Railways Pension Trustee Company Ltd v Atos It Services UK Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Julian Flaux C |
| Judgment Date | 16 December 2022 |
| Neutral Citation | [2022] EWHC 3236 (Ch) |
| Docket Number | Case No: PE-2021-000017 |
| Court | Chancery Division |
[2022] EWHC 3236 (Ch)
THE CHANCELLOR OF THE HIGH COURT
Case No: PE-2021-000017
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST: PENSIONS (ChD)
Rolls Building
Fetter Lane
London, EC4A 1NL
Brian Green KC and Edward Sawyer (instructed by Slaughter and May) for the Claimant
Andrew Spink KC and Philip Stear (instructed by Baker & McKenzie LLP) for the Defendants
Hearing dates: 9 and 10 November 2022
Approved Judgment
This judgment was handed down remotely at 10:30am on 16 December 2022 by circulation to the parties or their representatives by email and by release to The National Archives.
Introduction
In this Part 8 claim the claimant (hereafter referred to as “the Trustee”) which is the sole trustee of the Railways Pension Scheme (“the RPS”) seeks the directions of the Court on a number of questions arising in the administration of the RPS which is an industry-wide defined benefit occupational pension scheme established on privatisation of the railways for those employed in the railways industry.
The RPS was established as of 31 May 1994 by the Railways Pension Scheme Order ( SI 1994/1433) (“the RPS Order”) made pursuant to Schedule 11 of the Railways Act 1993 which provided expressly by para 2(3) that any occupational pension scheme established under the paragraph: “shall be treated for all purposes as if it were a pension scheme established under an irrevocable trust”. The RPS comprises 106 Sections (of which the Atos Section with which this case is concerned is one) which are distinct and ring-fenced from the other Sections, although with the same trustee administration, each with a sponsoring Participating Employer or Employers The defendants are the Participating Employers for the Atos Section, the first defendant being the Designated Employer or principal employer and the second defendant the only other Participating Employer for this Section. I will refer to them hereafter compendiously as “Atos”. The individual sections have the common characteristic that they are Shared Cost in that contributions payable by Participating Employers and Active Members are normally payable in the ratio 60:40.
Each Section is governed by the pension trust deed as originally established by statute (“the Pension Trust”) and by the individual Section's Rules. The Atos Section Rules have been amended from time to time. They provide for defined benefit pensions based on a fraction of pensionable salary at retirement in turn based on the number of years of pensionable service. The present claim is concerned in particular with the deficit contribution rule, Rule 21 (the terms of which are set out below), in the current version of the Atos Section Rules.
The Pension Trust and the Rules of each Section are required to be operated in such a way as to ensure that they comply with the Railway Pensions (Protection and Designation of Schemes) Order ( SI 1994/1432) (“the Protection Order”) which also came into force on 31 May 1994. Clause 7H of the Pension Trust provides:
“Where, in relation to a Protected Person, the provisions of this Pension Trust and the Rules do not satisfy the requirements of the Protection Order, then the Pension Trust and the Rules shall be operated in relation to that person in such a way as to ensure that they do comply with that Order.”
“Protected Person” is defined in para 5 of Schedule 11 to the Railways Act 1993 but in broad terms means someone employed in the railways industry immediately prior to the passing of the Act on 5 November 1993 who had pension rights under the British Rail Pension Scheme (“the BRPS”).
The Questions which the Court is asked to determine are set out at [18] below. They relate in particular to the interpretation and operation of Rule 21 and of provisions of the Protection Order in circumstances where there is a shortfall in Section funding as determined by the RPS actuary appointed by the Trustee (“the Actuary”) on his valuation pursuant to clause 6B of the Pension Trust of the assets and liabilities of the Section. Answers to the Questions are required to enable the Actuary to complete his outstanding 2016 and 2019 valuations of the Atos Section.
Factual and procedural background
Prior to privatisation in 1994, British Rail was operated by a statutory undertaking, the British Railways Board (“the BRB”), owned by the Government. It was government funded and provided railway employees with various pension schemes, of which the largest was the BRPS, which thus enjoyed implicit Government funding support.
