Company pension scheme - Employer in administration
BEST Trustees plc (as Trustee of the Singer & Friedlander Ltd Pension & Assurance Scheme) v Kaupthing Singer & Friedlander Ltd (in administration): Chancery Division (Mr Justice Sales): 16 March 2012
Regulation 5 of the Occupational Pension Schemes (Employer Debt) Regulations 2005, SI 2005/678 (the 2005 regulations), so far as material, provides: '(1) The value of the assets which are to be taken into account for the purposes of section 75(2) and (4) of the Pensions Act 1995 (the 1995 act) shall be determined, calculated and verified by the trustees or managers. (2) The liabilities which are to be taken into account for the purposes of section 75(2) and (4) of the 1995 act shall be determined by the trustees or managers and the amount of those liabilities shall be calculated and verified by the actuary. (3) The assets of the scheme shall be valued, and the amounts of the liabilities shall be determined and calculated by reference to the same date.'
Section 75 of the 1995 act, so far as material, provides: '(1) This section applies in relation to an occupational pension scheme other than a scheme which is (a) a money purchase scheme, or (b) a prescribed scheme or a scheme of a prescribed description. (2) If (a) at any time which falls (i) when a scheme is being wound up, but (ii) before any relevant event in relation to the employer which occurs while the scheme is being wound up, the value of the assets of the scheme is less than the amount at that time of the liabilities of the scheme, and (b) the trustees or managers of the scheme designate that time for the purposes of this subsection before the occurrence of an event within paragraph (a)(ii), an amount equal to the difference shall be treated as a debt due from the employer to the trustees or managers of the scheme... (4A) Where the current event is within subsection (6A)(a) or (b), the debt under subsection (4) is to be taken, for the purposes of the law relating to insolvency as it applies to the employer, to arise immediately before the occurrence of the current event... (16) For the purposes of paragraph (15), amount B shall be determined by the trustees or managers and calculated by the actuary as if it had become due at the applicable time.'
Section 75 of the 1995 act created a debt, which was owed, pursuant to the 2005 regulations, by an employer in respect of an occupational pension scheme to the trustee or trustees of the scheme, upon the occurrence of certain trigger events. One trigger event for a section 75 debt was where an employer became insolvent. The 'debt' came into existence upon the occurrence of that event and was calculated as the sum representing the difference between the cost of purchasing annuities in the market to meet the liabilities of the scheme and the market value of the scheme's assets.
The claimant (the trustee) was the trustee of an occupational pension scheme (the pension scheme). The defendant (the employer) was the former employer of individuals who were members of the pension scheme. The employer went into administration on 8 October 2008. The trustee applied to the Chancery Division of the High Court for a declaration as to the proper construction of regulation 5 of the 2005 regulations. The point of construction which arose was relevant to working out the amount of a debt owed by the employer to the trustee, as was deemed to arise by operation of section 75 of the act.
An issue arose as to the timing of the buy out valuation to be performed for the purposes of section 75 of the act, namely, the point in time at which the trustee was notionally to be assumed to go into the market to purchase annuities to meet the accrued pension liabilities of the scheme. The employer submitted that, on the true construction of regulation 5 of the 2005 regulations, the time at which both the value of the pension scheme assets and the cost of the notional acquisition of annuities in the market, should be assessed was 'the applicable time', namely 8 October 2008.
That was the date on which the employer went into administration, which triggered section 75 of the act. Pursuant to regulation 2 of the 2005 regulations, 'the applicable time' meant the time as at which the value of the assets of a scheme and the amount of its liabilities were to be determined, calculated and verified for the purposes of section 75 of the 1995 act. The trustee submitted that the time at which the cost of the notional acquisition of annuities in the market should be assessed was the time at which the scheme actuary for the pension scheme actually performed that calculation and certified the resulting figure.
The court ruled: On the true construction of regulation 5 of the 2005 regulations, the time at which both the value of the pension scheme assets and the cost of the notional acquisition of annuities in the market should be assessed, was 'applicable time', namely the date on which the event which triggered section 75 of the act occurred (see ,  of the judgment).
It was a reasonable inference that the 2005 regulations were intended to operate in a way which would promote the purposes of the insolvency regime, including allowing distributions to creditors at the earliest possible time (see  of the judgment). In the instant case, there was overwhelming textual and contextual support for the interpretation of regulation 5 of the 2005 regulations as advanced for the employer.
That interpretation was the natural interpretation of regulation 5 of the 2005 regulations. Applying that interpretation to the instant case, the applicable time was 8 October 2008 (see ,  of the judgment).
A declaratory order would be made to affirm the stated interpretation (see  of the judgment). Farrell v Alexander  2 All ER 721 applied.
Christopher Nugee QC (instructed by Pinsent Masons LLP) for the trustee; Jonathan Hilliard (instructed by Freshfields Bruckhaus Deringer LLP) for the employer.