Teachers Pension Scheme · CAS-42089-N4Y0 — Pensions Ombudsman determination

CAS-42089-N4Y0

Ombudsman’s Determination Applicant Mr T

Scheme Teachers' Pension Scheme (the Scheme)

Respondent Teachers' Pensions (TP)

Outcome

Complaint summary

Background information, including submissions from the parties and timeline of events The sequence of events is not in dispute, so I have only set out the salient points. I acknowledge there were other exchanges of information between all the parties.

• a covering letter;

• an ‘Application for Death Benefits’ form (Form 22);

• notes for completing Form 22; and

1 CAS-42089-N4Y0 • a copy of leaflet 450: ‘Benefits Payable to Members’ Beneficiaries’ (the Leaflet).

“Spouse’s pension payable for life unless spouse re-marries or co-habits. The pension must then stop.”

“Please inform us: […]

If we pay you a widow, widower or civil partner pension and you remarry, enter a civil partnership or live with another person as husband and wife.”

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• He did not know the consequences of his remarriage on his pension.

• He accepted the money in good faith and had made significant life decisions on that basis.

• He had not previously been notified that his pension would cease on his remarriage.

• The change of address notifications, that he had sent to TP, had not been actioned.

• TP should consider writing off the overpayment.

• He had changed his position and could demonstrate that he had acted in good faith. When he remarried, he took on financial responsibility for his wife’s two children. He also encouraged his wife to give up a well-paid career.

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• The Regulations state that payment of a widower’s pension must cease if the person receiving it marries, forms a civil partnership, or begins to live with someone as if they were married or as if they were civil partners. TP had acted correctly by following the Regulations and stopping the pension it was paying Mr T.

• Mr T had been provided with a copy of the Leaflet together with the Newsletters. The receipt of these documents precluded a change of position defence.

• TP had now adopted a more proactive approach by regularly contacting pensioners for confirmation that their circumstances had not changed. However, this was an enhancement to its service and did not invalidate the previous approach which put the onus on the beneficiary to keep TP informed.

• Before the telephone call Mr T made to TP on 30 November 2016, TP had no record of receiving a notification of a change of address from Mr T. TP’s letter of 3 May 2017, was knowingly sent to his old address in the Isle of Wight. No response had been received to five letters it had sent to his New Zealand address between 13 December 2016 and 23 March 2017.

• HM Treasury’s ‘Managing Public Money’ (MPM) guidance makes it clear that recovery of overpayments should be pursued in full.

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• He supplied his Kent address to TP in 2007. TP has subsequently said that it did not receive this.

• As a result of the change of address notification not being actioned by TP, he did not receive the Newsletters. Furthermore, TP’s use of the Newsletters, to advise pensioners of the impact remarrying would have on their pension, was an inadequate method of communicating such a message.

• The sporadic and inconsistent nature of the communications from TP and the DfE amounted to maladministration. This was evidenced by the letter from the DfE that incorrectly referred to a child’s pension being paid to his daughter. There was also a delay in him receiving the letter. The DfE had not provided an explanation or an apology for this. Nor had it apologised for any of the errors that resulted in the overpayment. The overpayment had caused him significant distress.

• TP applied undue pressure when asking him to make the repayment. Furthermore, a number of the invoices did not include the option of extending the repayment period.

• Capita’s letters of 19 December 2005 and 5 January 2006 confirmed the benefits payable to him. No conditions were attached to the payment of these benefits. Consequently, he accepted the benefits in good faith to his financial detriment. The letters amounted to unequivocal statements, made on behalf of the DfE, giving rise to the defence of estoppel by representation.

• In reliance on the benefits, he changed his lifestyle, made irreversible financial decisions and his wife gave up a well-paid career. As a result, he had a change of position defence to recovery of the overpayment.

• It was unjust for him to be burdened with a lengthy repayment plan given that he was over 70. Also, due to his medical history.