Following the passing of the Railways Act 1993 the industry began to be privatised during 1994. Schedule 11 of the Act dealt with railway pensions. Para 2 granted the Secretary of State for Transport power to establish a new pension scheme for railway employees. Paras 5 to 7 introduced protections for railway employees' accrued and future accruing rights under the existing pre-privatisation pension schemes which British Rail provided (specifically the BRPS) and under the RPS going forward. Para 7(1) provided that an order to protect such employees could impose on the employer various duties including a duty with respect to: “(f) the making or refunding of contributions”.
The assets and liabilities of the BRPS were transferred to the new scheme, the RPS, and the BRPS was wound up on 2 October 1994. The pensioner and deferred pensioner members of the BRPS (i.e. those who were former British Rail employees at the date of privatisation) together with a share of BRPS assets representing liabilities (and a share of the surplus) in respect of them were transferred to the 1994 Pensioners Section of the RPS which continued to benefit from a Government solvency guarantee. The then Active Members of the BRPS (i.e. those who were British Rail employees at the date of privatisation) together with a share of BRPS assets representing liabilities (and a share of the surplus) in respect of them were transferred initially to a holding Open Section of the RPS, then as parts of the rail industry were progressively sold into private ownership, each of the private sector employers would create their own Section within the RPS, to which the pension rights of the employees taken on by them, together with a share of the Open Section assets representing liabilities in respect of those employees, were transferred.
The ex-British Rail employees in the RPS Open Section and the subsequent sections set up did not have the benefit of Government support but their employers were required to provide them with the protections set out in the Protection Order made under Schedule 11, which amplified and confirmed the protections provided by paras 5 to 7 of Schedule 11. The private sector employers could also admit new post-privatisation employees either to the same Section as the ex-public sector employees or to a separate Section or to a wholly different pension scheme as they chose. The Protection Order did not apply to those new employees. In practice, the private sector employers (including Atos) did not introduce separate segregated Sections for protected employees and new employees, almost certainly because, when each Section was constituted, substantial assets were transferred over so the Section was extremely well-funded from the outset, making it attractive for employers and future employees. In contrast, starting and funding a new Section was inherently unattractive, giving rise to duplication of administrative costs. At the time of privatisation, the BRPS was in surplus, enabling payment of reduced contributions.
Article 5 of the Protection Order provides as follows:
“Article 5 Participation and acquisition of relevant pension rights
None of the persons mentioned in paragraph 7(2) (protection — supplementary provisions) of Schedule 11 nor any servant or agent of any such person nor, where any such person is a body corporate, any person who controls that body corporate, shall prevent a protected employee from—
(a) participating in … an occupational pension scheme provided by his employer in accordance with Article 4 [i.e. a scheme for protected employees providing for the accrual of relevant pension rights, such as the Atos Section];
(b) acquiring relevant pension rights in that scheme which are no less favourable than the relevant pension rights which he had under his designated scheme [i.e. the BRPS].”
Article 7 of the Protection Order provides as follows:
“ Article 7 Contributions
(1) Subject to the following paragraphs of this article, where any person mentioned in paragraph 7(2) (protection: supplementary provisions) of Schedule 11 [RA 1993] is under a duty to contribute to —
(a) a section of an occupational pension scheme in which a protected person has relevant pension rights; […]
the contributions which that person shall make under that duty shall be not less than such amount as, in the opinion of the scheme actuary, shall be sufficient to make provision in respect of the rights specified in paragraph (2) after having taken into account all of the relevant matters, including the resources of the occupational pension scheme or the relevant section of it and any employee contributions.
(2) The following rights are specified for the purposes of paragraph (1) —
(a) the pension rights which, at the date in respect of which the scheme actuary gives that opinion, have been accrued under that scheme or section or been transferred to it in accordance with article 6;
(b) any pension rights which are accruing in respect of current participation in that scheme or section; […]
(3) No obligation to make contributions arises under paragraph (1) in any case where, in the opinion of the...
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Railways Pension Trustee Company Ltd v Atos IT Services UK Ltd
...THE BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES BUSINESS LIST: PENSIONS (ChD) SIR JULIAN FLAUX, CHANCELLOR OF THE HIGH COURT [2022] EWHC 3236 (Ch) Royal Courts of Justice Strand, London, WC2A 2LL Andrew Spink KC and Philip Stear (instructed by Baker & McKenzie LLP) for the Brian Green......