Summary

Where an employer decided to close an existing pension scheme to new entrants, and created a new scheme which would coexist with the original scheme, there was no objection to the employer funding its contributions in respect of the new scheme from the surplus in the fund which had accrued when only the original scheme was in operation.

Facts

Barclays Bank plc ('the Bank'): (a) appealed from the determination of the Pensions Ombudsman that it had been guilty of maladministration in respect of its UK Retirement Fund ('the Fund'); and (b) sought a declaration that certain amendments to the Rules of the Fund ('the Rules') were valid and effective. Prior to June 1997 the Fund provided pension benefits to beneficiaries on a final salary basis. With effect from 1 July 1997 the Bank closed the final salary scheme ('the FSS') to new entrants and established in its place a money purchase scheme ('the MPS'). Existing employees were free to transfer from the FSS to the MPS if they wished. At that time the Fund was substantially in surplus. After July 1997 the Bank made use of the surplus in the Fund to reduce to nil its contributions to both the FSS and the MPS. One of the beneficiaries under the FSS ('H') complained to the Ombudsman that the Bank's use of the surplus to fund its contributions to the MPS constituted maladministration. The Ombudsman upheld that complaint, holding that the MPS was not actually a part of the pre-existing FSS, such that there was no legal basis for the Bank's use of the surplus. He ordered the Bank to restore the level of the Fund with interest. The Bank appealed. In the interim, the Bank and the trustee of the Fund executed a deed making various amendments to the Rules, the purpose of which was to ensure that, if the appeal failed, it would nevertheless be entitled in the future to fund its contributions to the MPS out of the surplus in the Fund. H, on behalf of himself and all other beneficiaries with a like interest, challenged those amendments on the basis that: (a) they purported to allow a return of a portion of the Fund to the Bank, contrary to the deed governing the Fund; (b) they were ultra vires the Bank and the trustee; and (c) they were contrary to s.67 Pensions Act 1995, as they purported to affect H's accrued rights in the Fund.

Held

(1) On the evidence the court was satisfied that there were two separate schemes operating within a single trust fund. (2) The Bank had the right to use the surplus in the Fund to finance its contributions to the MPS. Prior to the creation of the MPS the Bank had had the right to pay reduced or nil contributions to the FSS so long as there was a sufficient surplus in the Fund. The introduction of the MPS would not have been intended to cause the Bank to lose that right, whether in relation to the FSS or the MPS. Moreover, the surplus did not belong to the pensioners or employees under the FSS. (3) The amendments plainly did not affect a return of any portion of the Fund to the Bank. They simply reduced the amount which the Bank would otherwise be obliged to contribute. (4) There was nothing ultra vires about the amendments. (5) It could not be sensibly contended that a member of a pension scheme had any "right", much less an "accrued right" to or in relation to surplus.

Appeal allowed. Declaration as sought.