Nhs Pension Scheme · CAS-36965-P5M5

CAS-36965-P5M5

Ombudsman’s Determination Applicant Mr S

Scheme NHS Pension Scheme (the Scheme)

Respondent NHS Business Services Authority (NHS BSA)

Outcome

Complaint summary

Background information, including submissions from the parties and timeline of events

1 CAS-36965-P5M5 • Mrs S’ employment had been terminated on the grounds of capability due to ill health with immediate effect.

• Mr S had agreed to sign the ill-health retirement forms during the Meeting on Mrs S’ behalf.

• Mrs S was entitled to payment for 118 hours of outstanding annual leave.

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• The fact that Mrs S’ employment with the Trust had ended by reason of capability due to ill health was not in dispute.

• The reason for the change in the basis on which benefits were payable to Mr S was due to outstanding annual leave. This extended Mrs S’ last day of pensionable employment to 2 November 2018.

• As a result of this, Mrs S was still in pensionable employment when she died.

• Had NHS BSA known about Mrs S’ outstanding annual leave at the time, the submission for payment of benefits on the grounds of commuted ill-health would have been stopped.

• A death in service lump sum of approximately £65,000 was payable from the Scheme.

• An initial survivor pension (ISP) was payable to Mr S by the Trust for six months through the Trust’s payroll. This was estimated to be £2,654.31 per month.

• An ongoing survivor pension was payable to Mr S from the Scheme once the ISP had ceased. This was approximately £5,000 per annum.

• Children’s pensions were also payable.

• Benefits had been correctly calculated under the Scheme’s commuted ill-health retirement provisions.

• The relevant forms had been signed and copies of birth and marriage certificates had been prepared for submission.

• However, the PM’s letter of 3 December 2018 said that outstanding annual leave resulted in death in service benefits being payable following Mrs S’ death.

3 CAS-36965-P5M5 • The payment of the death in service lump sum, survivor’s pension and children’s pensions could only be made on receipt of the completed forms that had been provided to Mr S.

• These benefits could not be paid until the commuted ill-health retirement lump sum had been returned to it by Mr S.

• If the £104,179.69 lump sum was not returned within 30 days, the matter would be passed to the NHS Pensions Accounts Recoverable Team.

• It apologised for any confusion that may have been caused.

• An ill-health pension was payable from the day after the member’s last day of pensionable membership of the Scheme. Mrs S’ pension had initially been calculated as being payable from 12 October 2018.

• So, a lump sum was paid on 5 November 2018 of £104,179.69 in full commutation of Mrs S’ ill-health pension.

• Subsequently, it was discovered that the correct procedure had not been followed when signing the claim forms. This was due to the fact that Mr S was not permitted to sign the forms on Mrs S’ behalf. So, the ill-health retirement application was not valid.

• Even if the correct procedure had been followed, further information had been supplied to it, the effect of which annulled the commuted ill-health pension that had been paid.

• When calculating the last day of Mrs S’ pensionable employment, the Trust had not taken into account her unused annual leave entitlement. This was pensionable and extended her pensionable membership of the Scheme to 3 November 2018.

• As Mrs S died before that date, she did not qualify for ill-health retirement.

• It did not have direct access to the records held by NHS employers and was reliant on the information sent to it.

• It asked that Mr S return the £104,179.69 payment.

4 CAS-36965-P5M5 • Its stage one IDRP response had failed to provide the information that he had requested. This was in relation to extracts from the Regulations that governed the Scheme (the Regulations) and the calculation of Mrs S’ annual leave 1.

• Not all the relevant documentation had been considered and those involved interviewed.

• It could only pay benefits as set out in the Regulations.

• Its medical advisers had approved Mrs S’ application for ill-health early retirement on 11 October 2018. However, for ill-health retirement benefits to be paid, she would have had to have completed the necessary form, together with a second form if the benefits were to be commuted.

• During the Meeting, Mr S had been told that he could sign the forms on Mrs S’ behalf. This was not the case. The Trust first contacted it about the validity of both forms by email on 7 November 2018. This was after the commuted ill-health lump sum had been incorrectly paid.

• During a telephone call with the PM on 8 November 2018, Mrs S’ last day of service was initially confirmed as being 11 October 2018. Based on that information, death in deferment benefits would have been payable. The PM said that Mrs S had annual leave outstanding.

• It then had further communications with the Trust and a change to death in service benefits took place due to 118 hours of untaken annual leave extending Mrs S’ leaving date to 31 October 2018.

• It was required to seek recovery of the overpaid benefits. It proposed to offset the death in service lump sum due against the overpaid commuted ill-health lump sum. The death in service lump sum was estimated to be £70,000.

• Once it had the necessary information, it would write to Mr S to confirm the exact figures. Forms were enclosed for Mr S to complete to claim his dependant’s pension and the children’s pensions.

• To avoid a tax charge of up to 45% being levied, the lump sum death benefit had to be paid within two years of Mrs S’ death being notified to it.

1 NHS BSA had enclosed extracts from the Regulations with its IDRP decision and pointed Mr S to a website

where he could view the full Regulations. 5 CAS-36965-P5M5

• It would process the payment of the children’s pensions.

• The payment of Mr S’ dependant’s pension and the death lump sum would be put on hold until he confirmed his intentions in relation to the overpaid lump sum.

• It proposed to offset the repayment it was requesting by:

o the death in service lump sum; and

o with Mr S’ agreement, the arrears of dependant’s pension including the six months paid at the same rate as Mrs S’ pensionable pay.

• Alternatively, it could just use the death in service lump sum in which case the repayment would be higher.

• The estimated figures were a death in service lump sum of £71,131.92, arrears of the initial dependant’s pension of £15,925.86 gross and arrears of the continuing dependant’s pension of £6,489.24 gross.

