UK - An appellate court in London has ruled that insurer Prudential did not breach its obligation of good faith when it changed the basis for granting discretionary increases to pension scheme members.
Plaintiff Prudential Staff Pensions, which represents scheme members, claimed the firm had acted unlawfully in 2005 when it mandated a 2.5% cap on future discretionary increases.
Mr Justice Newey ruled: "I do not consider that the extent to which the anticipated deficit was attributable to the change in investment strategy meant the decision Prudential took as regards pension increases was irrational or perverse, or that it otherwise breached the obligation of good faith."
The case hinged on whether Prudential had acted in good faith when it initiated the 2005 policy and afterwards - a criterion codified in 1991 in a case involving the Imperial Tobacco pension scheme.
In its response to the ruling, Prudential pointed out that the measures had been designed to secure the financial future of the scheme.
In a statement, it said: "Prudential sought at all times to be open with the trustees of the scheme about its thinking and proposals."
Law firm Sackers, which acted for the claimants, described the ruling as "very disappointing".
Partner Katherine Dandy pointed to the judge's statement that scheme members might well feel Prudential had treated them unfairly.
She described the case as "a missed opportunity" to update judicial thinking on the relationship between employer and members - "particularly given the paradigm shift in operating conditions".
She added that members needed better protection.