TPO analyses defences to trustees’ claim for recoupment of overpaid pension benefits

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The Pensions Ombudsman (TPO) determination in the case of Mr E and the BIC UK Pension Scheme provides a detailed analysis of the defences available to members where they have been overpaid benefits which the trustees propose recouping by reducing or suspending future pension payments.

TPO sets out his thinking as regards the application of change of position and estoppel defences to claims for recoupment and how the defence of laches works in a recoupment context. The case is important because it indicates how TPO will approach future complaints from members on recoupment and in what circumstances members might have a defence.

Key points from the case

  1. When considering recoupment cases, TPO will look at the available defences which are whether: (1) it is “equitable, under general equitable principles, to permit recoupment”; and (2) “whether a defence of laches is available”.
  2. In deciding whether it would be equitable to allow recoupment, TPO will refer to the equitable principles underlying change of position and estoppel.
  3. For change of position this means looking at whether the member has acted in good faith, suffered detriment and would not have acted as they did but for the overpayment.
  4. For estoppel by representation, TPO will consider whether the three tests are met (a clear representation upon which it is reasonably foreseeable that the claimant will act, an act made in reasonable reliance on the representation, and detriment). Unconscionability will also be considered.
  5. Because of the trustee’s duty to correctly calculate and pay pensions, payslips and annual P60s provided to pensioners could amount to a representation for estoppel by representation purposes absent any caveats and other relevant information that would limit such a finding.
  6. Trustees should ensure that any communication sent to members about potentially overpaid benefits clearly outlines the effect (or potential effect) of any action taken as regards pension payments during the enquiry/ resolution period.
  7. When considering the actions taken by trustees in response to potentially overpaid benefits and time periods, time may begin to run for laches purposes (see below for explanation) from when they first identified an issue and not from when the position as regards the issue is determined. Trustees should not unduly delay when investigating potential benefit issues which could mean benefits have been overpaid, especially when the monetary impact on pensioners could be significant.
  8. The starting point for a recoupment period is that it should generally be at least as long as the overpayment period – this is subject to change in relevant cases. Affordability should also be considered. If a person’s circumstances change during the recoupment period, the rate should be reassessed and changed if it would be equitable to do so.

Key concepts in the case

Equitable recoupment

This is an equitable ‘self-help’ remedy that can be used by trustees to recover overpaid pension benefits by reducing or suspending future instalments of pension. It is how the trustees intended to recover Mr E’s overpaid benefits.


Repayment is different to recoupment – it is where the overpaid beneficiary would repay the overpaid amount under the legal principles of unjust enrichment. Repayment was not applicable in this case.


Although a limitation defence is available in repayment cases, it does not apply to recoupment. However, the equitable doctrine of laches is applicable. It can act as a defence to an attempt to recoup overpaid benefits where the trustee knows about a benefit issue, has delayed, and it would be unconscionable to allow recovery. Some form of detrimental reliance is usually needed. Relevant factors include the length of the delay and what was done or not done during the applicable period.

Change of position

For change of position defence, the member must be able to demonstrate the following.

Good faith: The member must have acted in good faith and not have actual or ‘Nelsonian’ knowledge of the overpayment – that is knowing that they had been overpaid or being aware that this was a possibility but not clarifying the position.

Detriment and causation: The overpayment must have caused the member to detrimentally change their circumstances – usually, because they have spent money which they would not otherwise have done but for the overpayment (a causal link between the change of position and the overpayment is required).

Detriment can encompass modest improvements in lifestyle and a rise in the general standard of living. Broadly, the member must have spent the money, and this must be irreversible.

Estoppel by representation

A representation may mean that a party will be held to the representation made (they are ‘estopped’ from going back on it). Three tests must be satisfied.

  • Test 1: There must be a clear representation (or promise) upon which it is reasonably foreseeable that the claimant will act.
  • Test 2: The claimant must act and do so reasonably in reliance on the representation.
  • Test 3: They must suffer detriment if the defendant is not held to the representation.

Estoppel by convention

If parties act on common assumption that a particular set of circumstances is true, a party will not be permitted to go back on that agreed assumption if it would be unfair to do so.

