Pensions Ombudsman orders member to return overpayment of benefits

Friday, November 23, 2012

In Fitzgerald, the Deputy Pensions Ombudsman has held that a member must repay over £70,000 of overpayments he received as a result of his failure to submit annual certificates of re-employment to the scheme administrator.

Mr Fitzgerald started receiving an early retirement pension on redundancy from the Teachers' Pension Scheme in 1997.  The pension application form he had completed stated that "subsequent teaching employment may result in the reduction or suspension of your pension". It also contained a declaration that he would return certificates of re-employment every year.  He also got a leaflet explaining that his combined pension and the salary he later received from teaching could not exceed his teacher's salary had he not retired and that if he did not notify Teachers' Pensions (TP), the scheme administrator, of future employment, he would have to repay any overpaid pension.

Mr Fitzgerald took up employment as a teacher for five separate periods from 1998 to 2010. He contacted TP's pension services section in relation to his re-employment many times but submitted a certificate of re-employment on only one occasion, in 1999. He stopped receiving blank re-employment certificates from TP after 2001.
In 2008, TP, having changed their administration process, realised Mr Fitzgerald's benefits should have been significantly abated. Mr Fitzgerald asserted that he should not have to return the overpayments as he had informed TP of his re-employment.

The Ombudsman held that TP's administration of service records after retirement had been "lax" up until they changed their system in 2008. However, this was not the main reason why Mr Fitzgerald's benefits were not abated. Rather it was Mr Fitzgerald's failure to return certificates of re-employment annually. The fact he returned a certificate in 1999 showed he was aware of his obligation to do so. Although TP did not send certificates for completion after 2001, this did not mean Mr Fitzgerald could not have actively chased TP.

The Ombudsman directed TP to agree a repayment arrangement with Mr Fitzgerald that would not cause him "undue hardship" – a 10-year period was agreed – and pay him £200 for the distress and inconvenience he had endured.

The decision upholds the legal position that members cannot retain overpayment of pension by a scheme unless they can show a change of position. However, the determination demonstrates that if the matter goes to the Ombudsman, the Ombudsman may direct repayment terms for the member that are rather generous.

Thank you for all your assistance in helping to meet the deadline for the capital reduction exercise – your professionalism and friendly approach was appreciated.

Finance Director - Leading UK Company

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