Access to the law of pensions. The lessons from National Grid v. Laws
| Pages | 282-285 |
| DOI | https://doi.org/10.1108/01425450010332550 |
| Date | 01 June 2000 |
| Published date | 01 June 2000 |
| Author | Richard Nobles |
| Subject Matter | HR & organizational behaviour |
Employee
Relations
22,3
282
Employee Relations,
Vol. 22 No. 3, 2000, pp. 282-285.
#MCB University Press, 0142-5455
Access to the law of pensions
The lessons from National Grid v. Laws
Richard Nobles
London School of Economics and Political Science, London, UK
Keywords Pensions, Roles, Disputes, Employee rights
Abstract This article uses the litigation in National Grid v. Laws to demonstrate two aspects
of the law surrounding occupational pension schemes: the wide range of interpretations that are
possible when construing pension scheme rules; and the enormous difficulties faced by scheme
members when seeking to assert an interpretation of those rules that runs counter to an
employer's major commercial interests.
The litigation in this case[1] illustrates two matters that are central to the law
surrounding the use of pension fund surpluses. First, it shows the wide range of
interpretations that are possible when construing pension scheme rules.
Second, it demonstrates the enormous difficulties faced by scheme members
when seeking to assert an interpretation of those rules that runs counter to an
employer's major commercial interests.
The ambiguity of pension scheme rules
The case turns on the meaning of the word ``arrangements'' within a rule of the
electricity industry's pension scheme which provided that National Grid Plc
should make ``arrangements'' to deal with actuarial surpluses. Relying on this
rule, National Grid had used £34 million of the surplus to meet the cost of
generous early retirement benefits provided to redundant workers as part of
the post-privatisation downsizing of its workforce. This is a multi-employer
scheme, and most of the electricity industry's employers used their share of the
surplus in a similar manner. If what National Grid did is unlawful, the
cumulative bill for the industry as a whole could exceed £1 billion. National
Grid's use of the surplus was challenged by two pensioners, Messrs Laws and
Mayes, who took the matter to the Pension Ombudsman. The Ombudsman
took a different view of the meaning of the relevant clause from that adopted by
National Grid. He felt that ``arrangements'' could not be interpreted as widely as
the employer claimed, and ordered National Grid to pay for the redundancies
out of its own moneys instead of using the pension scheme surplus.
National Grid had claimed that it had a completely unfettered power to make
``arrangements'' (even paying the surplus to itself in cash if it could obtain
revenue permission). Laws and Mayes argued that the requirement for National
Grid to make ``arrangements'' was an instruction to National Grid to introduce
benefit increases, or make further reserves. What will surprise those who
expect formal legal documentation to produce certainty are that both
interpretations are possible. Indeed, both have been adopted: the Pensions
Ombudsman favoured the interpretation offered by Messrs Mayes and Laws;
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