• The cessation of his pension was a breach of his right to marry, his right to family life and the protection of his property under the Human Rights Act 1998.

• It was required to administer the Scheme in accordance with the Regulations.

• It did not accept responsibility for the overpayment.

5 CAS-42089-N4Y0 • The annual Newsletters were sent to all pensioners of the Scheme. TP included a reminder in the Newsletters of the requirement to notify any change in circumstances. The Leaflet was also issued to Mr T in December 2005.

• It had asked Mr T to complete a ‘Statement of Income and Expenditure’ so that it could gain a better understanding of his financial situation. He had not yet provided this.

• Its records showed that Mr T was residing at an address in the Isle of Wight from December 2005, and then at an address in New Zealand from November 2016.

• The “print file”, in respect of Mr T’s P60 for the 2006/07 tax year, was produced on 19 April 2007. The P60, together with a copy of the 2007 newsletter, would have been issued to Mr T shortly after this date.

• It was required to issue Mr T with his P60 by 31 May each year. Consequently, the Newsletters, which were sent with the P60s, would have been issued to him prior to 31 May each year.

Adjudicator’s Opinion

• TP continued paying Mr T’s widower’s pension after the date it should have ceased. So, there was no dispute that a problem had occurred.

• TP is required to pay benefits from the Scheme in accordance with the Regulations. Regulation E30, applied at the time that Mr T became eligible for his pension. Mrs T was not in pensionable employment after 31 December 2006. So, Mr T’s pension ceased to be payable on remarriage.

• In the Adjudicator’s view, TP acted correctly by ceasing Mr T’s pension when it became aware, in November 2016, that he had remarried. By this time, Mr T’s widower’s pension had been overpaid since 12 April 2008. This resulted in a total overpayment of £31,507.53 (net), which TP has asked Mr T to repay to the Scheme.

• Before considering whether Mr T had any other defences available to the recovery of the overpaid pension, the Adjudicator considered the relevance of the Limitation Act 1980 (the Act). The applicable cut-off date for the purposes of the Act was the date when TP brought its claim during the course of TPO’s complaints procedure. That date was 24 January 2020, the date TPO received TP’s response to Mr T’s complaint.

• For the purposes of the Act, time started running from the date that the overpayment first occurred in April 2008 and subsequently upon each further overpayment occurring (Section 5 of the Act). However, the limitation period can 6 CAS-42089-N4Y0 be postponed where there has been fraud, concealment or mistake (Section 32 of the Act).

• In such cases, the limitation period is six years from the date TP discovered the fraud, concealment or mistake or could do so with reasonable diligence. In Mr T’s case, the mistake went unnoticed for over eight years.

• The Adjudicator took the view that, even with reasonable diligence, it would not have been possible for TP to have been able to identify, until November 2016, that overpayments were being made to Mr T. He said this because TP was not made aware of Mr T’s remarriage until November 2016. It followed that time started to run later than the date of the first overpayment because TP could not have detected on an earlier date that a mistake had been made. It ran from when TP could have reasonably discovered it.

• It followed that Mr T did not have a limitation defence in respect of any part of the overpayment that he received from the Scheme because TP made its claim within time.

• The most common defence against recovery of an overpayment is referred to as “change of position”. That is, the recipient has changed their position such that it would be unjust to require them to repay the overpayment; either in whole or in part. Change of position is a defence to a claim in unjust enrichment. To make out a change of position defence certain conditions must be satisfied. The recipient must be able to show on the balance of probabilities that:

o their circumstances have changed detrimentally;

o the change of circumstances was caused by receipt of the overpayment; and

o they are not disqualified from relying on the defence.

• A change of position defence is not available to an individual who did not act in ‘good faith’ when changing their position.

