The purpose of this document is to set out the Union’s position in relation to overpayment of pension cases.

BACKGROUND

The Teachers’ Pension Scheme includes provision at regulation E14 of the Teachers’ Pension Regulations 1997 for a retired teacher’s pension to be abated if they are re-employed in teaching and their combined salary and pension is greater than their salary would have been if they had not retired. This is calculated by reference to an indexed linked salary of reference. Regulation E14(5) states that “the annual rate of the pension is reduced” if the retired teacher is so re-employed.

Regulation H3(2) requires employers and persons to whom regulation E14 applies (or has applied) to give the Secretary of State “such information and to produce such documents as he may reasonably require for” the purposes of his functions under the Regulations.

Further, regulation H3(4) provides (and has provided since 1 November 1998) as follows:

“Without prejudice to paragraph (2), a person who has become entitled to payment of a teacher’s pension and who takes up employment such as is described in regulation E14(1) shall –

(a) within 14 days of taking up such employment notify the Secretary of State giving details of the salary in the employment; and

(b) within 14 days of any change in salary notify the Secretary of State.”

The information provided to teachers was different pre and post 2006. Until 2006, teachers were given leaflet 192 (as amended) at retirement:

a. This stated in the introduction “TO PREVENT OVERPAYMENT OF BENEFIT YOU SHOULD NOTIFY THE APPROPRIATE PAYING AUTHORITY IMMEDIATELY YOU UNDERTAKE RE-EMPLOYMENT”;

b. At paragraph 6.1 it stated “If you intend to take up an appointment after you retire, or if you have already done so, you should inform Paymaster General’s Office at once, even if you think the re-employment is not of a type likely to affect your pension. You should let Paymaster General’s Office have as much information about the post as you can and the information they require is shown in the Appendix. On obtaining a post you should complete and detach TP64 (substitute) and send it to PGO at the address in Part 1 without delay”;

c. Paragraph 6.3 then stated that “If you become re-employed but do not advise either the TPA or Paymaster General’s Office then your pension will continue to be paid in full. When notification of your re-employment is received from you or your employer, from HM Inspector of Taxes or from DSS, then Paymaster General’s Office will determine what effect, if any, the re-employment will have on your pension and action will be taken to recover from you any overpayment of pension which may have occurred”;

d. The accompanying form asked for details of re-employment for that particular tax year. It stated at the bottom that “It is vital that the re-employing authority inform Teachers’ Pensions of re-employment and termination of employment. …Any overpayment of pension will have to be repaid immediately”; and

e. The Awards letter, which is a letter containing the details of the retired teacher’s pension and lump sum, reiterated the requirement to notify Teachers’ Pensions of re-employment.

f. Since 2006, teachers have received a notice from their employer, attached to the first payslip following re-employment. This informs them of the effects of re-employment on their teachers’ pensions and of the need to complete a Certificate of Re-employment, which is enclosed with the payslip.

g. Furthermore, since April 2008 a blank certificate of re-employment has been sent to retired members where teaching service is shown on their record (as supplied in the employer’s annual returns).

A number of claims have arisen as a result of retired teachers allegedly failing to provide notification of re-employment following retirement. In recent months Teachers’ Pensions has sought to recover substantial sums from individual members for overpayments accrued over a number of years and, in one case, over a nine year period.

THE LEGAL POSITION – A SUMMARY

·  TP is likely to claim that the overpayments were made under a mistake of fact and/or as a result of the retired teacher’s wrongdoing;

·  Where a claim is issued within six years of the final overpayment, the retired teacher will not have a limitation defence to the claim. However, where the claim is issued more than six years after the final overpayment, the retired teacher is likely to have a limitation defence;

·  The retired teacher may be able to rely on a defence of change of position;

·  Unless there is evidence to suggest that TP could have discovered the mistake sooner with reasonable diligence, TP is likely to be entitled to recover all overpayments if successful, not just those made in the six years prior to the date of issuing the claim.

THE NUT’S POSITION

As with other requests for legal assistance, preliminary inquiries will need to be made by the regional and Wales offices in order to test the member’s veracity and also the prospects of success of each claim. The nature of these preliminary inquiries has been set out below in the FAQs section of this document.

