Spirit (Legacy) Pension Trustee Ltd v Mrs Isabella Fisher Alexis

Hearing date: 7 May 2025

APPROVED JUDGMENT

This judgment was handed down remotely at 10.30am on 1 September 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Introduction

This judgment concerns a decision of the Pensions Ombudsman ( Ombudsman) dated 12 June 2024 ( Decision) by which he upheld a complaint by Mrs Isabella Alexis ( Mrs Alexis) that she was entitled to be paid a ‘bridging pension’ (or, as I shall call it, a ‘supplement’) from the Spirit (Legacy) Pension Scheme ( Scheme) until the age of 66.

The Scheme trustee ( Trustee) maintains that, under the relevant provision of the applicable 2001 Scheme rules ( 2001 Rules), Mrs Alexis was only entitled to the supplement until 65.

With the permission of Richards J granted on 14 November 2024, the Trustee has appealed the Decision.

At the appeal hearing, the Trustee was represented by Mr James Walmsley of counsel. Mrs Alexis appeared in person, remotely by video link.

Background

Mrs Alexis joined the Scheme in May 1982. She became a deferred member in October 2006.

Aon is the Scheme Administrator. On 13 July 2018, Aon wrote to Mrs Alexis about her forthcoming retirement from the Scheme, setting out the options for her to receive her benefits, including an annual pension and tax-free lump sum payment. Aon also explained that a bridging pension would be payable to her and that this would “cease at State Pension Age”. Aon did not explain then the meaning of that term.

In October 2018, Mrs Alexis turned 60 and retired from the Scheme.

On 4 April 2019, Mrs Alexis wrote to Aon explaining that she had been advised that the bridging element of her pension would cease on her 65 ^th birthday. She took issue with this, noting that the Scheme wording provided that this would cease at her state pension age. Since the Government had increased her state pension age some years earlier, she claimed that she was entitled to be paid the supplement for longer than had been advised.

On 19 February 2020, Mrs Alexis registered a complaint under the Scheme's two-stage internal dispute resolution procedure ( IDRP).

On 5 May 2020, the Trustee provided its stage one response to Mrs Alexis' complaint. This explained that there were two possible interpretations for the expression “State pension age” in the 2001 Rules. The first was that this was fixed by reference to the legislation in place at the time the 2001 Rules were introduced. Another possible interpretation was that this was fixed by reference to the legislation in place at the time the member ceased to accrue benefits in the Scheme. The Trustee had historically administered the Scheme on the latter basis. In any event, either interpretation led to the same outcome for Mrs Alexis, namely a supplement payable until her 65 ^th birthday. The Trustee rejected the further possible interpretation that legislative amendments introduced after the 2001 Rules to increase state pension age meant that Mrs Alexis should receive the supplement until her actual state pension age of 66.

The Trustee therefore did not uphold Mrs Alexis' complaint but recognised that the information provided to her around the time of her retirement was insufficiently clear and offered her £500 compensation in recognition of that issue.

Mrs Alexis did not accept this offer, confirming instead on 23 June 2020 that she wished her complaint to be moved to stage 2 of the IDRP.

On 4 February 2021, the Trustee issued its stage two response, affirming the stage one decision. The Trustee also explained that it had received further legal advice to the effect that, unless the 2001 Rules contained “express provision providing for statutory references to be interpreted as including subsequent amendments, they should be treated as fixed at the date the rules themselves were signed”. Nevertheless, the Trustee increased the compensation offer from £500 to £1,000 in recognition of the delay in its response.

Mrs Alexis then referred her complaint to the Ombudsman, following which, the offer of compensation was increased to £1,500.

An Adjudicator considered Mrs Alexis' complaint, finding that further action was required by the Trustee. The £1,500 offer was sufficient recognition of Mrs Alexis' distress and inconvenience. However, the Adjudicator was also of the view that the definition of “State pension age” in the 2001 Rules by reference to paragraph 1 of Part I of Schedule 4 to the Pensions Act 1995 ( Act) encompassed subsequent amendments to that legislation, including that by which Mrs Alexis' state pension age had been increased to 66.