• To meet the good faith test, Mr T must not have had actual knowledge of the overpayment. The good faith test would not be considered as having been met if the recipient of the overpaid benefits had doubts over their entitlement to those benefits. In other words, the recipient was aware that they might not be entitled to the pension payments, but then failed to make enquiries of the scheme before spending the money (this is often referred to as having “Nelsonian knowledge”). This includes situations where someone might suspect that there was something amiss and could have taken simple steps to ascertain the correct position but did not do so. In other words, the recipient of an overpayment cannot turn a blind eye. ‘Bad faith’ does not, however, include acting negligently; so, a careless recipient might still be able to invoke a change of position defence. 7 CAS-42089-N4Y0 • In Mr T’s case, the information about the conditions for payment of the widower’s pension was included in the Leaflet, which TP said was sent to him in December 2005, shortly after the death of his wife. The Adjudicator took the view that individuals might not read all of the information they were sent at what is usually a very stressful time. So, in the Adjudicator’s opinion, Mr T may not have remembered what was in the Leaflet at the time he remarried in 2008.

• Turning now to consider the Newsletters. Having reviewed the contents, the Adjudicator noted that they included wording to alert the reader to a number of changes that TP needed to be made aware of. The Newsletters required individuals in receipt of a spouse’s pension to notify TP when they remarried.

• Mr T said that he did not receive the Newsletters from TP because it did not action his change of address notifications in June 2007 and July 2014. TP advised that the only change of address notification that it received from Mr T was in November 2016. No evidence exists of the earlier change of address notifications that Mr T says he sent to TP. So, it was not possible for the Adjudicator to say with any certainty whether TP had been notified of his addresses in Kent.

• However, the Adjudicator noted that TP held the correct address for Mr T before he moved to Kent in June 2007. Prior to this date, Mr T was living in the Isle of Wight and this was the address that TP held for him.

• The first instalment of Mr T’s long-term pension was paid to him by TP on 28 March 2006. So, he would have been sent a P60 for the 2005/06 tax year in April or May 2006. Furthermore, TP said that the print file for Mr T’s 2006/07 P60 was produced on 19 April 2007, and his P60 was issued shortly after this date.

• In the Adjudicator’s opinion, Mr T’s P60s for the 2005/06 and 2006/07 tax years, together with a copy of the Newsletter for those years, were sent to the address where he was residing at the time. The Adjudicator’s view was that Mr T received at least two of the Newsletters; and on the balance of probabilities, he read one or more of them.

• The Adjudicator acknowledged that the Newsletters did not detail the consequences of Mr T’s remarriage on his pension, but they made it clear that this was something which Mr T should notify TP about. This would have put him on notice that his widower’s pension might be affected by his remarriage. At that point he should have taken steps to clarify the position with TP. The fact that he did not do so means that the good faith test was not satisfied, and a change of position defence was not available to Mr T.

• There are three requirements that need to be satisfied in order to establish estoppel by representation; namely:

8 CAS-42089-N4Y0 o a clear representation or promise made by the defendant upon which it is reasonably foreseeable that the claimant will act;

o an act on the part of the claimant which was reasonably taken in reliance on the representation or promise; and

o after the act has been taken, the claimant must be able to show that he/she will suffer detriment if the defendant is not held to the representation or promise.

• The Adjudicator did not consider that Mr T’s reliance on the continued payment of his pension was reasonable in the circumstances. Mr T had the requisite information to know that a review of his pension may be required when he remarried. Also, that there might have been an error when his pension continued to be paid after he had remarried.

• Similarly, because of the knowledge Mr T had, the Adjudicator said that it cannot be argued that there was a common assumption between the parties that Mr T had an entitlement to the pension he was receiving in error. This is necessary to establish a defence of estoppel by convention. Consequently, the Adjudicator did not consider that Mr T had a valid estoppel defence.

• The Adjudicator was not able to identify the necessary elements for a contract to exist. That is, offer, acceptance, consideration and an intention to enter into legal relations. In particular, the Adjudicator could not see that there was any intention on the part of TP to enter into a legal relationship with Mr T beyond any entitlement that it considered he may have under the Regulations.

