Hogan Lovells

Key Dates

Britvic PLC v Britvic Pensions Limited and another [2021] EWCA Civ 867

Judgment given on 10 June 2021.


Summary

The Court of Appeal has held that the scheme’s pension increase rule permitted the principal employer to substitute a higher or lower rate of increase. It overturned the decision of the High Court that the rule allowed only substitution of a higher rate of increase. The Court of Appeal was also asked to decide on other aspects of the principal employer’s power under the pension increase rule. It decided in favour of the principal employer on all grounds.

Background

The Britvic Pension Plan (the “BPP”) was established in 2003 for employees and former employees of the soft drinks business of Six Continents plc. Bulk transfers were made to the BPP of assets and liabilities from the existing Six Continents staff pension plan and from its executive pension plan. Pension increase rule Rule C.10(2) of the BPP provided for pensions from both the staff section and the executive sections to increase on 1 October each year in line with the retail prices index (RPI) up to a maximum of 5% in respect of pensionable service up to 30 June 2008 and to a maximum of 2.5% in respect of pensionable service from 1 July 2008 onwards, “or any other rate decided by the Principal Employer”. The Six Continents staff pension plan had included a similar pension increase rule (Rule 23). In contrast, the increase rule in the Six Continents executive pension plan had provided simply for increases at RPI subject to a 5% cap (Rule 24). It was noted that Rule 23 of the Six Continents staff pension plan is the subject of a separate interpretation and rectification claim, expected to come to trial in late June 2021. At first instance, the High Court had held that “any other rate” in Rule C.10(2) of the BPP meant “any higher rate”. The principal employer appealed, arguing that “any other rate” meant any higher or lower rate.

Pension increase rule

Rule C.10(2) of the BPP provided for pensions from both the staff section and the executive sections to increase on 1 October each year in line with the retail prices index (RPI) up to a maximum of 5% in respect of pensionable service up to 30 June 2008 and to a maximum of 2.5% in respect of pensionable service from 1 July 2008 onwards, “or any other rate decided by the Principal Employer”.

The Six Continents staff pension plan had included a similar pension increase rule (Rule 23).  In contrast, the increase rule in the Six Continents executive pension plan had provided simply for increases at RPI subject to a 5% cap (Rule 24).  It was noted that Rule 23 of the Six Continents staff pension plan is the subject of a separate interpretation and rectification claim, expected to come to trial in late June 2021.  

At first instance, the High Court had held that “any other rate” in Rule C.10(2) of the BPP meant “any higher rate”.  The principal employer appealed, arguing that “any other rate” meant any higher or lower rate.

High Court’s reasoning

Had there been a mistake in the drafting of the pension increase rule?

Unambiguous language

Interaction with section 51 Pensions Act 1995

Could the principal employer decide different increase rates for different periods of pensionable service?

Could the principal employer only exercise its power to decide a different increase rate annually?

Could the principal employer decide on an increase rate of 0%?

Could the principal employer set different rates for revaluation of deferred pensions?

It followed that the words “any other rate” also allowed the principal employer to fix different rates of revaluation (referred to in the judgement as rates of increase) for deferred members.



Date Accessed: 28/05/2022