“1. Directions as to whether [the Trustee] may, in the circumstances set forth in the witness statement of [Mr Martin] made in support of the Claimant’s application, properly exercise its powers under Rule 12.3(b) of the Scheme Rules to purchase buy-out policies in respect of Scheme members (or any of them) prior to the commencement of an assessment period (as defined insection 132 Pensions Act 2004 ) in relation to the Scheme. 2. If paragraph 1 above is answered in terms that the Claimant may properly purchase buy-out policies in such circumstances, directions as to whether the Claimant should apply the entire fund which is subject to the trusts of the Scheme (subject to any appropriate reserve for costs and expenses and so far as it may be practicable to do so) or only part of such fund (and, if so, which part) in purchasing such buy-out policies. 3. If paragraph 1 above is answered in terms that the Claimant may properly purchase buy-out policies in such circumstances, directions as to whether the Claimant may properly implement the buy-out proposal referred to in Mr Martin’s said witness statement.”
“Where the Trustees purchase a Buy-out Policy under this Rule, they shall be relieved of all liability to provide the specified benefits under the Plan.”
“I was 54 at the time and so became a potential candidate for early retirement under the new arrangements. Following discussions with the Group Managing Director, Ilford offered me a package whereby I would waive my contractual entitlement to 12 months’ notice (at the time I was earning£76,648 per annum and entitled to a bonus of up to 30% depending on performance against target) and in return receive a£30,000 redundancy payment plus an enhanced non-actuarially reduced pension (which I commuted to take the maximum lump sum).”
“In this Schedule “normal pension age”, in relation to the scheme and any pension or lump sum under it, means the age specified in the admissible rules as the earliest age at which the pension or lump sum becomes payable without actuarial adjustment (disregarding any admissible rule making special provision as to early payment on the grounds of ill health or otherwise).”
“The cost issue is important, but the greatest risk to the [PPF] is, without question, moral hazard – that those with the ability to influence the way in which a pension scheme is run will take less care than they otherwise would because of the new PPF. Scheme decision makers might deliberately undertake certain activities or fail to take action if they knew that the PPF will step in 100%. They may make risky investment decisions or not adequately fund their schemes, especially if their employer is in difficulty and they have to make hard choices about where to put the money. Also, others with influence may be less inclined to intervene if they, or their members, will not lose out. We are concerned about moral hazard.”
“I think we must all feel that the settled principles of the law upon this subject must be upheld, namely, that the donee, the appointor under the power, shall, at the time of the exercise of that power, and for any purpose for which it is used, act with good faith and sincerity, and with an entire and single view to the real purpose and object of the power, and not for the purpose of accomplishing or carrying in to effect any bye or sinister object (I mean sinister in the sense of its being beyond the purpose and intent of the power) which he may desire to effect in the exercise of the power.”
“My Lords, the rules on this subject are so well settled that it is quite unnecessary to go through any authorities on the subject. A party having a power like this must fairly and honestly execute it without having any ulterior object to be accomplished. He cannot carry into execution any indirect object, or acquire any benefit for himself, directly or indirectly. It may be subject to limitations and directions, but it must be a pure, straightforward, honest dedication of the property, as property, to the person to whom he affects, or attempts, to give it in that character.”
“In their Lordships’ opinion it is necessary to start with a consideration of the power whose exercise is in question, in this case a power to issue shares. Having ascertained, on a fair view, the nature of this power, and having defined as can best be done in the light of modern conditions the, or some, limits within which it may be exercised, it is then necessary for the court, if a particular exercise of it is challenged, to examine the substantial purpose for which it was exercised, and to reach a conclusion whether that purpose was proper or not.”
“… as with any other instrument, a provision of a trust deed must be interpreted in the light of the factual situation at the time it was created.”
“pleas to this effect have invariably been rejected … - just as trustees who buy trust property are not permitted to assert that they paid a good price.”
“At the risk of stating the obvious, that “main purpose” rule embodies three concepts which are fundamental to a pension scheme of this nature. First, the purpose of the scheme is to provide the retirement and other benefits to which the members, pensioners and dependents are entitled under the rules. The scheme is a “defined benefits” scheme: the benefits are fixed by the rules. The scheme is not set up as a unit trust, under which the members would be entitled to a proportionate share in the fund. … Third, the task of the trustees is to maintain a balance between assets and liabilities valued on that actuarial basis; so that, so far as the future can be foreseen, they will be in a position to provide pensions and other benefits in accordance with the rules throughout the life of the scheme.”
“Whilst avoiding the limits placed on PPF compensation and securing benefits for members at the expense of the PPF might be consequences of the buy-out proposal, if implemented, neither represents the purpose of the proposal.”
“The Trustees may (subject to Members’ rights under Rule 12.2(a)), in lieu of providing the benefits to which all or any of the Members or other persons are entitled under the Plan, transfer to the trustees or administrator of any Retirement Benefits Scheme that satisfies the requirements of the Board of Inland Revenue for this purpose, such amount as they shall decide to be just and equitable, after taking Actuarial Advice.”
