Recovery of benefit overpayments: member’s complaint dismissed due to “Nelsonian knowledge” that his entitlement was in doubt - Mr R (CAS-33474-K7Y1)

In 2014, the administrator of the Principal Civil Service Pension Scheme contacted Mr R to tell him he may be entitled to benefits under the Scheme. Mr R queried this as he had not worked for the Civil Service, although he had been a member of the Territorial Army. The administrator suggested that the pension could be in relation to that service. Mr R then completed a form declaring his entitlement to the benefits and confirming that he understood any over payment of benefits may be recovered.

The administrator subsequently sent Mr R a statement detailing benefits of a lump sum of £4,548 and an annual pension of £1,532. The statement quoted an incorrect NI number. The benefits came into payment on April 25, 2014, backdated to November 11, 2013. In May 2015, Mr R noticed that the NI number quoted in correspondence was incorrect and called the administrator to provide the correct number. He again queried his entitlement but was again told it must relate to his time in the TA.

In March 2018, the (new) administrator told Mr R he was not entitled to Scheme benefits and would be required to repay £9,846. In light of the incorrect NI number quoted on correspondence, the administrator concluded that Mr R had not accepted the benefits in good faith, that he had no defence to recovery and offered to recover the overpayments over 83 months, offsetting any tax he incurred. Mr R escalated his complaint to the Ombudsman.

The Ombudsman rejected Mr R’s complaint. The possible defences to recovery of overpayment are:

• Change of position in such a way that it would be unfair to require the individual to repay.
• Estoppel where there had been an unambiguous representation to the recipient on which there has been detrimental reliance.
• Limitation, where the trustee must bring the claim for repayment within 6 years of the date of discovery of the mistake.

None of the defences applied. The Ombudsman concluded that although Mr R had claimed the benefits honestly, he did not satisfy the good faith test, which was subjective. This was because he had “Nelsonian knowledge” that he might not be entitled to the benefits and should have made additional enquiries before claiming them, particularly as he had not worked for the Civil Service and had received no earlier communications about the benefits.

The Ombudsman accepted that the administrator could have made enquiries upon being informed the incorrect NI number had been quoted but he did not consider this amounted to maladministration. It was reasonable for the administrator to assume Mr R’s enquiry was a straightforward request to correct his NI number. Therefore no award was made for distress and inconvenience. As Mr R had suggested that the repayments would cause him financial hardship, the administrator should allow him to provide further evidence of his financial circumstances and how the repayments would affect them.

Comment

By contrast, in Mrs E (CAS-30002-K6Z8) the Ombudsman concluded that the member satisfied the good faith test in relation to an overpayment as the error at issue was hard to spot, the documents provided were very technical and the member’s pensions knowledge was very basic. This is a timely reminder that the Ombudsman is not bound by its previous decisions and each claim is decided on a case-by-case basis.