Employers can adopt pragmatic approach to pension equalisation
Pension lawyers have broadly welcomed a Court of Appeal ruling on pension schemes with mixed retirement dates.
In Foster Wheeler Ltd v Hanley and Ors [2009] EWCA Civ 651, the court held that members of the Foster Wheeler pension scheme with mixed retirement dates of 60 and 65 should be allowed to take all their benefits at an earlier age but with an actuarial reduction for the income that is paid early.
The court overturned an earlier high court ruling in November, which allowed members to take all their benefits without reduction at 60. Lady Justice Arden said this amounted to a “windfall” that was unfair on the company and other members. The company had argued for “split” pensions, where a member took some benefits at 60 and had to wait until 65 for the rest.
Robin Simmons, partner at niche pensions law firm, Sacker & Partners, says: “The appeal demonstrates the judiciary’s willingness to find ways to reach the ‘right’ solution. The High Court’s decision resulted in a windfall for certain members and the Court of Appeal was at pains to find a workaround within the confines of the scheme’s rules.
“It has succeeded in doing so on a construction of the particular scheme’s rules. Other possibilities—such as splitting periods of benefits—might work in other cases.”
Giles Orton, partner at Eversheds, says: “The Court of Appeal has told employers they can adopt pragmatic approaches to equalisation, with no need to allow members windfall bonuses where these are not required to comply with the basics of European discrimination law.
“Equalisation issues have proved very expensive to pension schemes over the years. Many members have been awarded extra benefits because trustees and employers have failed to equalise properly. In this case the courts appear to have recognised that pension schemes are already underfunded and set their face against further benefit windfalls.”
