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Articles Pensions Law 23rd Jan 2024

Additional step to recoup overpayments of pension

Following the Court of Appeal’s judgment in CMG Pension Trustees v CGI IT UK Ltd and Another [2023] EWCA Civ 1258, the Pensions Ombudsman has issued a helpful factsheet to explain what pension scheme trustees (or managers) need to do to be able to recoup benefit overpayments from future instalments of pension.

When trustees discover an overpayment has been made, they need to consider how the money can be recovered. Recoupment is only one of the options which could include:

  • Reaching agreement with the member for them to repay the amount;
  • Reaching agreement with the member to reduce future benefit payments until the overpayment has been recovered;
  • Explaining the overpayment to the member and how the trustees propose to recover it from future benefit payments without obtaining the member’s express agreement;
  • Seeking compensation from the pension scheme’s administrators or trustee advisers if they are at fault (or the previous administrators or advisers);
  • Requesting indemnification from the pension scheme’s employer if the rules provide for that;
  • Making a claim against the member.

The starting point will be to try and reach agreement with the member but if that cannot be achieved, other options need to be explored some of which may be unpalatable to the trustees and pose reputational risks.

At first sight, the “self-help” remedy of recouping the overpayment from future instalments of pension seems attractive. The trustees are in control of what money is paid out so they should not be frustrated by an uncooperative member who simply does not want to repay the money. The costs are likely to be lower than other options. There is no statutory limitation period.

It is not all good news for trustees. Section 91 of the Pensions Act 1995 may make recoupment impossible without the member’s agreement or a court order.

Section 91 provides (among other things) that a set-off cannot be exercised against an entitlement to pension or right to a future pension under an occupational pension scheme. “Pension” is defined to include any benefit under the scheme and any part of a pension and any payment by way of pension.

Exceptions are listed in section 91(5). With effect from 6 April 2005, section 91(5)(f) was added to provide an exception for:

a charge or lien on, or set-off against, the person in question’s entitlement, or right, for the purpose of discharging some monetary obligation due from the person in question to the scheme arising out of a payment made in error in respect of the pension”.

Section 91(5) is however subject to section 91(6) and therein lies a problem for trustees:

where there is a dispute as to its amount, the charge, lien or set-off must not be exercised unless the obligation in question has become enforceable under an order of a competent court

If section 91 is engaged (it was accepted in the CMG case that it was) and the member disputes the trustees’ right to recover the overpayment from future instalments of their pension, the trustees will not be able to proceed without a court order. That dispute could be as to the amount of the overpayment, the amount the member should be required to repay or the period over which the overpayment will be recovered.

The Pensions Ombudsman appealed the decision of the High Court in the CMG case that he is not a competent court for the purposes of section 91(6) of the Pensions Act 1995. The Court of Appeal dismissed the appeal. Hence, trustees will need to take the additional step of obtaining an order from a County Court to enforce the Pensions Ombudsman’s determination of a dispute about recoupment. This is simply a procedural step. The County Court would not reconsider the dispute.

The Pensions Ombudsman’s factsheet provides a clear explanation of the process which will be followed for such disputes. It notes that the DWP has said it intends to introduce legislation which will allow the Pensions Ombudsman to bring an overpayment dispute to an end without the need for a court order. That would be helpful for trustees whilst maintaining the protection which the legislation gives to members. It would not resolve all the issues which trustees face in relation to such disputes. Trustees themselves have no power to refer disputes to the Pensions Ombudsman. That potentially puts a member who disputes the right of recovery but does nothing more in a better position than members who co-operate with the trustees or takes the trouble to refer the matter to the Pensions Ombudsman.


If you have any questions regarding anything covered in this article, please get in contact with Maxwell Ballad.


The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.

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