“Where a Member has made application to the Trustees under Rule 9.5 for a transfer to an Approved Insurance Company, then the Trustees shall apply the whole or such part of the Member’s Cash Equivalent as is directed by him in the purchase of a Buy-out Policy providing benefits in substitution for the benefits (or relevant part) which would otherwise have been payable under the Plan.”
“… accordingly, the scheme is to be treated as having been wound up immediately after that time.”
“As I explained in paragraph 9 of my first witness statement, the purpose of the proposal is, by combining payments under any annuities purchased with the compensation that the PPF is likely to pay, to secure for members as high a proportion as is possible of the benefits that they were promised under the Scheme.”
“The statutory powers conferred on local authorities to be exercised for public purposes can only be validly used if they are used in the way which Parliament, when conferring the powers, is presumed to have intended. This is a general principle of public law …” (3) The purpose of the PPF is to provide support for schemes that are genuinely unable to afford to secure benefits for their members at the PPF level, and to do so to the extent that they cannot so afford. It would be contrary to this fundamental purpose if a trustee were permitted to take advantage of the presence of the PPF so as to provide benefits in excess of the statutory limits on PPF compensation, and to deplete the scheme assets which will vest in the PPF when the scheme enters it. If it were legitimate to do this, the PPF would soon be exposed to a wide variety of attempts to “game” the system in a way that Parliament could never have intended when it established the PPF. (4) It is perfectly possible for a legislative scheme to guide the court’s decision about what is and is not a proper purpose or a proper consideration in the exercise of a power, even if that power is not itself statutory in origin. The common law can and should develop in a manner that is in harmony with the law as made by Parliament. A desire to circumvent statutory controls cannot be a legally relevant or proper consideration in the exercise of a discretionary power, whatever the source of that power may be. (5) What is a legally proper use of a power must depend upon the context in which the power exists. The context in which modern occupational pension schemes exist cannot be considered purely in terms of the private law relationship between the trustee and the members. Quite apart from the need for trustees to consider the interests of the employer, the legislative framework applicable to pension schemes now includes a considerable public interest element. As Arden LJ recognised in Stevens v Bell, loc.cit., at para 33, “[t]here is a clear public interest in the proper constitution and management of pension funds”
“[t]he common law has treated this matter as one depending on justice, reasonableness and public policy”
“It appears to me that public policy must enter largely into our decision and that therefore it is very relevant to see what policy Parliament has followed in dealing with a closely related subject. … If public policy, as now interpreted by Parliament, requires all pensions to be disregarded in actions under the Fatal Accidents Act, I find it impossible to see how it can be proper to bring pensions into account in common law actions … In my judgment, a decision that pensions should not be brought into account in assessing damages at common law is consistent with general principles, with the preponderating weight of authority, and with public policy as enacted by Parliament, and I would therefore so decide.”
“[He] must do his best by his creditors and contributories. He is in a fiduciary capacity and cannot make moral gestures, nor can the court authorise him to do so.”
“When once you get astride it you never know where it will carry you. It may lead you from the sound law. It is never argued at all but when other points fail.”
“Whereas it is necessary to provide for the protection of employees in the event of the insolvency of their employer, in particular in order to guarantee payment of their outstanding claims, while taking account of the need for balanced economic and social development in the Community.” (2) Article 1(1) provides: “This Directive shall apply to employees’ claims arising from contracts of employment or employment relationships and existing against employers who are in a state of insolvency within the meaning of Article 2(1).” (3) Section II (Articles 3 to 5) of the Directive is headed “Provisions concerning guarantee institutions”
“However, in order to avoid the payment of sums going beyond the social objective of this Directive, Member States may set a ceiling to the liability for employees’ outstanding claims.” (4) Section III of the Directive (Articles 6 to 8) is headed “Provisions concerning social security”
“Member States shall ensure that the necessary measures are taken to protect the interests of employees and of persons having already left the employer’s undertaking or business at the date of the onset of the employer’s insolvency in respect of rights conferring on them immediate or prospective entitlement to old-age benefits, including survivors’ benefits, under supplementary company or inter-company pension schemes outside the national statutory social security schemes.”
“A member state may therefore impose, for example, an obligation on employers to insure or provide for the setting up of a guarantee institution in respect of which it will lay down the detailed rules for funding, rather than provide for funding by the public authorities.”
“In this regard, in so far as it does no more than prescribe in general terms the adoption of the measures necessary to “protect the interests” of the persons concerned, article 8 of the Directive gives the member states, for the purposes of determining the level of protection, considerable latitude which excludes an obligation to guarantee in full.”
