Merchant Navy scheme to seek sponsor funding after High Court ruling
The Merchant Navy Ratings Pension Fund (MNRPF) has won a High Court battle over a deficit contribution model, allowing it to collect funding from around 210 former sponsors.
The multi-employer defined benefit scheme for naval ratings, subordinates to officers, has a deficit near £500m (€682m) but has only seen 40 of its roughly 250 former sponsors contribute to the deficit regime since it closed to future accrual in 2001.
A UK High Court judge ruled in favour of a trustee regime allowing it to collect deficit reduction payments from all former sponsors of the fund.
It relates back to when the 30,000-member scheme closed to future accrual in 2001, when only 40 employers still had actively accruing members within the scheme.
The MNRPF was closed in deficit as the remaining sponsors created a deficit reduction plan looking to eliminate the underfunding by 2007.
However, external economic circumstances prevented this, leaving the 40 to seek assistance from former 210 sponsors during a two-year legal dispute ending in 2011.
The Court ruled in favour of the 40 leaving the trustee of the scheme to create a complex actuarial model for deficit funding for all sponsors.
Mrs Justice Asplin ruled after a one-month hearing at the end of 2014 and said the trustees of the pension fund could introduce the new contribution regime to address the scheme deficit.
“I am happy to approve the proposed exercise of the power of amendment in the form which has been put before the Court,” she said in her judgement.
“It seems to me that the trustee dealt with this matter in a meticulous manner and sought all relevant and proper advice upon which it quite properly relied.”
Asplin said the trustee work did not exceed the scope of its powers and had not taken any irrelevant matters into consideration.
She said it was unfortunate the regime had suffered “wide-ranging criticism” but added it was inevitable given the commercial interests at hand for the former sponsors.
The trustees took the model to the High Court and were opposed by five former sponsoring employers of the MNRPF including shipping giants P&O Ferries and Stena Line.
The trustee’s success was supported by law firm Mayer Brown on both the creation of the regime and in court litigation.
Chairman of the MNRPF, Edmund Brookes, said members and sponsoring employers could take comfort the new regime has been subjected to legal scrutiny.
“All involved in the MNRPF can take comfort from the Judge’s comments, which were very supportive of the process we went through in making our decisions,” he said.
“The trustee anticipates shortly starting the process of formally introducing the new deficit contribution regime.”
The judgement also clarified rules surrounding the inter-relationship between trust law’s stance of acting in a member’s ‘best interest’ while also creating reasonable outcomes for sponsoring employers.
Counter-arguments against the regime said the trustee acted outside of its powers and the ‘best interest’ rule by giving the 40 sponsors credit in the new regime for deficit contributions since 2001, as this only benefited those employers and not members.
However, Asplin said the ‘best interest’ principle was not a standalone point and that the trustee was allowed to account for an employer’s interest if the primary purpose of providing pensions was being furthered.
Burges Salmon, who acted on behalf of member representatives and P&O Ferries, warned: “This judgement will now result in trustees coming under increasing pressure from employers to take their interests into account.
“They can no longer simply rely on the argument they are obliged to act in the best interests of members.”