Hogan Lovells

Key Dates

In the matter of the Axminster Carpets Group Retirement Benefits Plan

Punter Southall Governance Services Limited v Jonathan Hazlett [2021] EWHC 1652 (Ch)

Judgment given on 17 June 2021.


Summary

The High Court has given judgment on several issues concerning limitation, forfeiture and interest on arrears of pension, of wider interest to pension schemes.  The arrears arose from the compromise of various pension increase issues, from which it followed that some beneficiaries had been underpaid.  

The judge in this case (Mr Justice Morgan) was the same as gave judgment in the decisions in 2018 and 2020 involving the Lloyds Banking Group pension schemes and the equalisation of guaranteed minimum pensions (GMPs). 

The case concerned the Axminster Carpets Group Retirement Benefits Plan (the “Plan”).  The principal employer and the sole other participating employer had entered voluntary liquidation and the Plan was in a PPF assessment period.

Limitation

Mr Justice Morgan followed the approach he adopted in the Lloyds case, and found that a claim for arrears by a beneficiary against the current trustee (appointed in 2013) was “an action to recover from the trustee trust property” within section 21(1)(b) Limitation Act 1980, to which no limitation period applied.  However, any claim against the previous trustees (who no longer hold trust property) would not fall within section 21(1)(b). 

Forfeiture

Clause 25 of the 1992 trust deed concerned monies “not claimed within six years from the date on which they were due to be paid” and gave the trustees discretion to apply such monies in augmenting benefits of active members, reducing employer contributions, or in payment of scheme expenses.  Rule 36 of the 2001 trust deed replaced clause 25 but rule 36 explicitly provided for unclaimed benefits to be forfeited after six years, with discretion for the trustees to use the forfeited benefits for similar purposes as under clause 25 or for payment to the beneficiary (notwithstanding the forfeiture). 

The High Court found that:

Relevant factors for exercise of discretionary power to pay forfeited benefits to the beneficiary

The High Court was asked to consider the factors trustee should take into account when deciding whether to pay forfeited benefits to the beneficiary, using its discretionary power in rule 36.  Relevant factors included that: the underpayment had arisen because of a breach of trust by the trustee; and that beneficiaries could not be expected to be aware of the underpayments, meaning that the forfeiture was “wholly undeserved”.   In the judge’s view, the trustees’ first reaction should be to make good the earlier underpayments without further delay. However there might be other compelling uses of the money, or administrative difficulties, which would justify not exercising the power in favour of the beneficiaries.

Interest on arrears of pension

Mr Justice Morgan considered that the approach to interest on arrears he had adopted in the first and second Lloyds judgments remained valid, at least for the vast majority of affected beneficiaries.  He ordered interest to be paid at 1% over base rate (the same rate ordered in Lloyds) for all affected beneficiaries. 



Date Accessed: 28/05/2022