Royal Academy Arts Pension Scheme · CAS-111359-D3J5

CAS-111359-D3J5

Ombudsman’s Determination Applicant Mr L

Scheme Royal Academy of Arts Pension Scheme (the Scheme)

Respondents Trustees of the Royal Academy of Arts Pension Scheme (the Trustees) XPS Administration (XPS)

Outcome

Complaint summary

Background information, including submissions from the parties The sequence of events is not in dispute, so I have only set out the salient points. I acknowledge there were other exchanges of information between all the parties.

• pensionable service from 1 June 1986 to 31 May 1990;

• final pensionable salary of £9,368; 1 Trustees of the Royal Academy of Arts Pension Scheme, XPS Administration CAS-111359-D3J5 • an annual preserved pension at date of leaving of £3,571; and

• a CETV of £245,048.

• Mr L’s annual deferred pension at date of leaving the Scheme was £749.44. The previous administrators had applied annual increases of 5% to this figure for the period from his date of leaving the Scheme to his NRD. The revalued deferred pension, amounting to £3,571.04, had been incorrectly recorded as his deferred pension at his date of leaving. XPS inherited this data in 2014.

• The error in the data resulted in Mr L’s CETV being higher than it should have been. The correct CETV was £51,428. So, an overpayment of £193,620 had occurred which needed to be returned to the Scheme.

The Trustees’ submissions

On 5 February 2025, the Trustees provided a formal response to The Pensions Ombudsman (TPO).

The error in the inherited data, in respect of the deferred pension, came to light when XPS identified that the CETV it had calculated for another member of the Scheme was excessive given the member’s pensionable service.

Mr L and the IFA should have been aware that the CETV paid to Royal London was excessive, based on his four years of pensionable service and his final pensionable salary on leaving the Scheme. 2 CAS-111359-D3J5 The Trustees understand that the bulk of the CETV has remained in the Plan. Royal London needs Mr L’s authority to recover the overpayment.

It would need evidence of the fees Mr L said he would not have incurred but for the overpayment, before considering whether to reimburse them. It would also need additional evidence, including details of any other pension provision and a copy of the IFA’s advice, to back up his claim that he would not have retired, when he did, had he known the correct amount of the CETV.

The Pensions Ombudsman’s position on overpayment cases – trust based schemes

• their benefits should not be corrected going forward; and/or

• all or part of the past overpayments should not be recovered.

• they had been given inaccurate statements as to their benefit entitlement on which it was reasonable for them to rely; and

• they had suffered a loss as a result of their reliance on those statements.

1 See Catchpole v Alitalia Pension Trustees at [47] to [58] for an example of where an estoppel was held to give a right to a benefit but noting that this would only be appropriate in unusual circumstances. 3 CAS-111359-D3J5

• repayment - making a claim for repayment directly from the member on the grounds of unjust enrichment; and/or

• recoupment - recovering the overpayments from future payments of pension under the principles of equitable recoupment, which the courts consider to be “a self-help remedy.”

• change of position;

• estoppel by representation or convention;

• contract (that is a contractual right to keep or continue to receive the mistaken payments); or

• a limitation defence under the Limitation Act 1980 (the Limitation Act).

2 Trustees of trust based occupational pension schemes governed by English law generally have power to compromise claims under section 15 of the Trustee Act 1925 subject to the requirements of the Trustee Act 2000 (Schedule 1, paragraph 4). There may also be an express power to compromise claims in the trust deed and rules. 3 Re Musgrave [1916] 2 Ch 417

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4 Burgess v BIC UK [2018] 054 PBLR (040), paragraphs [169] to [172]. 5 In England and Wales this will normally be the County Court . 6 However, it was announced in the King’s speech in July 2024 that the law will be changed so that TPO will be treated as a competent court for the purposes of section 91 of the 1995 Act. Once the new legislation is in force this will reverse this aspect of the CMG decision. 7 Pensions Ombudsman v (1) CMG Pension Trustees Limited and (2) CGI IT UK Limited at paragraph 56. 8 There is a more comprehensive analysis by me of the law relating to the recovery of overpayments in trust based occupational pension schemes, on which this Determination relies, in the TPO Determination BIC UK Pension Scheme (CAS-55100-G3W9) – 19 April 2024. 5 CAS-111359-D3J5 Adjudicator’s Opinion

Legal issues arising in this particular case

• Mr L disputed whether the past overpayment should be recovered; and

• Mr L argued that, as a consequence of the negligent misstatement by XPS on which he had relied, he had sustained a financial loss.

