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. This is not to say that the trustees are compelled to accept the employer's design. If the trustees object to it they cannot be compelled to join in executing the Deed and Rules.

Mr Steinfeld and Mr Inglis-Jones understandably replied that such an approach would run contrary to the general tenor of decided cases over the last 15 years, which show that it is too simplistic to treat an actuarial surplus as being at an employer's disposal. 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. Measured in terms of liabilities, roughly 80% of the liabilities of the Fund relate to pre-transfer joiners. The original 1983 Scheme did not provide for participating companies.

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.

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.

The “reasonable contemplation” of the parties, or rather what can “reasonably be considered to have been within the contemplation of the parties” imports an objective test. It is not, in my view, relevant to know what the parties did or did not actually consider. I am not, for instance, concerned with what the directors of any of the CHAs discussed in their boardroom or considered with their lawyers.