In this article we explore The Pensions Ombudsman’s (TPO) third determination in seminal series of overpayment decisions arising from the Burgess v BIC UK 2019 Court of Appeal case.
Introduction
TPO has published a third determination relating to the BIC UK Pension Scheme and overpayments. The first April 2024 determination (Mr E) was used as a lead case in which TPO provided a detailed analysis of the defences available to members where they have been overpaid benefits which the trustees wish to recoup by reducing or suspending future pension payments. The second June 2025 determination (Mr and Mrs D) provided useful guidance on how TPO will approach overpayment recovery complaints in trust based occupational pension schemes.
In both the first and second cases, TPO concluded that it would not be equitable for the trustees to recoup most of the overpayments made to the members. However, the third case is interesting because, although TPO found that Mr M had sustained severe non-financial injustice because of the trustees’ maladministration in connection with the overpayment, Mr M had no valid defence to the recoupment itself. The case provides useful information regarding when a member might not be able to demonstrate the necessary detriment to successfully defend a recoupment case.
Recap of the Burgess v BIC 2019 Court of Appeal case
The court case
The complaint relates to the Burgess v BIC UK 2019 Court of Appeal judgment that a 1991 trustee resolution to increase the pre-April 1997 part of members’ pensions in excess of the guaranteed minimum pension (GMP) annually by the lower of the Retail Prices Index or 5% (the Pre 97 Increase) was ineffective. The Court’s decision meant that affected members such as Mr M had been overpaid benefits (£12,620 in Mr M’s case) which the trustees decided to recoup in March 2020.
TPO’s findings regarding trustees actions relating to the overpayments and member communications
TPO considered the trustees’ actions surrounding the court case and overpayments including what members had been told about the possible impact on their overpaid benefits. He found that a February 2013 announcement informing members that further increases would be suspended because of possible issues with the Pre 97 Increase and subsequent announcements about the ensuing court case issued up to March 2020 did not adequately cover the potential consequences of suspending future increases. Such inadequacy included that the communications did not inform members that further overpayments were still ‘baked-in’ and continuing to accrue and might need to be recovered. Payslips and P60s also did not include any additional ‘warning’ that part of affected members’ pensions included past increases to which they may not be entitled.
Decision of TPO in the first and second determination
Under general trust law, trustees must pay the correct benefits as provided for under the rules and overriding legislation and must generally reduce a pension to its correct level going forwards where incorrect benefits have been provided.
As regards any overpaid benefits, the typical beginning point is that it is fair that overpaid benefits are paid back because not to do so means the member is being unjustly enriched. However, as TPO explained in the Mr E case, a member might not have to repay an overpayment if they have a defence.
There are four defences to recovery of an overpayment (not relevant here) and two defences to recouping overpaid benefits: (1) if it would be inequitable to permit recoupment; and (2) if the defence of laches applies (an equitable doctrine that can act as a defence to a recoupment claim where, broadly, it would be inequitable or unconscionable to allow recovery because of delay and actions/ inaction).
The inequity defence involves considering change of position and estoppel. In change of position the member must have changed their position acting in good faith and suffered detriment because of the overpayment or in expectation of receiving it – there must be a causal link between the change of position and receipt of the overpayment. Estoppel, which involves a party being stopped from going back on an assumption or being held to a representation, is far more difficult to establish in a pensions context.
In the case of both Mr E and Mr and Mrs D, recoupment was not permitted up to the date of the March 2020 announcement meaning that only a small proportion of the overall overpayment could be recovered by the trustees. This was on the grounds of a successful change of position defence and because a defence of laches applied. A defence of estoppel was, however, only available until the 2013 announcement because the requirement to have a clear representation for this defence to be successful was not present after this time.