• change of position;

• estoppel;

• limitation; and

• contract.

• the trustees or manager owed the party, to whom the negligent misstatement was allegedly made, a duty of care. (Generally trustees of trust based schemes and managers of public sector schemes owe a duty of care to beneficiaries);

• there was a breach of the duty of care (that is the information provided was not correct and could not be made by someone exercising reasonable care);

• the person to whom the information was provided reasonably relied on the representation and has suffered loss (the “but for” test is satisfied); and

6 CAS-111359-D3J5 • the loss suffered was not too remote (it was of the kind falling within the scope of the duty of care).

• did the applicant rely on the statements?

• was the reliance reasonable?

• would the applicant have acted differently if they had been given the correct information?

Past overpayment

Repayment claim

9 Corsham v Police and Crime Commissioner for Essex [2019] EWHC 1776 (Ch), at paragraph 173.

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Change of position

• good faith - the recipient of the overpayment must be acting in good faith;

• detriment - their circumstances must have changed detrimentally as a result of the overpayment or in anticipation of receiving it. Generally, this means that the money must have been spent and the expenditure cannot be legally or practically reversed, or any asset bought with the overpayment cannot be easily sold; and

• causation - there must be a causal link between the change of position and receipt of the overpayment (as a minimum it is necessary to show at least that “but for” the mistake the applicant would not have acted as they did).

Good faith

10 Lipkin Gorman (a firm) v Karpale [1991] 2 AC 548 as per Lord Goff at paragraph [580C]. Lord Goff set out this principle in general terms and the courts have subsequently developed principles about where such a defence applies. 11 See Webber v Department for Education, Teacher's Pensions [2012] EWHC 4225 (Ch) and Webber v Department of Education which applied the earlier test in Niru Battery Manufacturing Co v Milestone Trading Ltd [2002] EWHC 1425 (Comm) in a pensions context. 12 See for example Abouh Ramah v Abacha [2006] EWHC Civ 1492 Armstrong DLW GmBH v Winningham Networks Ltd [2012] EWHC 10 (Ch) at [110]. 8 CAS-111359-D3J5

Detriment

Causation

13 See Scottish Equitable v Derby [2000] PLR 1 (CA) at [33]. 14 Philip Collins Ltd v Davis [2000] 3 All ER case (cited with approval in Scottish Equitable v Derby). 15 National Westminster Bank plc v Somer International UK Limited [2002] 16 Scottish Equitable v Derby [2001] 3 All ER 818, Harrison J at paragraphs [37]-[41]

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Estoppel

• estoppel by representation which can apply where one party has made a false statement or representation to the other; and

• estoppel by convention, which can apply where both parties have been dealing with each other on a common understanding of fact which turns out to be false.

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Limitation

Contract

17 Arjo Wiggins v Ralph [2009] 079 PBLR at [26] 18 Webber v Department for Education [2016] 102 PBLR (024)

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XPS said that the information it received from the previous administrators in 2014 was incorrect and this resulted in the overpayment of Mr L’s CETV. While no evidence had been submitted to support this, the Adjudicator had no reason to doubt that this was the cause of this issue. Although the previous administrators were not a party to this complaint, the Trustees had overall responsibility for the administration of the Scheme.

Ombudsman’s decision

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I uphold Mr L’s complaint in part.

Directions

• notify Mr L of their intention to recover the overpayment of £193,620 directly from the Plan and obtain his authorisation, in a format acceptable to Royal London, to make this recovery;

• recover the overpayment from Royal London; and

• pay Mr L £1,000, in respect of the serious non-financial injustice he has sustained as a consequence of the maladministration

Dominic Harris

Pensions Ombudsman 16 October 2025

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