Time to protect your interests - The Pensions Trust court case


The Trustees of The Pensions Trust (TPT), which includes the Social Housing Pension Scheme (SHPS), employers who have undertaken a bulk transfer from SHPS, and other standalone defined benefit schemes, have discovered that there is uncertainty over whether a series of amendments which purported to change a variety of benefits under the schemes within TPT are valid.

What is the potential issue?

The core issue is whether the power of amendment contained in the governing documentation of TPT prevents benefits from being amended in certain ways. In particular, the power of amendment contains a "Fetter" which prevents changes which operate to “diminish or prejudicially affect the rights of any person in receipt of a pension or otherwise interested in the assets of the Fund”. It is possible that this Fetter prevents benefits from being changed in certain ways – ways in which the Trustees have used the power over many years.

The Trustees have been advised that the uncertainty is sufficient to require them to ask the Court to determine whether the changes are valid or not. The Trustees are asking the Court to answer a number of questions, but in broad terms, the types of amendments which are potentially affected by the Fetter are:

  • The introduction of the Matrix Options in 1995.
  • Changes to the way in which increases to pensions in payment are calculated to reflect the increases required by section 51 of the Pensions Act 1995.
  • Allowing schemes to terminate defined benefit accrual.
  • An amendment which allowed scheme documents to provide for different benefits as agreed between the Trustees and the relevant employer.

How are the Trustees dealing with this?

The Trustees will present the case to the Court that the amendments made to the rules are valid, and that the benefits have been correctly administered. The Trustees are seeking an order from the Court that they represent all employers and members in whose interests it is to argue that the rules have been applied correctly. An active member of one of the schemes will be appointed to represent all employers and members whose interest it is to argue that the amendments were not valid. 

How much are the potential additional liabilities? 

Potential additional liabilities have been estimated at approximately £233 million over the 1,500 active employers who are affected by these issues. Each employer has been provided with an individual estimate of their share of the extra liabilities on a worst-case basis. Some will be hit harder than others, depending on each employer's membership profile. 

When will a decision be made by the Court?

It is expected that Court proceedings will be issued later in 2023, with the proceedings likely concluding by late 2024. If the Court rules that some or all of the benefit changes were invalid, the Trustees will have to calculate the revised benefits, and notify employers of their increased funding obligations.

What should employers do now?

Employers should be taking steps to protect themselves now in case the Court rules that some or all of the benefit changes were invalid, leading to increased funding obligations for employers. Employers are also invited to submit comments or questions to the Trustees on the draft Court documents.  

How can we help?

Trowers is uniquely placed to assist employers. We have extensive experience advising employers in relation to their liabilities in The Pensions Trust, and regularly advise employers faced with potential increases to their liabilities as a result of negligent actions taken by trustees or their advisers.

We advised on the Court of Appeal decision in Bic v Burgess on the question of historic pensions in payment increases. Our expertise in this area sets us apart from other firms in the sector. We can help you assess the proposed Court documents and prepare your comments on them.  

If you would like further details, or for a discussion of your needs, please contact Martin McFall, Pensions Partner, on mmcfall@trowers.com or Deborah Shumate, Senior Pensions Associate, on dshumate@trowers.com. Alternatively, contact one of the key Pensions team contacts listed to the right. 


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