• He had kept the disputed money in a separate bank account and none of this money had been spent.

• He was continuing to pay his mortgage which was causing financial hardship. The £104,179.69 could have lifted this burden, as it would have allowed him to pay off the mortgage.

• Due to this dispute, he had been caused stress and sleepless nights, and had needed support and medication from his doctor.

• He has had to deal with conflicting information from NHS BSA.

Adjudicator’s Opinion

• NHS BSA was initially seeking to recover the overpayment of £104,179.69. In November 2020, Mr S agreed to offset this amount by his lump sum death benefit

6 CAS-36965-P5M5 and the arrears of his dependant’s pension. As a result of this, an overpayment of £11,729.65 remained that NHS BSA was seeking to recover.

• NHS BSA was required to pay benefits from the Scheme in accordance with the Regulations and pensions law. An extract from the Regulations can be found in the Appendix.

• When NHS BSA initially processed Mrs S’ benefits it was on the basis that her last day of pensionable employment was 11 October 2018. This day was before her date of death and it believed that the necessary ill-health retirement forms had been signed. So, it made arrangements to make a payment of a lump sum of £104,179.69 in full commutation of her ill-health benefits.

• However, NHS BSA was subsequently notified that Mrs S had outstanding annual leave which extended her last day of pensionable employment to 2 November 2018. As Mrs S died before this date, it said that she was no longer entitled to receive the ill-health retirement benefits. It confirmed to Mr S that death in service benefits were payable, and it asked him to repay the £104,179.69.

• Part 3, chapter 3, paragraph 20 of the Regulations is relevant in this instance. It confirms that, if a payment is made in respect of untaken leave, pensionable service is treated as continuing for a period equal to the period of leave. So, in the Adjudicator’s view, NHS BSA was correct in recording a date of leaving pensionable employment for Mrs S of 2 November 2018.

• Furthermore, this date was after Mrs S’ date of death. So, in the Adjudicator’s opinion, NHS BSA was correct in identifying that death in service benefits were applicable as opposed to the ill-health retirement benefits that had already been paid.

• The Adjudicator noted that concerns were raised in relation to the validity of the ill- health retirement forms that had been signed on Mrs S’ behalf by Mr S. The Adjudicator did not consider this as, in his view, Mrs S was not entitled to these benefits for the reason stated above. So, the validity of the forms had no relevance to the outcome of this case.

• In the Adjudicator’s opinion, on the basis that NHS BSA was correct to say that death in service benefits were payable, an overpayment had occurred.

• Before considering whether Mr S had any defences available to the recovery of the overpaid funds requested by NHS BSA, the Adjudicator considered the applicability of the Limitation Act 1980 (the Act). The Act can prevent the recovery of an overpayment made more than six years before the claimant, in this case NHS BSA, took formal action to recover it. The overpayment occurred on 5 November 2018, so the Act did not provide Mr S with a defence from recovery.

7 CAS-36965-P5M5 • Change of position involves the recipient changing their position such that it would be unjust to require them to repay the overpayment; either in whole or in part. Change of position is a defence to a claim in unjust enrichment. To make out a change of position defence certain conditions must be satisfied. Briefly, the recipient must be able to show that, on the balance of probabilities:

• In Mr S’ case, he has confirmed that he kept the disputed money in a separate bank account, and he did not spend it.

• In the Adjudicator’s view, Mr S’ circumstances had not changed detrimentally. In other words, Mr S had not taken any action he would not otherwise have taken but for receiving the disputed money. The Adjudicator noted Mr S’ reference to paying his mortgage. However, Mr S would be required to pay the mortgage regardless of having been paid the incorrect benefits. So, he did not have a change of position defence available to the recovery of any part of the overpayment.

• Turning now to the defence of estoppel, there are three requirements that need to be satisfied in order to establish estoppel by representation:

• For the same reasons as those given to address change of position, the Adjudicator did not consider that Mr S would suffer detriment if the defendant was not held to the representation or promise. This was principally because he did not take any action he would not otherwise have done. Consequently, the Adjudicator did not consider that Mr S had a valid estoppel defence.

• Finally, the Adjudicator was not able to identify the necessary elements for a contract to exist. That is, offer, acceptance, consideration and an intention to enter into legal relations. In particular, he could not see that there was any intention on the part of NHS BSA to enter into a legal relationship with Mrs or Mr S beyond their entitlements under the Regulations.

8 CAS-36965-P5M5 • Although Mr S did not have any defences available to the recovery of the part of the overpayment that had yet to be repaid, the error was nonetheless unfortunate. Ordinarily, the payment of an incorrect benefit would be considered maladministration. The Adjudicator noted, however, that NHS BSA was unaware of Mrs S’ outstanding leave at the time it made the incorrect payment. NHS BSA was not Mrs S’ direct employer and could not have known the position with regard to her leave until notified of this by the Trust. In the circumstances, the payment of the incorrect benefits was not as a result of maladministration on the part of NHS BSA.

Ombudsman’s decision

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I do not uphold Mr S’ complaint.

Anthony Arter

Pensions Ombudsman 31 October 2022

10 CAS-36965-P5M5 Appendix Extract from the National Health Service Pension Scheme Regulations 2015

PART 3 Scheme membership

CHAPTER 3 Pensionable service

Pensionable service

“20 – (3) Paragraph (4) applies if –

(a) the employment in which M is an active member ceases; and

(b) a payment is made in respect of untaken leave.

(4) If this payment applies –

(a) M’s pensionable service is treated as continuing for a period equal to the period of leave in respect of which payment is made; and

(b) the payment is treated as M’s pensionable earnings for the period.”

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