His pension(s) would have been paid directly into his bank account and so his standing orders would have been paid out as normal. With sufficient income, nothing would make alarm bells ring at the bank.
Perhaps the banks could set up a system (don't ask me how) whereby an account that does not have any cash or cheque withdrawals from it except for S.O.s or D/Ds, sets alarm bells ringing after a period of say 2 months.
This situation has happened before and, unfortunately, this will probably not be the last time.
Wonder if the Pensions department will want to reclaim the overpaid pension, (bet they'll try) if so they will have to try to get it from the council who had the rates paid for two years.