Summary
Trustees are expected to take on greater responsibility, be more pro-active and take initiative on being a good trustee and fulfilling their fiduciary role, now more than ever. Alongside this increase in responsibility and accountability set out in the legislation and by The Pensions Regulator, the National Health Service (the “NHS“) is also under increasing financial strain, and many people are disgruntled with the impact of financial cuts and where they foresee the NHS’s future. It was, therefore, not the most welcomed news when the health minister, Philip Dunne, revealed last year that the National Health Service Pension Scheme (the “NHS pension scheme“) made overpayments amounting to a total of £92 million to over 123,000 retired NHS workers from 2012-2017.
Mr Dunne revealed the amount of overpayments made since 2012
Mr Dunne revealed in a written parliamentary response to a question posed from an opposition (Labour) MP that administrative errors were not to blame for the majority of the overpayments, and that only 72 of all of the overpayments were due to clerical errors, which, amounted to £824,000 of the total overpayments. Mr Dunne stated that: “In a majority of cases an overpayment arises from changes in scheme member circumstances after the initial pension has been awarded. These are generally beyond the control of the scheme administrator, with subsequent revision to pension benefits often resulting in an overpayment.” These types of overpayments usually occur in instances when the pension scheme trustees are not immediately notified of the death of a member who is in receipt of their pension; or when a member returns to work after retiring and their salary is not adjusted due to them also receiving their retirement income. Regardless, £92 million seems to be an extremely large and costly mistake to make.
When questioned about how much of the overpayments due to clerical error had been recovered or written-off, Mr Dunne replied that the NHS, as a public body, is required to act in accordance with the document Managing Public Money, issued by the Treasury, when considering writing-off overpayments. This document states that: “In principle public sector organisations should always pursue recovery of overpayments, irrespective of how they came to be made. In practice, however, there will be both practical and legal limits to how cases should be handled. So each case should be dealt with on its merits“. Factors taken into account could include the complexity of the overpayment; when it occurred; the amount overpaid; and any potential hardship suffered. Mr Dunne did not provide great detail and it is not known how much of the overpayments had been recovered of written-off.
Mr Dunne stated that the NHS Business Service Authority is attempting to address a number of overpayments made every year: “[It] is improving its quality assurance processes and investing in additional staff training… Progress in their quality assurance process improvements is overseen by the NHS Pension Board… and by the Pensions Regulator through its annual survey of pension scheme governance.”
Recent Pensions Ombudsman determinations relating to the NHS
Outcomes to recent Pensions Ombudsman cases relating to the NHS Scheme have varied. In the case of Mrs S (PO-10270), overpayments given to Mrs S, a member of the NHS Injury Benefit Scheme, were not recoverable as Mrs S had been wrongly reassured that the benefits provided by the NHS were correct. In this case, the Pensions Ombudsman held that Mrs S had spent the money in good faith and she had relied on the NHS’ reassurance that the payments were correct. In a contrasting NHS Pensions Ombudsman case (Mrs R (PO-9632), an overpayment was recoverable because gifts to children did not demonstrate a change of position. In the second of these determinations, Mrs R, a member of the NHS Pension Scheme, was provided with an estimate of benefits which stated that her lump sum benefits amounted to £78.090. Mrs R was then later provided with another benefit statement showing a revised lump sum figure of £124,902. Despite: (i) Mrs R querying this and being reassured that the new sum was correct; (ii) Mrs R making payments totalling over £30,000 to her children as a wedding gift and to contribute to a property purchase; and (iii) the Pensions Ombudsman stating that it was reasonable for Mrs R to have relied on the benefit statement, it was nevertheless determined that the NHS was entitled to recover the overpayment. It was found that the payments made to Mrs R’s children, did not amount to a “change of position”, and Mrs R was only offered £500 for the significant distress and inconvenience caused by the error.
Wedlake Bell Comment
There is no definite trend as to how trustees and the Pensions Ombudsman treat schemes other than the NHS Pension Scheme. However, it is clear that trustees are under a duty to take steps to recover over payments and follow the rules of the scheme. Trustees should also be reminded that care needs to be taken in their approach to contacting the member affected as it is a sensitive topic, and an unreasonable and insensitive attempt to recover payment could result in maladministration. In addition, the longer the period of the overpayment, the more likely there is a chance that the member would have changed their position and relied on the overpayment to their detriment. This would be an argument for the overpayment not being recoverable.
It is inevitable that some mistakes and overpayments will continue to occur for reasons of clerical error and due to factors that those running the scheme are unable to control (e.g. not being updated by members). However, this does not provide much comfort, especially for those who are relying on a service that is constantly battling with saving costs and having cuts being made to it. Add the words that the scheme has “almost overpaid £100 million”, then this adds fuel to the fire. This case acts as a reminder of how costs in a final salary pension scheme can really rack up.