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This landmark decision is now only the second case (after Lloyds Bank Pension Trust Corporation v Lloyds Bank plc  PLR 263) in which a domestic court has found that a fetter on a pension scheme’s amendment power protects future service benefits.
The case was brought because the BBC wished to limit the ongoing costs of funding the BBC Pension Scheme and needed to understand the scope of the fetter on the Scheme’s amendment power. The fetter provides that no alteration or modification shall take effect as regards active members “whose interests are certified by the Actuary to be affected thereby”.
The BBC contended that on a correct construction of the fetter an active member’s interests extended no further than their past service rights. In doing so the BBC placed reliance on what it said was the correct construction of the fetter when it was first introduced in a 1949 Deed. The High Court rejected the BBC’s case and held that (1) as a matter of ordinary language the concept of interests was not “apt to suggest that the intended division between matters which are protected and matters which are not is marked by the fault line between benefits already earned by past service and those which are yet to be earned in the future”; and, (2) the correct construction of the 1949 Deed supported the case of Representative Beneficiary that the fetter protected future service benefits.
As a result, the fetter places a significant limit on the scope that the BBC has to close the Scheme to future accrual or to alter the basis upon which benefits continue to accrue. The decision highlights the focus of the courts on conducting a textual analysis of pension deeds and demonstrates the limitations of arguments based on the need for provisions to be interpreted in a “practical” way so as to provide the principal employer with the maximum flexibility to deal with changing economic circumstances.
A copy of the judgment is available here.
Andrew Spink KC has a broad-based business law practice, specialising particularly in disputes relating to the interpretation or breach of most types of commercial contract and trust deed, claims for breach of fiduciary duty, freezing injunctions and asset recovery, cross-jurisdictional issues, CPR Part 8 claims as well as hostile CPR Part 7 claims for damages and other relief in the context of pensions and other commercial trusts, banking and financial services, a wide range of other commercial contracts and contractual issues (including cases of force majeure and frustration arising out of the Covid-19 pandemic and cases involving crypto-assets and associated worldwide freezing orders), professional negligence claims (acting for both claimants and defendants) and company law and insolvency issues.
Saul Margo specialises in pensions and employment, as well as professional negligence claims relating to pension schemes. His pensions practice encompasses both pure pensions litigation and advisory work with his litigation experience including Part 8, professional negligence and rectification claims. Additionally, Saul is in demand for his specialist knowledge of cross-over pensions and employment work having been instructed in the litigation relating to the judges pensions scheme, the police pension scheme, sexual orientation discrimination claims relating to the Teachers’ pension scheme and in the leading case relating to discrimination arising from the provision ill-health retirement benefits.
News 28 Jul, 2023