High Court ruling in pilots’ litigation spells out employer obligations
Employers may need to revisit their obligations under industry pension schemes, following an important ruling in the high court.
PNPF Trust Company Ltd v Geoff Taylor and others [2010] EWHC 1573 (Ch) (Pilots litigation) provides clarification of legislative provisions for industry-wide pension schemes.
The claimant was the trustee of a pension scheme, the Pilots’ National Pension Fund, which had a substantial funding deficit.
The court interpreted legislation passed in the wake of the Robert Maxwell scandal in the early 1990s, which was designed to protect scheme members from future mismanagement. Employers had to pay into the scheme while still involved, and pay a one-off sum towards any deficit when ceasing to be involved in it (Pensions Act 1995, s 75).
However, it was not clear when an employer ceased to be involved in a pension scheme, or whether there was a gap in between being involved and ceasing to be involved, during which the employer would pay nothing.
Mr Justice Warren held there was no gap between the obligations. On the question of whether the new legislation overruled the existing terms of a pension scheme, Warren J held that the statutory rules underpin the pension scheme rules and do not override them.
Angela Dimsdale Gill, partner at Hogan Lovells, who acted for the trustee, says the judgment was “a much needed clarification of vital legislative provisions for multi-employer, industry-wide schemes such as this one.
“It tells employers when they have an obligation to pay periodic contributions into their schemes and when they become liable to make lump sum payments into the scheme in order to secure benefits.
“It is true however that finance directors generally will now need to go back to the books and carefully evaluate whether their pension liabilities have increased as a result of this judgment. It is even possible that there will be employers who have thought they have left their pension liabilities behind them and who will now find that they are still ‘on the hook’. There could be some sleepless nights.”
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