• Although Mr T did not have any defences available to the recovery of the overpayment, the fact that TP did not cease his pension in a timely manner was nonetheless very unfortunate.

• Paying a pension beyond the date it is due to cease would be considered maladministration if the scheme is responsible for the error. The Adjudicator noted that TP was unaware that Mr T had remarried until he notified it in November 2016. Consequently, the overpayment was not as a result of maladministration on the part of TP.

• Mr T had highlighted that the DfE’s letter of 12 April 2019, erroneously referred to a child’s pension being paid to his daughter. In the Adjudicator’s view, this was a genuine error and would not have caused Mr T significant distress.

• Mr T maintained that TP applied undue pressure when asking him to make the repayment and that a number of invoices were sent to him which did not include

9 CAS-42089-N4Y0 extended repayment options. The Adjudicator acknowledged that Mr T would likely have been upset that TP was asking him to repay the overpayment of his pension. However, in the Adjudicator’s view, it was reasonable for TP to have sought repayment in the way that it did as it had a duty to protect public money.

• In relation to offering extended payment options, the Adjudicator highlighted that TP’s letter of 14 December 2016 advised Mr T to contact its Finance Department if he would find it difficult to make the repayment. The letter was sent to Mr T’s address in New Zealand shortly after he notified TP that this was his new address.

• The Adjudicator said that it was unfortunate that there were periods when TP did not hold a correct address for Mr T, which would likely have negatively impacted the effectiveness of its communications. However, there was no documentary evidence that Mr T notified TP of all of his changes of address. So, the Adjudicator could not hold TP responsible in this respect.

• Mr T said that the cessation of his pension was a breach of the Human Rights Act 1998. The Adjudicator took the view that this was not the case. TP was required to pay Mr T benefits in accordance with the Regulations and it sought recovery of the overpayment, in line with the MPM guidance. The actions on the part of TP did not prevent Mr T from remarrying, affect his right to family life or the protection of his property. In the Adjudicator’s view, the money TP was recovering did not belong to Mr T but represented public funds, which TP, as the administrators of the Scheme, had a duty to protect.

10 CAS-42089-N4Y0

• Their main assets consist of the family home, a car, and £5,000 in savings. Their home is held in his wife’s name.

11 CAS-42089-N4Y0 • They have total debts amounting to £16,744.

• Their joint monthly income amounts to £5,513. Their total monthly expenditure on essential items amounts to £3,873; this includes £750 on credit cards. The excess of income over expenditure amounts to £1,640.

• The essential monthly expenditure does not include visits to the doctor and dentist, vet's bills, the cost of servicing the car, house maintenance, haircuts, clothing, travel, gifts and social outings.

• His family would suffer financial hardship if he is required to make monthly repayments of £305.90 to the Scheme. He is also concerned about his wife’s ability to make the repayments should he pre-decease her.

• Following TP’s attempt to trace Mr T’s address, its Finance Department sent a letter to Mr T’s second address in Kent on 4 September 2018 by recorded delivery. In the letter, the Finance Department advised that it had received no response to several reminders that had been sent to the New Zealand address that TP held on its records. The letter was returned to the Finance Department on 17 September 2018, marked “return to sender”.

• During the period between 23 March 2017 and 1 August 2018, TP did not hold an email address or alternative telephone number for Mr T. TP prevented any further overpayment from accruing by stopping his pension on 21 November 2016. However, TP acknowledges that there was a delay in issuing Mr T with a further reminder after its letter of 3 May 2017 was returned.

I have considered the additional points raised by Mr T and TP; however, they do not change the outcome. I agree with the Adjudicator’s Opinion.

