Capita demanded the return of the overpayment of over £12,000 and rejected Mrs Barrow’s first stage appeal under the IDRP.

The stage two IDRP (made by the Cabinet Office’s Scheme Management Executive (SME)) noted that the literature provided to Mrs Barrow stated that the widow’s pension would only potentially stop on any remarriage and decided that she ought to only repay one third of the overpayments, with Capita paying the balance to the Scheme. The SME referred to HM Treasury’s guidance for Government departments, entitled ‘Managing Public Money’, which provides information regarding the defences of change of position, estoppel and hardship whereby recovery of overpayments may not be appropriate. The SME directed Capita, in the event of Mrs Barrow appealing against recovery of the monies as set out in the ‘Managing Public Money’ guidance, to refer the matter to the Cabinet Office Finance and Estates Management team, if necessary.

Capita continued to demand the repayment throughout the appeals process and even requested the full £12,000 on one occasion following the SME’s decision, thus also ignoring any of the potential defences which Mrs Barrow raised. Mrs Barrow averred that she had changed her position in good faith in reliance of the continued payment of the widow’s pension, for example she had irreversibly reduced her working hours. However, Capita continued to state that there was no defence against the recovery - they argued that this was the case because the pension should never have been received following her remarriage.

Determination

Capita was guilty of maladministration, having incorrectly maintained that there was no defence against recovery in any circumstances, and, ignoring the SME’s binding stage two decision, did not consider the defences raised by Mrs Barrow and which were included in HM Treasury’s guidance. The PO believed that Capita “effectively tried to bully Mrs Barrow into repaying the money without understanding what her case was for not doing so.”  The PO also directed that Mrs Barrow had changed her position and so didn’t need to repay the outstanding £4,000 and awarded her £500 compensation for the distress and inconvenience caused.

Capita’s actions so distressed the PO that he recommended that Capita review its overpayment recovery process to ensure that it took proper account of any decisions made by the SME and adhered to HM Treasury’s published guidance, ‘Managing Public Money’.  Also, recommending that Capita improved the training of staff who deal with the recovery of overpayments, so that they understand the key principles and the role of the PO.