Welcome to the December pensions podcast from the Stevenson Howard pensions team, you can subscribe and listen on iTunes and Stitcher or by visiting our website@www.sh legal.com. I'm Alex Rush a senior associate in the pensions team. And I have with me, my fellow associate Casey Whitford, this month's topic of summary includes a DWP consultation on changing annual benefit statements and a case considering rectification of pension scheme documents.
First though, we will look at a high court decision that clarifies the test. The court should apply when approving a settlement between a trustee and an employee .
Thanks Alex. The case concerns the airways pension scheme by way of background, the trustee of that scheme had previously amended the rules of the scheme to give it the power to award discretionary increases to pensions. The trustee then subsequently sought to exercise that power and grant such increases British airways challenged in court. The trustees amendment to the scheme rules on the basis that it had exercised the power of amendment for an improper purpose.
The matter went through the courts and the trustee was granted permission to appeal. The matter to the Supreme court, the trustee was also granted a Beddows order, which allowed it to meet its cross to proceedings from the assets of the scheme. British airways said that the trustee entered into a settlement agreement in order to compromise the appeal and prevent proceedings in the Supreme court.
The trustee looked to the court to approve the settlement agreement in the case of airway's pension scheme, trustee and fielder and another, the trustee and the representative beneficiary differed in their opinion as to the correct test to be applied by the courts .
When approving the settlement, the trustees supported by British airways argued that in order to bless the settlement, the correct test to be applied was whether the trustees decision was one that a reasonable body of trustees could arrive at the representative beneficiary. On the other hand, argued that where there had been a previous order of the court allowing the scheme assets to be used to fund litigation.
The test was that the court should determine that the settlement agreement was in the best interest of the scheme. The court rejected the representative beneficiaries argument and stated that the rationality test was sufficient. The court noted that in previously granting the trustee a Beddows order, allowing scheme funds to be used to fund the litigation. The court authorized the trustee to perceive the case, but did not direct the trustee to do so as such.
There was no inconsistency and the court reaching its own view as to whether it was appropriate for the cost of the litigation to be borne by the scheme. But deferring to the trustee is judgment subject only to attest a rationality on the question, whether the dispute should be compromised
For our next topic, we will look at a consultation published by the DWP, which considers changing the content and presentation of annual benefit statements. The consultation is part of attempts to build on the success of auto-enrollment by improving engagement, with working age savers, so that they have a stronger sense of personal ownership of their workplace pension.
The DWP is seeking views on how to use simpler, more consistent annual benefit statements across the, and that was a , with a view to helping improve engagement with pensions. In particular, the DWP is asking for views on three alternative options for achieving simplicity and consistency in such statements. The first is based on annual benefit statement template, which would be a two page simpler statement, similar to the one developed by industry experts and available on the PLSS website.
The secondary is design principles approach, and this would require a set of design principles to be applied to statements, addressing points such as length structure, format , and content. The final option is an approach based on descriptors. This would involve a set of descriptors framed to be more detailed than design principles. They would set out requirements for the length structure and content of simpler statements.
The DWP is preference is the voluntary adoption of simplified annual benefit statements. However, it does also seek views on whether it should mandate an approach to simplified statements, three statutory guidance. The consultation runs until 20 December, 2019
For our final topic, we were considered a further recent decision of the courts on the rectification of pension scheme documentation.
In the Blatchford case, the high courts allowed rectification of pension scheme documentation, which had a [inaudible] incorporated higher pension increase rates than were ever intended the cases of interest because it concluded that it was sufficient to establish that the parties had never addressed their minds to the relevant wording in order to allow rectification. In other words, the court was able to rely on a negative intention.
That is an intention not to do something in order to allow rectification to remove the inserted unintended provisions, none of the contemporaneous documentation suggested that there was any intention to provide a more favorable pension increase rate. If it had been intended, it was considered that such a change would have been drawn expressly to the attention of the scheme trustees. It was noted by chief must much that an outward expression of agreement is not required in pension cases.
If there was a joint continuing common intention to make no change the consensus or be a negative one is established and rectification could be granted.
That's all for the podcast this year for the topics in detail on all the subjects discussed can be found in the December snapshots and from your usual Stevenson , Howard pensions law team contact. Thanks for listening. We hope you have a lovely Christmas and new year, and don't forget that you can listen again and subscribe to the series on iTunes or Stitcher or on the Stephenson Harwood website.