The Trustee did not accept the Adjudicator's opinion and the matter was considered by the Ombudsman who confirmed his agreement with the Adjudicator and upheld Mrs Alexis' complaint in the Decision.

Grounds of Appeal

Richards J granted the Trustee permission to appeal against the Decision on both grounds advanced, namely that the Ombudsman had fallen into legal error in:-

(i) determining that the supplement was payable to Mrs Alexis until her 66 ^th, rather than her 65 ^th, birthday; and, more specifically, in

(ii) construing the definition of “State pension age” in Rule 5.5 as “dynamic” so as to encompass any and all amendments to paragraph 1 of Part I of Schedule 4 to the Act (and therefore any change to state pensionable age thereunder) that followed (or might follow) the execution of the 2001 Rules.

There was no appeal against the finding with respect to Mrs Alexis' distress or inconvenience or the related award of £1,500 compensation.

I should also add that, in giving permission to appeal, Richards J ordered pursuant to CPR, Part 52.19 that there should be no order for costs as between the parties to the appeal.

After the commencement of the appeal, it became apparent that the Trustee had paid Mrs Alexis the supplement to her 66 ^th birthday despite its position that this only ran until 65. Although this does not affect the issue I must decide, it does give rise to a potential complication if the Trustee is correct in its construction and there has been an overpayment.

Mrs Alexis' position on the appeal

Mrs Alexis was not represented at the appeal hearing and she did not seek to address me on the detailed legal issues. However, she made known her position articulately and courteously. I am grateful for her representations which I have fully taken into account.

Mrs Alexis explained that she had been employed by Scottish & Newcastle for 35 years or so. This was then sold and she was made her redundant after around five years of working for her new employer. When she applied for her pension, she was told that the supplement stopped at 65. She disagreed with this and rejected the £1,000 compensation offered by the Trustee for its related errors. She then went to the Ombudsman, won her case and received her pension, including the supplement.

Mrs Alexis' essential position is that the Trustee should have changed its paperwork when the Government guidelines for the payment of state pension changed. More recently, Mrs Alexis had received e-mails from the Trustee with a view to deducting £220 per month from her pension for a period of one year if the appeal were to succeed. However, having made multiple errors, and her complaint having been upheld, she feels that the Trustee should be held accountable.

Finally, I am also grateful to the Trustee's counsel for what I consider to be his fair presentation of matters on the appeal, including those arguments which potentially undermined his client's interpretation of the 2001 Rules.

The 2001 Rules

Since the appeal is essentially concerned with a point of legal construction, I first summarise the relevant parts of the 2001 Rules, as to which:-

(i) These comprise a ‘special edition’ of the rules of the Scottish & Newcastle Retail Managers Pension Scheme concluded between Scottish & Newcastle plc (as Principal Employer) and the Trustee;

(ii) Those rules set out special benefits for members who transferred into the Scheme with effect from 1 May 1995 and who were immediately before that date members of the Scottish & Newcastle Staff Pension Scheme;

(iii) The Scheme is a Final Salary Scheme with a Normal Retirement Date of a member's 60 ^th birthday;

(iv) The 2001 Rules explain how the member's relevant basic salary is identified for the purpose of calculating the member's Final Salary;

(v) For that purpose, the relevant basic salary is reduced by the “Pensionable Deduction”, namely the “lower earnings limit for National Insurance contributions in force at the time in question” or such other amount as may be agreed between the Principal Employer and the Trustee;

(vi) Final Salary cannot exceed the amount of the “Earnings Cap” at the relevant date of calculation, such cap defined as the “amount specified from time to time for the purpose of section 590C of the Income and Corporation Taxes Act 1988 (earnings cap)” (since repealed);

(vii) Rule 5 of the 2001 Rules contains specific provisions as to a member's entitlement to a pension in different scenarios. So, for example, in the paradigm case of a member leaving employment at Normal Retirement Date, that member will receive a pension for life at the rate of 1/60 ^th of Final Salary for each year of relevant pensionable service, with a maximum...