Hogan Lovells

Key Dates

19 May 2017


Summary

The trustees acted properly in using their unilateral power to amend the scheme to allow discretionary pension increases and in subsequently deciding to award increases.

Background

The rules of the Airways Pension Scheme provided for annual increases to be paid based on statutory orders.  The power of amendment stated that no amendment could be made that (among other things) would have effect of changing the purposes of the scheme.

In 2010 the Government switched from RPI to CPI for statutory pension increases. In response, the trustees used their unilateral power of amendment to introduce a new rule 15 allowing them to award discretionary annual increases.

The employer challenged both the exercise of the power of amendment and the subsequent decisions by the trustees in 2013 under amended rule 15 to award additional pension increases.

Judgment

Morgan J found in favour of the trustees on all points, except that one purported exercise of amended rule 15 was invalid because no effective date was determined.

The amendment to the pension increase rule was valid and effective; it was not beyond the scope of the power to amend or an abuse of the power to amend. The power to amend was unilateral.  The employer's position was relevant but it did not have a veto, regardless of whether the scheme was in surplus or deficit. The amendment did not offend the restriction in the objects clause of the scheme preventing “benevolent or compassionate” payments, nor did it have the effect of changing the purposes of the scheme. The trustees actively and genuinely engaged with the decision-making process in deciding to amend the rule and were not guilty of unlawful pre-determination.

The subsequent decision to award discretionary increases was also valid, for the same reasons as the amendment was found to be. The Court also found that the trustees had regard to all relevant factors (including the employer's wishes and interests and its funding commitments, the position of the Pensions Regulator, and the potential cost) and had not taken into account any irrelevant considerations.



Date Accessed: 03/12/2021