Summary of decision

TPO partially upheld the complaint made by Mr E, a member of the Bic UK Pension Scheme, regarding the recoupment of £90,934 of benefits that were overpaid to him over 24 years. He decided that it would not be equitable for the trustees to recoup the overpayments made prior to 1 August 2019 and that Mr E also had a defence of laches in respect of the recovery of overpayments relating to the period from 22 February 2013 to 31 July 2019 (the relevance of these dates is explained below).

This meant that the trustees could only recover £6,554 at a reduced rate to that proposed (and after they have obtained a County Court order – see here for further details of the CMG court case in which it was held that in order for recoupment to be applied when a monetary obligation to a pension scheme is disputed, the obligation must first become enforceable pursuant to an order from a competent court).

Mr E was also awarded £1,000 for significant distress and inconvenience.


Related court case

The complaint stems from the Burgess v BIC UK 2019 Court of Appeal judgment that a 1991 resolution by the then trustees (which included directors of the employer, BIC UK Limited) to increase pensions in excess of GMP annually by the lower of the Retail Price Index or 5% (the Pre-97 Increase) was ineffective as regards that part of a member’s pension relating to pre-April 1997 pensionable service. Although the trustees had a power under the 1991 rules to award discretionary pension increases, this discretion was not carried over to subsequent sets of rules. The court’s decision meant that affected members such as Mr E had been overpaid benefits.

Mr E

Mr E retired in 1995. His retirement statement which referenced pension increases contained no caveats. Mr E moved to Spain in 2003 but subsequently moved back to the UK in 2016 for health and family reasons and because of concerns regarding correspondence received from the trustees starting on 22 February 2013 (the 2013 Announcement) relating to the increase issue.

The 2013 Announcement

The 2013 Announcement explained that, because of a discrepancy between the scheme rules and application of pension increases which needed to be investigated, future pension increases would be suspended but there would be no “deductions, at this time, for increases already applied that may not have been in line with Scheme Rules”.

Although Pre-97 Increases would no longer be awarded going forwards, overpayments to members continued between 2013 and 2020 because the pension being paid included increases already awarded. For Mr E these overpayments were considerable, amounting to approximately £40,942.

Further trustee letters issued to pensioners regarding the issue and the court case did not explain that the overpayments were possibly still continuing, or the impact on pensioners should the court find that the Pre-97 Increases were invalid.

30 March 2020 Trustee Announcement

The trustees informed (the 2020 Announcement) Mr E that they would be reducing his pension to the correct level because of the Court of Appeal’s finding that the Pre 97 Increases had been invalidly granted and that they would also be recouping past overpayments over a period of 24 years and 8 months, this being the same as the period over which the overpayments had built up (TPR’s general position being that the recoupment period should be at least as long as the overpayment period subject to change in relevant cases, e.g. affordability).

Recoupment: what are the available defences and how should these be applied?

The starting position is that recoupment cannot be applied if it would be inequitable to do so. Because there is no case law developing this basic equitable principle, TPO had to consider how his consideration of general equitable principles should be undertaken. He accepted that although change of position and estoppel do not operate as “specific [or formal], free-standing defences” to a recoupment claim, the principles ‘underlying’ these defences are relevant and it is just and equitable to apply these when considering recoupment and equitability. Broadly, the relevant principles are those outlined in the ‘key concepts’ table above. Whether a defence of laches is available must also be considered.

Application of change of position principles to Mr E

It would be inequitable to allow recoupment in respect of the period before August 2019

