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Foster Wheeler ruling could trigger further legal action

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  • Foster Wheeler ruling could trigger further legal action

UK - The Court of Appeal's judgement in the Foster Wheeler case has received conflicting reactions from the industry including a suggestion that the ruling could lead to further litigation.

In a judgement issued yesterday in the Foster Wheeler Ltd Vs Hanley and Others case, the three Appeal Court judges decided members of the Foster Wheeler pension scheme with mixed retirement dates of 60 and 65, as a result of equalisation rules, should be allowed to take all their benefits at the earlier age but with an actuarial reduction for the income that is paid early.

But Paul Jayson, partner at Barnett Waddingham, claimed: "Whether or not this issue will impact on a particular scheme is a 'drafting lottery', depending on how the issue of sex equalisation was dealt with nearly 20 years ago, in the face of considerable uncertainty at the time and pressure to put something in place following European Court decisions.

"Today's judgement can only lead to more litigation against previous advisers from trustees who find themselves with an unexpected bill," he added.

The court granted the employer's appeal against an earlier High Court ruling in November, which allowed members to take all their benefits from age 60 without any reduction - as allowed by the company from 1993 until a rule change in 2003 - but it rejected the idea of splitting the pension and paying it in two instalments. (See earlier IPE article: Judges allow Foster Wheeler appeal)

One of the arguments applied by Lady Justice Arden in the ruling against the High Court decision was that allowing members to take a single pension without a reduction for the age 65 benefits could constitute a "windfall" that was unfair to the company and other members.

Robin Simmons, partner at law firm Sackers, said: "The appeal can rightly be hailed as a good result. It 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."

He pointed out the judges had "succeeded in doing so on a construction of the particular scheme's rules", although he admitted other possibilities - such as splitting periods of benefits and paying them at different ages - "might work in other cases".

However, Jayson argued: "It is a nonsense that certain scheme members will receive a windfall that was never intended nor expected, at a time when the pressure on scheme finances and sponsors is immense. I certainly did not expect this result. I thought the Courts would consider this issue as a matter of policy and that common sense would prevail."

In comparison, Simmons claimed the ruling had sent "a positive message to other pension schemes with difficult equalisation issues. The judges stated schemes should only be treated as amended, with minimum interference, to give effect to equalisation".

He meanwhile pointed out the decision had steered employers and trustees to work together to find solutions for their particular scheme, as the judgement stated "it must be much more satisfactory, from every point of view, if the task of ensuring compliance with [European] law can be accomplished in the case of most schemes without recourse to the court".

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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