Pensions update: case law

Gordon Kenworthy (Pensions Ombudsman)

Dr Kenworthy complained to the Pensions Ombudsman that the trustees and actuary to the scheme had not correctly calculated his pension in accordance with the scheme’s deed and rules and existing sex equality legislation.

The GMP component of scheme benefits can be unequal between the sexes because the legislation provides for different accrual rates, payment ages and increases for men and women. The Government consulted on GMP equalisation back in 2012, but no alternative approaches have been put forward to equalise GMPs. The legal position on whether and how GMPs should be equalised remains unclear.

As a result, the Pensions Ombudsman did not uphold the complaint on the basis that Dr Kenworthy’s pension had been calculated in accordance with the scheme rules (the current method had been certified and recommended by the actuary) and the trustees could continue deferring taking action to equalise GMPs whilst the position remains unresolved.

Buckinghamshire v Barnado’s (High Court)

This case concerned whether the trustees could change the index used to increase pensions in payment and revalue deferred pensions from RPI to CPI.

The rules of the Barnado’s scheme provided for increases/revaluation to be calculated by reference to RPI “or such any replacement [index] adopted by the Trustees”.

The Court held in this case that for so long as RPI remains a published index, the trustees under the rules of the scheme did not have the power to select a different index.

Dutton v FDR Ltd (High Court)

The FDR scheme, which was established in 1972, originally provided for pensions in payment to increase by 3 per cent per annum fixed. In 1991, the scheme’s provisions were amended to provide instead for increases at the lesser of 5 per cent and RPI, purportedly in respect of past as well as future service.

It was common ground that it was not possible to amend the increase applying to pre-1991 benefits as drafted. However, there was dispute as to how the increase should be applied to past service benefits in light of the amendment made in 1991.

The court held that members were entitled to the better of an increase of 3 per cent fixed and 5 per cent applied on an annual basis to pensions in payment attributable to pre-1991 service. The additional cost of providing members with benefits in this way has been estimated as being up to £17 million on a technical provisions basis.

Re BCA Pension Plan (High Court)

The High Court has granted an application by BCA Pension Trustees Limited under Section 48 of the Administration of Justice Act 1985. This section provides that where a question of construction has arisen out of the terms of a trust, the High Court may make an order authorising the trustees to rely on a written opinion given by someone with a 10 year High Court Qualification.

In this case, BCA Pension Trustees Limited had obtained a QC’s opinion on the correct interpretation of the scheme’s pension increase rule. The QC’s opinion was that the wording in the consolidated trust deed and rules clearly contained errors and that the original wording should be reinstated.

The Judge agreed, and granted the trustee’s application. The trustee agreed to notify members of the order as part of the next routine member communication (the Judge had originally proposed that the granting of the order was conditional on members being given two months’ notice to apply for the order to be set aside, but took into account the trustee’s objection to this that this would encourage members to object).