UK - Trustees behind a pension fund for marine pilots have launched a complex legal case has begun in the UK High Court to determine the definition of an employer for the purpose of funding pension scheme liabilities, and the point at which an employer stops being an employer.

The Pilots’ National Pension Fund (PNPF) is a multi-employer pension scheme established in 1971 for marine pilots working for port authorities on an employed or self-employed basis.

Over the years, there has been a substantial decline in membership, as port authorities have left the scheme and made other arrangements for their pilots. The action has therefore been brought as the scheme now has less than 200 active members and a deficit of over £200m (€228m).

At 31 December 2006, the scheme was worth £350.2m, but with such a large deficit against its liabilities the trustee feels it must seek a ruling forcing port authorities to help make good this deficit.

“There is now no way that the remaining active members can contribute enough to make up the deficit,” says Giles Orton, a partner with Eversheds, who is representing the Port of Tyne Authority, one of eight defendants. “The trustees want to know how far they can force the port authorities to pay money into the scheme.”

Orton said officials will have to examine who is an employer for the purposes of scheme-specific funding, and for the purposes of Section 75 debt. And the judgment could influence what employers have to pay if they try to leave behind their responsibilities to earlier scheme membership.

The defendants in the court action also include the Port of London Authority and Milford Haven Port Authority.

The case itself is a test for the pensions industry, however Eversheds officials believe it will not be a landmark ruling largely because of its membership.

“While it is certainly going to be of use, its significance has been overplayed. In particular, 87% of the scheme’s liabilities relate to self-employed service, which is a unique feature,” said Orton.

Lesley Harrold, professional support team lawyer at Norton Rose, also added: “It is a real one-off [case]. Although it’s a large case with multiple partners, I am not sure that it will have a wide impact on pension schemes generally, because it is not likely that there are many schemes with self-employed members.”

The case is expected to take three weeks, with judgement reserved for up to several months afterwards. Legal costs are estimated to run to between £10m and £15m.

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