Ombudsman’s decision Mr T’s widower’s pension should have ceased when he remarried; this is not in dispute. Mr T’s complaint concerns TP’s decision to seek recovery of the overpayment which has arisen because his pension continued in payment. Unlike other overpayment cases, as his pension has now ceased, Mr T has no future pension from which TP might seek to recover the overpayment from by way of set-off.

As explained by the Adjudicator, the most common defence against recovery of an overpayment on grounds that Mr T has been unjustly enriched by virtue of money paid by mistake is referred to as “change of position”. For this defence to be open to Mr T he would need to meet the good faith test.

I wish to make it clear that ‘bad faith’ is not synonymous with dishonesty. It can simply mean that, if the recipient knew or had grounds for believing that the payment had been made in error, but could not be sure, the defence would not be open to them. In 12 CAS-42089-N4Y0 making a judgment as to Mr T’s knowledge of the circumstances in which his pension should cease, it is not a question of deciding what he should have known; rather, it is a question of what he did know.

The burden of proof is on Mr T to show that he acted in good faith in continuing to accept the widower’s pension after his remarriage. It is for him to demonstrate, on the balance of probabilities, that he was unaware that his pension should have ceased on his remarriage or that he needed to check the position with TP. I recognise that only Mr T can know what his knowledge of the conditions for payment of his pension were at the relevant time.

Mr T is providing evidence of what he read (or did not read) several years ago in circumstances that he may not now recall, given the passage of time. The evidence supports the view that he was sent 11 Newsletters during the period from 2006 to 2016, but that not all of these were sent to his then current address. TP’s standard procedure was to issue the Newsletters on an annual basis with the members’ P60s. I have to come to a decision, on the balance of probabilities, whether Mr T had actual, or “Nelsonian Knowledge,” that payments were being made in error but failed to take reasonable steps to ascertain the position. In other words, he had doubts concerning his entitlement to those payments.

It is in essence a judgement call based on the available evidence; in most cases concerning an overpayment of pension benefits it is a finely balanced judgement.

The information about the conditions for payment of a widower’s pension was contained in the Leaflet, which was included in the bereavement pack that TP maintains was sent to Mr T in December 2005. Mr T received a copy of Form 22, that TP said was included in the bereavement pack. However, I also note Mr T’s point that there is no corroborating evidence that the bereavement pack was sent to him. I also note that Mr T said he may possibly have received Form 22 from a colleague who was helping him arrange payment of his pension. On reviewing the evidence, I accept that there is a possibility that Mr T may not have read a copy of the Leaflet at the time.

Turning now to consider the Newsletters. Recipients of a widower’s pension from the Scheme were asked to notify TP in the event of their remarriage. I note that TP did not hold a correct current address for Mr T for part of the period during which he was sent the Newsletters. On reviewing the evidence, I am satisfied that, on the balance of probabilities, Mr T would have received at least two of the Newsletters. I say this because TP held a record of Mr T’s address in the Isle of Wight which was correct until he moved to Kent in June 2007. So, the Newsletters that TP issued at the start of the 2006/07 and 2007/08 tax years would have been addressed correctly.

I acknowledge that, when asked about his marital status during the telephone call with TP on 30 November 2016, Mr T disclosed that he had remarried. I am sure that had he been asked to divulge this information in 2008, when he re-married, he would have done so with the same measure of honesty.

13 CAS-42089-N4Y0 That said, I do not find it credible that Mr T disposed of the Newsletters relating to his pension without reading any of them. While I acknowledge that the Newsletters did not go into detail concerning the possible consequences of his remarriage on his entitlement to the widower’s pension, they made it sufficiently clear that TP should be notified of any change in his marital status. On the balance of probabilities, I find that Mr T did read one or more of the Newsletters. This would have put him on notice that his widower’s pension might be affected by his remarriage. At that point in time, he should have taken steps to clarify the position with TP. The fact that he did not do so means that a change of position defence is not now available to him.

