UK High Court upholds amendment made to Wembley DB pension scheme
UK - The UK High Court has upheld an amendment made to a pension scheme in 2000 that aimed to lower the rate of increase applicable to pensions in payment for future service.
In 2000, the defined benefit (DB) pension scheme owned by the company Wembley Plc introduced an amendment that sought to reduce the rate of increase from 5% fixed to capped LPI (Limited Price Indexation) at 5%.
According to Chantal Thompson, partner at law firm Baker & McKenzie, which represented Wembley, the rules the DB scheme operated under meant members would receive a 5% increase per annum.
Thompson told IPE: "Both the company and the trustees were concerned about the funding of the pension plan back in 1999.
"Therefore, they agreed that, instead of providing this 5% increase, they would amend the plan to reflect the statutory requirements, which stipulated that it would no longer be 5% fixed but 5% capped."
The scheme was winding up in 2005 as the company went into liquidation.
In January this year, Wembley and HR Trustees - an independent company of trustees responsible for winding up the pension scheme - settled a dispute regarding the amendment.
The case concerned the validity of the amendment made to the pension scheme operating under standard Legal & General rules.
The rules include a requirement for the trustee to "forthwith declare" amendments in writing.
"The issue came from the fact one of the trustees representing the DB pension scheme did not sign the amendment," Thompson said.
"The failure was simply due to an omission and not to the fact this trustee objected to the amendment."
As a result, the key issue for the court was to decide whether the trustees had indeed properly declared the amendment.
On Tuesday this week, the High Court finally validated the amendment, applying the maxim that equity "treats as done that which ought to have been done".