Pensions

Pension scheme - employer required to 'make arrangements' to deal with actuarial surplus - arrangement to use part of surplus to offset employer's existing accrued liabilities valid National Grid Co Plc v Mayes and others; International Power Plc (formerly National Power Plc) v Healy and others: HL (Lord Slynn of Hadley, Lord Steyn, Lord Hoffmann, Lord Clyde and Lord Scott of Foscote ): 4 April 2001Clause 14(5) of the occupational pension schemes of two companies, NG and NP, provided that if there were an actuarial surplus in the fund, the principal employer 'shall make arrangements certified by the actuary as reasonable, to deal with the surplus'.The companies used part of their surpluses, among other things, to reduce the amounts which they paid into the fund.

Beneficiaries of NG's pension fund objected and complained to the Pensions Ombudsman, who upheld the complaints on the ground, among other things, that clause 41(2)(b) prohibited an amendment of the scheme 'making any of the moneys of the scheme payable to any of the employers' and that the release of an accrued debt from the employer to the scheme amounted to paying it an equivalent in money, and clause 14(5) could not be construed as conferring such a power.

NG appealed.

NP sought a declaration that its arrangements were valid.Mr Justice Robert Walker [1997] PLR 157 allowed the appeal and granted the declaration.

The Court of Appeal [2000] ICR 174 allowed appeals by the beneficiaries of both funds.

The companies appealed.Jonathan Sumption QC, Nicholas Warren QC and Christopher Nugee QC (instructed by Linklaters) for NP.

Alan Steinfeld QC and John Stephens (instructed by Lovells) for the representative beneficiary under the NP scheme.

Andrew Simmonds QC (instructed by Pinsent Curtis Biddle) for the trustees of the NP scheme.

Christopher McCall QC, Peter Crampin QC and Michael Furness QC (instructed by Eversheds) for NG.

Nigel Inglis-Jones QC and Geoffrey Topham (instructed by Finers Stephens Innocent) for the representative beneficiaries under the NG scheme.

Paul Newman (instructed by DLA) for the trustees of the NG scheme.Held, allowing the appeals, that a surplus was money in excess of what was needed to effect the main purpose of the scheme and once it was accepted that the employers could act in their own interests, and that the extent to which they were doing so could not be criticised, any arguments about the way in which the surplus was funded were irrelevant; that, from the point of view of the adequacy of the fund, there was no difference between paying the money to the employer and paying it in the form of extra benefits to classes of employees, since both resulted in there being less money in the fund; that clause 14(5) did not require the employer to be sceptical about the actuarial certificate and caution was a matter for the actuary in certifying the arrangements as reasonable; that the employer's duty was simply to make the arrangements, and they did not infringe any express or implied restriction on the employer's powers; that the limitation on the power of amendment did not bar an amendment which released an employer's accrued liability to pay contributions which had not yet been paid, and British Coal Corporation v British Coal Staff Superannuation Scheme Trustees Ltd [1994] ICR 537 had been wrongly decided on that point; and that, accordingly, the arrangements to treat the employers' accrued liabilities as discharged out of the surplus funds did not amount to a payment to the employers out of scheme moneys.

(WLR)