Similarly, the other defences against the recovery of the overpayment do not apply in this case for the reasons explained by the Adjudicator. In particular, if Mr T was told that he should contact TP if he remarried (but did not do so after having read the annual Newsletter) it was then not reasonable for him to rely on any representation or implied representation from payslips or otherwise that he was entitled to the money in relation to any estoppel defence.

I note that Mr T has made reference to an earlier Determination [PO-23848]. Previous Determinations are always very fact specific, and the courts have confirmed that I have to determine all cases involving a dispute of law or maladministration (involving an infringement of a legal right) in accordance with established legal principles. In coming to my conclusions on Mr T’s complaint, I have considered the evidence presented to me and have determined the complaint in line with established legal principles.

Mr T submits that it was reasonable for him to conclude that TP had agreed to waive the overpayment. I do not agree that the lack of communication from TP over the period in question could be considered as confirmation that it was no longer seeking repayment of the overpayment. If Mr T considered that this may have been the case, he should have contacted TP to confirm the position. I also note that, prior to the start of this period, TP sent letters to Mr T on 28 December 2016 and 23 March 2017 which he acknowledges he received but did not respond to. In the circumstances, it was not unreasonable for TP to consider that the contact details it held for Mr T were not correct.

The MPM guidance states that hardship is one of the defences which may be claimed against the recovery of an overpayment. Annex 4.11: overpayments, states:

“…Public sector organisations may waive recovery of overpayments where it is demonstrated that recovery would cause hardship. But hardship should not be confused with inconvenience. Where the recipient has no entitlement, repayment does not in itself amount to hardship, especially if the overpayment was discovered quickly. Acceptable pleas of hardship should be supported by reasonable evidence that the recovery action proposed by the paying organisation would be detrimental to the welfare of the debtor or the debtor’s family. Hardship is not necessarily limited to financial hardship; public sector organisations may waive recovery of overpayments where recovery would be 14 CAS-42089-N4Y0 detrimental to the mental welfare of the debtor or the debtor’s family. Again, such hardship must be demonstrated by evidence.”

• Their main assets consist of the family home, a car, and £5,000 in savings. Their home is held in his wife’s name.

• They have total debts amounting to £16,744.

15 CAS-42089-N4Y0

Determination and Directions

I determine that the overpayment of £31,507.53 (net) is recoverable and Mr T does not have any legal defences to recovery.

I direct it is open to TP to seek recovery of the overpayment from Mr T on grounds of unjust enrichment at the rate of £305.90 per calendar month.

I direct that, if at a future date Mr T can demonstrate to the satisfaction of TP that his financial circumstances have deteriorated (from those described above) and recovery of the overpayment at that rate will cause hardship, TP should consider whether it is still appropriate to recover the overpayment at that rate.

I direct that, if the full amount is not recovered from Mr T at the date of death, TP should consider whether to seek recovery of any outstanding amount from Mr T’s estate or whether this amount should be written off in accordance with the MPM guidelines on grounds of hardship or otherwise.

Dominic Harris

Pensions Ombudsman 2 January 2024

16 CAS-42089-N4Y0 Appendix Extract from the Teachers’ Pensions Regulations 1997 as amended

PART E BENEFITS

Commencement and duration of long-term family pensions “E30. (1) A pension under regulation E26 payable to a surviving spouse, surviving civil partner, surviving nominated partner or a nominated beneficiary (“an adult pension”) is to be paid -

(a) from the day on which any short-term pension that became so payable under regulation E24 ceases to be payable, or

(b) if no short-term pension became payable, from the day after that of the death.

(2) Subject to paragraph (3), an adult pension is payable for life.

(3) Unless the Secretary of State determines otherwise in the particular case, an adult pension – […]

(b) ceases to be payable when the person to whom it was payable marries, forms a civil partnership or begins to live with someone as if they were husband and wife or as if they were civil partners.

(3A) But paragraph (3) does not apply to any pension payable following the death of a person who was in pensionable employment after 31st December 2006 […]”

Full determination