Pension Scheme in UK Law

A decision to have a pension scheme and the consequential decisions about the structure and design of the scheme are matters for the employer, or at least matters primarily for the employer. If the scheme is to have a pension trust fund there will be trustees, but the design of the scheme is still a matter for the employer, not for the trustees. This is not to say that the trustees are compelled to accept the employer's design.

Mr Warren submitted that we could not go far wrong when interpreting the scheme if we were to treat the pension fund simply as the security for the employers' pension promise. The solution to the present problem lies within the terms of the scheme itself, and not within a world populated by competing philosophies as to the true nature and ownership of an actuarial surplus.

At its last actuarial valuation at the end of 2008 it had assets worth £31.3 billion, a decrease of about £4 billion from the preceding valuation three years before that. On an ongoing basis there are liabilities of £40.4 billion, so there is a deficiency. I was told that that was currently being addressed by deficiency contributions. Measured in terms of liabilities, roughly 80% of the liabilities of the Fund relate to pre-transfer joiners.

The Trustee argues that the contribution obligations under the pension deed are all a single indivisible liability to pay money. The amount of money payable varies from time to time, and in particular it varies as employees come and go (and in particular come), but the liability to pay the money was imposed at the outset and it was the same immediately before the transfer moment as it was after it, and remained the same when the next new post-transfer employee was engaged.

Thirdly, it is an instrument which is designed to operate in the long term, defining people's rights long after the economic and other circumstances, which existed at the time when it was signed, may have ceased to exist. Fourthly, the scheme confers important rights on parties, the members of the pension scheme, who were not parties to the instrument and who may have joined the scheme many years after it was initiated.

But the flaw in the Secretary of State's approach is that the guidance has singled out certain types of non-financial factors, concerned with foreign/defence and the other matters to which reference has been made, and stated that administering authorities cannot base investment decisions upon them. In doing this I cannot see how the Secretary of State has acted for a pensions' purpose.

The approach Vos J adopted in HR Trustees Ltd v Wembley plc has the obvious merit of having brought the legal position in that case into line with the parties' expectations. As Vos J pointed out, members of the pension scheme had been told at the time about the change that the defective documentation had been intended to effect and they did not expect to continue to accrue rights on the previous basis.