  • Good faith: TPO found that Mr E had acted in good faith up to the 2020 Announcement when he had actual knowledge that he was not entitled to the Pre-97 Increases (and indeed reduced his expenditure to below his monthly income from 1 August 2019 which is the point from which the change of position ‘defence’ was no longer available). There was no reason why Mr E would have known that the Pre-97 Increases were not validly granted up to the 2013 Announcement – he was told that increases were due, and his payslips set out increased amounts. 
    Even after the 2013 Announcement, Mr E acted in good faith – the 2013 Announcement did not explain that the pension still being paid included possibly incorrectly applied increases or the potential consequences of the trustees reserving their position to make future deductions from an affected member’s pension (i.e. that a member might have been overpaid and that this may need to be recovered). It should have done. The wording was ‘unclear’ and ‘over-optimistic’.
  • Detriment: The available evidence showed that Mr and Mrs E’s standard of living was higher than it would have been but for the overpayments. This was enough to establish detriment. The purchase of the various properties by Mr E during his retirement was irrelevant in this respect – TPO considered what the overpayments were used for and concluded that they were not used to finance property purchases.
  • Causation: TPO was satisfied that Mr E lived within his means and that he would not have gone above his available income but for the overpayments (both before and after the 2013 Announcement when Mr E’s pension stopped increasing)

Application of estoppel by representation principles to Mr E 

It would be inequitable to allow recoupment in respect of the period up to the 2013 Announcement

  • Test 1: A clear representation/ promise and reasonable foreseeability: TPO found that the retirement statement, monthly payslips and annual P60s amounted to a clear express representation that Mr E was entitled to the overpaid pension. It is important in this respect that no caveats were included in these documents. In fact, TPO noted that the ‘mere’ payment of the pension itself was an implied representation of entitlement. This was because of the surrounding circumstances including the trustees’ legal obligation to correctly calculate the payments.
    TPO’s findings on what may amount to a representation for estoppel purposes means that an estoppel “may arise in many more circumstances that it is commonly thought”. However, other information provided to the member is also relevant and, in many cases, other information sent to the member will contain caveats or disclaimers which may mean that the representation test is not satisfied.
  • Test 2: Act on the representation and spending reasonably in reliance: The same reasoning as applied to change of position meant that Mr E had acted on the representation and had spent reasonably in reliance on it.
  • Test 3: Detriment suffered if trustees not held to the representation/ promise: Again, using the same reasoning as applied on change of position and detriment, Mr E would suffer detriment if the trustees were not held to the representation as regards Mr E’s pension.
  • Wider equitable principle of unconscionability: Because the courts have referenced not applying estoppel which would favour one, or just some, of a pension scheme membership, TPO considered whether estoppel would be inappropriate because it could arguably favour Mr E over and above other members. TPO decided that his decision in respect of Mr E would not have a direct effect on benefits provided to other members and that he was not being favoured over other overpaid pensioners who had agreed to repayment because they could have complained to TPO. 

TPO concluded that it would be inequitable on estoppel by representation principles to allow the trustees to recoup the overpayments made in the period up to the 2013 Announcement. However, he differentiated the period after this from the change of position reasoning. This was on the basis that, despite being poorly worded, the 2013 Announcement meant that Mr E had the requisite knowledge for estoppel purposes which should have prompted queries as to whether he should be spending all his pension going forwards.

Application of estoppel by convention principles to Mr E

Inapplicable because no continuing common assumption as required

TPO noted that estoppel by convention was not applicable because it was not possible to meet the requirement to have mutual dealings between the trustees and Mr E – Mr E was simply told about his pension by the trustees and the dealing was all one way. 

Overall conclusion

TPO noted that different conclusions could be reached depending on the defence applied from which the relevant equitable principles for recoupment could be drawn. However, ultimately, the position depended on the 2013 Announcement – because it was unclear, TPO concluded that it would be equitable to deny recoupment after the 2013 Announcement up to 1 August 2019 – this being the date that Mr E reduced his expenditure below his monthly income and a change of position ‘defence’ would no longer apply.

Laches defence 

It was equitable to allow a laches defence in respect of recovery for the overpayments that built up from the date of the 2013 Announcement up to 1 August 2019. 

TPO also applied the equitable doctrine of laches to the case, concluding that:

  • time began to run from when the trustees first knew about the potential issue in 2011 and not from when the Court of Appeal determined the position in 2019;
  • the trustees should have investigated the position more quickly than they did given the importance of the issue and potential ramifications for members;
  • Mr E had suffered detriment; and
  • it was equitable to allow the defence in respect of the period from the date the 2013 Announcement was issued through to and including 31 July 2019, after which date any overpayments were recoverable for reasons already considered.

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