Overpayment Of Benefits: Limits On Recovery

The recent High Court decision in Webber v Department of Education highlights some of the duties and responsibilities of trustees where an overpayment of benefits has been made to a scheme member. It also clarifies the time period over which overpayments can be recovered. The case concerned the Teachers' Pension Scheme, which is managed by Teachers' Pensions (TP) rather than trustees, but similar principles will apply in relation to trust-based pension schemes.

The starting point is that trustees generally have a duty to recover any overpayments. The member has several possible defences, the most commonly pleaded one being "change of position". This allows the member to keep the overpayment if their position has so changed as a result of the overpayment that it would be inequitable to require him to repay the money. The availability of the defence depends very much on the facts of the case. In Webber, the judge held that as the member appreciated that the payment he was receiving might be an overpayment, and turned a blind eye to it (e.g. he could have made a simple inquiry to clarify the position but did not do so), he could not rely on the change of position defence.

The second main issue in Webber was the period over which TP could recover the overpayments. Mr Webber had taken early retirement in 1997 but his pension should have been reduced following his return to work in 2001. The trustees knew that Mr Webber had returned to work and that there would definitely be an overpayment if he continued in his employment for a...