Not valid, you need a ticket to U1 or a Travelcard to do that.
Apparently you are allowed out if you try to exit at a station such as Pimlico, I think this is done on the basis that you could be feeling unwell or some other reason, however you will not be allowed back in, and you would have to make your way to Vauxhall by alternative means (or buying a new ticket / use Oyster).
You are allowed out for any reason, provided you pay on return to the system (if you do return).
You made the same mistake I did - we both know that the SB Victoria Line was used but how would the barrier assistant know? In this case the transfer could have been made at Vauxhall and travelling northbound to another terminal (depending on the destination on the ticket).
Say Earlsfield to Stevenage - interchange at Vauxhall, break at Pimlico, pay Pimlico to King's Cross, and then continue to Stevenage. Changing at Waterloo and going by Tube to Pimlico (whilst stupid there is nothing to stop you unless it is seen by CCTV that you are lying) and saying you changed at Vauxhall and travelled northbound should be enough.
I'm actually finding it rather difficult to find something that wouldn't be valid at Pimlico on the NB Victoria (obviously with a '+'). The most intuitive to me would be say Earlsfield to somewhere like St Johns where it is obvious you should go via London Bridge - obvious to the extent the fare is 'London Not Und' so the use of the Tube between Waterloo and London Bridge is forbidden. However, if this was changed to say, '+Any Permitted' then this is the kind of ticket which has no use at all at Pimlico.
After realising the NB Victoria could be used as a get-out I cut down a lot of my reply, if it could be proved that the ticket was being used southbound then it would not be valid at all at Pimlico.
The only two places you could be theoretically going would be Vauxhall or Brixton. On this ticket, both are invalid.
If you did indeed enter the system at Waterloo (presumably from a SWT station rather than Waterloo East), then you really have no need to be going to Vauxhall by Tube on a cross-London ticket* - a change could have been made at Clapham Junction, or in the worst case, a train straight back out of Waterloo.
The other alternative is Brixton, which actually is not a recognised change for cross-London transfer, although I suspect many LU staff are not aware of this, except probably those at Brixton...
*Indeed, I doubt there's any flow between two SWT stations that has anything (i.e. a '+Any Permitted') other than a Not London and a London Not Und fare. Things like a Clapham Junction to Reading '+Any Permitted' are a somewhat grey area - it seems silly to do Clapham > Waterloo > Vauxhall (by Tube) > Clapham > Reading, after all does the '+Any Permitted' imply that doubling back has been paid for if you wish to use that route?.
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Incidentally, where is it that I've seen it written that you can break a journey on LU provided you pay upon re-entry? I thought it was the NCoC but it says there (along with the old NFM98 section A) that BoJ is forbidden :?.
The only reference I can now find in the public domain is on:
http://www.nationalrail.co.uk/times_fares/london/ where it says:
You can 'break your journey' and leave the Underground service en route. However, you'll need to buy another ticket in order to continue your journey.