Change of position – is it a Dunne deal?

The UK Pensions Ombudsman has woven another strand into the already tangled web of how trustees should deal with administrative overpayments of pension to members.  A recent determination has highlighted how carefully trustees must approach the process of analysing whether it is appropriate to reclaim the overpayments. In the case in question, Mr Dunne received a pension overpayment of £20 a month for a period of 6 years and had subsumed the overpayment into his monthly income adopting a slightly higher standard of living than he would otherwise have done had he not received the overpaid monies. Mr Dunne raised the defence that he had changed  his financial position and should not have to re-pay the overpayments.

In analysing the complaint, the Pensions Ombudsman requested Mr Dunne to provide evidence of his living standards. Mr Dunne confirmed that he and his wife had bought a new house based on their finances at the time and he confirmed that had it not been for the overpayment they would have moved to a cheaper property.  The Ombudsman rejected Mr Dunne’s assertion that he would have bought a cheaper house had it not been for the overpayment of pension, but did determine that looking at the overall finances of Mr and Mrs Dunne and their limited financial resources, the overpayment had been subsumed into their general day to day living costs.  The couple’s usual joint outgoings were approximately £1,223 per month and their monthly joint income was £1,684 per month so that without this money there would be a slight deterioration in their standard of living. The Dunnes were therefore able to rely on the change of position defence and did not have to re-pay the overpayment.

Change of position is a common defence that is used by recipients of pension overpayments, usually to argue that it would be unfair for the trustees to require them to pay the overpayment back. It is a general defence to claims for restitution (such as an overpayment) where a recipient has changed their position so that it would be inequitable to require them to repay the money paid to them in error.  While the Ombudsman upheld the member’s change of position defence it did determine that the correct level of pension should be paid going forward.  The case highlights how difficult it can be to recover overpayments from members and how a member’s personal circumstances can have a significant impact on whether the money (however small an amount) can be recovered.