When a drafting error is discovered in pension schemes rules it can be an expensive and lengthy process to correct it. If the error affects the calculation of benefits then it is very unlikely that it will be possible simply to amend the scheme to correct the mistake as statute prevents amendments which could have a detrimental effect on accrued rights. 

There are a number of cases where trustees and employers have sought to correct drafting errors by seeking a rectification order from the court. If successful this will provide a complete solution, with the court confirming the correction of the error retrospectively to the point the mistake was made. Rectification actions require very clear evidence of exactly what the intention of the parties was. This evidence can be difficult to obtain, particularly if the mistake was made a long time ago.

In the case of BCA Pension Trustees Limited (BCA), which was decided in the High Court this month, the scheme trustees used a legal solution more often seen in small private trusts to obtain an order confirming the correct construction of the scheme rules.        

BCA concerned the drafting of the pension increase rule in a consolidated deed. Some of the words from the original rule had been left out and this made the new rule unclear.

Section 48 of the Administration of Estates Act 1985 allows the court, on application by the trustees, to decide a question of construction where it is supported by the written opinion of a 10-year qualified barrister. In BCA, Paul Newman QC provided the trustees with an opinion that the terms of the original (pre-consolidation) rules were admissible as evidence and that it would not be contrary to the general principles of construction (which are set out in some detail in the judgment) for the missing wording to be read in. He accepted that, in a construction case, the subjective intention and actions of the trustees were not relevant (unlike in a rectification case).

The judge agreed and ruled that the pension increase rule should be construed with the additional wording in order to make the rule work.

However, this decision does not bind the scheme members. This leaves the trustees in a slightly uncertain position. They can properly provide pension increases in line with the construction approved by the court but are open to a future challenge by members (possibly unlikely because of the cost implications) and any such challenge could result in a different construction which might mean the trustees having to recover any increases wrongly paid. The judge also ordered that the trustees must give notice of this judgment to the members in a form agreed by him. 

This uncertainty is the main reason for section 48 not being widely used in pensions cases. It could however be a practical solution for trustees to consider, particularly where the construction contended for is not so controversial that it is likely to give rise to a challenge from members.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.