RegulationJul 17 2014

How to correct pay mistakes

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ByDanny Tsang

This month, I look at a determination by the deputy pensions ombudsman.

The applicant David Clift belonged to the Industry-wide Coal Scheme Superannuation Scheme which was established on 29 December 1994, and which he was eligible to join by virtue of having previously been a member of the British Coal Staff Superannuation Scheme (BCSSS).

In April 1999, he was granted ill health early retirement under the scheme. This included a tax free lump sum of £8,478.47.

Two months later, the trustees realised that, due to the use of an incorrect date when calculating Mr Clift’s pensionable salary for overtime, his benefits had been overpaid. The trustees recovered the monthly sums but did not attempt to recoup the £3,876 lump sum part of the overpayment because they accepted that Mr Clift’s decision to purchase an £11,220 conservatory on 4 May 1999 had relied upon it.

In August 2011, the trustees discovered another overpayment dating back to April 1999 which had been paid to Mr Clift because his overtime while a BCSSS member had been included in his pension calculation.

On 17 August 2011, the trustees wrote to Mr Cliff explaining how the miscalculation had occurred and that it was only years after the BCSSS was closed that it was discovered that the use of BCSSS overtime in a number of calculations was not correct.

The trustees requested that Mr Clift committed to a 60-month repayment plan for the £587 lump sum and £2,209 pension overpayments. Mr Clift appealed unsuccessfully under the scheme’s internal dispute procedure, and during the unfair appeal process, the trustees began the repayment plan.

The “change of position” argument was accepted by the trustees after the first overpayment and should apply equally to the £587 lump sum in the second overpayment. Also, he had bought about £2,880 of take-away meals since 1999 which he would not have purchased had his pension not been overpaid.

Mr Clift also argued that the Limitation Act 1980 restricted the time after a pension payment had been made within which it could be recovered. The trustees were claiming 12 years of overpayments when they should have been limited to six years.

He also submitted that, as the amount was in dispute, the trustees had not complied with Section 91 of the Pensions Act 1995.

Mr Clift was represented by his son who confirmed that as well as his pension from the scheme, his father was also in receipt of a pension from the BCSSS amounting to £12,788.80 a year.