Unless there are exceptional circumstances which suggest that TP is acting unreasonably, the Union will not be defending members against claims for restitution (i.e. claims by TP to recover the overpayments). Caseworkers may instead offer to negotiate a repayment plan with TP on the members’ behalf.

FAQs FOR CASEWORKERS

What information should I ask members to provide?

In order to decide whether TP is acting reasonably or unreasonably, you will need to see the documents which the member received from TP and his/her employer at retirement and subsequently. For example, if the member received correspondence (including leaflets) from TP explaining the effects of re-employment on pensions and enclosing a blank Certificate of Re-employment for completion, and the member failed to complete it without good excuse, TP is likely to be acting reasonably in seeking to recover the alleged overpayments.

How do I find out whether TP acted with ‘reasonable diligence’ to discover its mistake?

Whether or not TP acted with reasonable diligence to discover its mistake is relevant only where the first of the alleged overpayments was made more than six years ago. The reason for asking whether TP acted with reasonable diligence is to determine whether TP can recover all overpayments or only those which were made six years prior to the claim being issued.

Most local authorities (and presumably most governing body employers) complete an online TR6 form to notify TP of the appointment of teachers in receipt of pension. Re-employed teachers in receipt of pension are also included on annual returns to TP. The annual return would normally contain the rate of the member’s salary, so that it would be possible from this and the TR6 form for TP to determine whether the member was overpaid pension, even in the absence of a completed Certificate of Re-employment. Unfortunately, TP keeps TR6 forms for only three years, but local authorities may keep theirs (and evidence of annual returns) for a longer period. Therefore, it may be of benefit to persuade members to seek copies from their employers.

What is the defence of change of position?

Change of position, which has developed from the equitable doctrine of estoppel, enables the recipient of an overpayment to claim that, in reliance on the overpayment made, she/he changed her/his position so that it would now be unfair to have to repay the money, either in full or in part. Case law has established certain principles: the recipient must have been unaware that overpayments had been made; there must be a causal link between the change of position and receipt of the overpayment (i.e. but for the overpayment the expenditure would not have been incurred); and the action taken must be irreversible – the end result being that it would be inequitable to seek full recovery (Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548).

The Courts have held (National Westminster Bank plc v Somer International UK Limited [2002] 1 ALL ER 198) that the change of position defence is not limited to cases where the money has been spent on specific identifiable items of expenditure, and that it may be right for the court not to apply too demanding a standard of proof when an honest defendant says she/he has spent an overpayment on improving her/his lifestyle but cannot produce detailed accounting. Spending money on food and drink, holidays, leisure and gifts can constitute change of position although, apparently, expenditure on mortgage payments and ordinary household bills which would have been incurred in any event does not. In Scottish Equitable plc v Derby [2001] EWCA Civ 369, the Court of Appeal held that £9,000 spent on modest but unspecified lifestyle improvements was not recoverable.

When is a member likely to be able to rely on a defence of change of position?

The availability of the defence will depend on the facts of each case, in particular looking at what information each retired teacher received, the reasons why they did not provide notification of re-employment, whether they suspected for any reason that they had been overpaid and what steps they had taken having received the money. In general:

-  In any case where the retired teacher intentionally failed to provide notification of re-employment in order to fraudulently receive a full pension, they will not be able to rely on the defence of change of position;

-  It will be difficult for retired teachers who have entirely failed to provide notification of re-employment to rely on the defence, because the documents (both pre and post 2006) are very clear that notification must take place on re-employment. However, some members who entirely failed to provide notification may have exceptional reasons for this, for example, if they did not receive the information or were given misleading information about the obligation to notify;

-  It will be much easier for members who initially notified TP of re-employment to rely on the defence, because there is nothing in the information provided to retired teachers to suggest that they have to make an annual notification of re-employment or that they have to notify each time their salary changes. If a teacher has provided notification at the start of re-employment, it is likely that a court would find that they genuinely and reasonably believed that they were in receipt of the correct pension; and

-  In either case, the retired member will need to provide evidence of their change of position in reliance on their belief that they were in receipt of the correct pension. This may include actions taken in reliance that the pension would continue at that level in future. This could include decisions to continue in re-employment, if there is a causal link between that decision and the level of pension received, or include loans that had been taken out and other financial commitments.