The law still stands that it’s very hard to successfully challenge trustees’ decisions if they go through
the right decision-making processes, even if the challenger wheels out the big guns to throw the book
at the trustees.
BA disputed the power of the trustee to amend the scheme in 2011 to introduce a new trustee
discretion to apply pension increases. This power was introduced around the time when it became
possible for pension increases to be determined by CPI rather than RPI. The trustee then used this
new power in 2013 to grant a discretionary increase of 0.2% from 1 December 2013. However,
despite BA’s best efforts, the High Court decided the trustee validly introduced the discretionary
power – in doing so the trustee had not abused its powers. They had also validly gone on to exercise
that power in their trustee meeting in November 2013. Although the decision is fact-specific, in
deciding this, the judge endorsed the standard principles of interpretation for pension scheme
interpretation. The judgment also shows the importance of trustees going through the right decision-making
process when reaching a decision, i.e.:
- They must consider all relevant factors and ignore all irrelevant factors
- They should decide what weight to give each factor when reaching their decision
- They can take account of the scheme’s financial position and the employer’s views, but these are
only two factors among others
- They must reach a decision which a reasonable set of trustees could reach
- They should take professional advice as required
- They should document the decision-making process fully in the trustee’s minutes, especially with
important decisions.
Doing this means they have followed a proper process. Equally, if an employer wants to challenge
trustees’ decisions, they should not delay like BA did, as it makes it harder to challenge the decision.
While BA is appealing two points in the Court of Appeal, these are scheme-specific. They relate to
restrictions in the BA scheme’s amendment power about the scheme not being a benevolent scheme
and no compassionate payments allowed to be made from it.
Published:21 July 2017
Pensions Law Update - July 2017
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