The High Court has ruled that there is no limitation period on the recovery of overpayments of pensions under DB schemes by adjusting future payments.

Many schemes have overpaid certain pensioners due to administration errors. The case is extremely helpful as to how overpayments can be dealt with.

In the recent case of Burgess and others v BIC UK Ltd, the High Court confirmed recovery of pension overpayments under DB schemes is not subject to a limitation period provided that this process is conducted via an adjustment of benefits in the future rather than a request to be repaid monies previously received by members.

The judge stated that if the trustees were to exercise the equitable right of recoupment to recover overpayments, this was subject to section 91 of the Pensions Act 1995 so that if a member disputed the recoupment, a determination made by the Pensions Ombudsman was not enough to make the recoupment in itself legally enforceable. Instead, the determination would need to be referred to the County Court in order to be sanctioned.

It was further held that the remedy of equitable recoupment is not subject to a limitation period despite the trustees’ reliance on a six-year limitation confirmed in earlier case law. Unlike the recovery of overpayments, recoupment did not involve a claim for repayment of pension benefits, but operated instead as an adjustment to future pension instalments.

However, trustees should carefully review recoupment of overpayments on a member-by-member basis as this may still be considered inequitable in some cases.