The High Court has today handed down the longest judgment ever in a pensions case, dealing with a whole series of deficit related questions concerning the Pilots' National Pension Fund ("PNPF").  CMS Cameron McKenna took a central role in the case, with Andrew Spink QC and Nicolas Stallworthy as counsel, acting on behalf of representative members.

The PNPF is an under-funded, industry-wide pension scheme that unusually included self-employed, as well as employed, members.

The main issues in the case were which "employers" (potentially including the harbour authorities who only authorised the self-employed pilots and had never previously been required to contribute to the scheme) were liable to pay contributions in respect of the deficit and what powers the trustee had to require contributions from them in the light of its unilateral power to amend the rules and funding legislation.

Following a three-week trial in which nine parties were separately represented, Warren J decided as follows. 

  • In respect of the employer debt legislation as it stood prior to 6 April 2008, an employer exits a multi-employer scheme (thus becoming liable for a Section 75 debt) when it ceases to employ any active members or anyone eligible to become a member (whether or not consent is required for them to join).   However, in contrast to the recent High Court decision in Cemex, the mere employment of a deferred or pensioner member who is no longer eligible to re-join the scheme is not sufficient to avoid a debt arising.
  • "Employer" in this context does not include a self-employed person, but the assets and liabilities in respect of them still need to be taken into account when considering the level of any deficit in the scheme.
  • An employer ceases to be an employer for the purpose of the ongoing scheme funding legislation (Part 3 Pensions Act 2004) in the same circumstances that it would cease to be an employer under the employer debt legislation.  This is different to the approach taken by the High Court in Hearn v Dobson.
  • Contributions can be set at a level above that which could otherwise be required under the scheme rules where necessary to comply with the statutory funding requirements. 
  • Where the scheme rules allow trustees (without employer consent) to impose contributions up to a prescribed limit, but employer consent is required above that limit, those respective powers will apply to statutory funding.

The judge said that in his view, trustees could, if they had the power in their scheme rules, require contributions which were higher than those set out in the schedule of contributions.  However, he declined to decide this point so his comments on this issue are not binding.

The judge was asked to consider the Section 75 debt issue in the context of guidance issued by the Pensions Regulator and held that in this case he attached only the "slightest weight" to it and had no "sense of anxiety" that his views differed from those of the Regulator.  This emphasises the point, that such guidance represents the Regulator's view on particular issues and does not have the force of law.

The ruling will provide welcome clarification to schemes trying to determine whether and if so when an employer may have ceased to be an employer for Section 75 debt and statutory funding purposes.  It also provides detailed guidance on how provisions in the rules of a pension scheme should be construed.

A full copy of the judgment can be found here, while a more detailed analysis of the judgment will follow shortly.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 28/06/2010.