“54. According to unchallenged statements in the documents before the court, two of the claimants will receive only 20% and 49% respectively of the benefits to which they were entitled. 55. There being no obligation to guarantee entitlement to benefits in full, it remains to determine the minimum level of protection required by [the Insolvency Directive]. 56. It must be pointed out that, unlike articles 3 and 4 of the Directive, the words of which make it possible, notwithstanding the latitude given to the member states, to determine the minimum guarantee of outstanding claims relating to pay (see Francovich v Italian Republic[1995] ICR 722 , paras 18-20), neither article 8 of the Directive nor any other provision therein contains elements which make it possible to establish with any precision the minimum level required in order to protect entitlement to benefits under supplementary pension schemes. 57. Nevertheless, having regard to the express wish of the Community legislature, it must be held that provisions of domestic law that may, in certain cases, lead to a guarantee of benefits limited to 20% or 49% of the benefits to which an employee was entitled, that is to say, of less than half of that entitlement, cannot be considered to fall within the definition of the word “protect” used in article 8 of the Directive. 58. On that point, it may be noted that in 2004, according to unchallenged figures communicated to the Commission by the United Kingdom, about 65,000 members of pension schemes suffered the loss of more than 20% of expected benefits, and some 35,000 of them, that is to say, nearly 54% of the total, suffered losses exceeding 50% of those benefits. 59. It must therefore be concluded that a system such as that established by the United Kingdom legislation does not ensure the protection provided for by the Directive and does not constitute proper implementation of article 8 thereof.”
“… it should be observed that, as the Court pointed out in its judgment in Case 14/93 Von Colson and Kamann v Land Nordrhein-Westfalen [1984] ECR 1891, paragraph 26, the Member States’ obligation arising from a directive to achieve the result envisaged by the directive and their duty under Article 5 of the Treaty to take all appropriate measures, whether general or particular, to ensure the fulfilment of that obligation, is binding on all the authorities of Member States including, for matters within their jurisdiction, the courts. It follows that, in applying national law, whether the provisions in question were adopted before or after the directive, the national court called upon to interpret it is required to do so, as far as possible, in the light of the wording and the purpose of the directive in order to achieve the result pursued by the latter and thereby comply with the third paragraph of Article 189 of the Treaty.”
“115. Although the principle that national law must be interpreted in conformity with Community law concerns chiefly domestic provisions enacted in order to implement the directive in question, it does not entail an interpretation merely of those provisions but requires the national court to consider national law as a whole in order to assess to what extent it may be applied so as not to produce a result contrary to that sought by the directive … … 118. In this instance, the principle of interpretation in conformity with Community law thus requires the referring court to do whatever lies within its jurisdiction, having regard to the whole body of rules of national law, to ensure that directive 93/104 is fully effective, in order to prevent the maximum weekly working time laid down in Article 6(2) of the directive from being exceeded (see, to that effect, Marleasing, paragraphs 7 and 13). 119. Accordingly, it must be concluded that, when hearing a case between individuals, a national court is required, when applying the provisions of domestic law adopted for the purpose of transposing obligations laid down by a directive, to consider the whole body of rules of national law and to interpret them, so far as possible, in the light of the wording and purpose of the directive in order to achieve an outcome consistent with the objective pursued by the directive. In the main proceedings, the national court must thus do whatever lies within its jurisdiction to ensure that the maximum period of weekly working time, which is set at 48 hours by Article 6(2) of Directive 93/104, is not exceeded.”
“In such circumstances the solvency of the PPF would be jeopardised to the detriment of all those (including the members of the Scheme) who are or will be relying on it in the future (possibly many decades into the future) to pay their pensions, and to pay them at the levels currently envisaged.”
“This is the best estimate we can make of the potential extra annual costs to be passed on to levy payers in future using the data available to the PPF based on its experience to date. It compares reasonably with the estimations made by the Government in the Parliamentary debates on the 2004 Act. Although it should be seen as a broad estimate of potential consequences rather than anything more precise than that, the fundamental points I make in this statement would hold good in relation to any large-scale repetition of this proposal by other schemes, regardless of the precise amount of the resulting cost to the PPF.”
“4. I am far less confident than Mr Martin that other schemes will not be able to exploit the existence of the PPF by entering the buy-out market to provide benefits in excess of PPF limits. While the market may at present require fairly long lead in times for a full buy-out of benefits to take place, my own experience from time at the Regulator has taught me that practices and markets invariably evolve to take advantage of commercial opportunities where it is perceived such opportunities exist. I think it would be naïve to assume insurance companies could not act very quickly to secure the buy-out of at least part of a scheme’s liabilities if there were a commercial demand for them to do so. … 5. Even if I were wrong in my assessment of the risks of many other schemes attempting to buy out benefits in excess of PPF limits (which I do not believe I am), it does not follow that the PPF is safe from proposals of a similar nature to that being considered in the present case. Similar arguments to those being deployed in the present case, are also being deployed in many other cases of which the Regulator has become aware, to justify a whole range of schemes and practices which, in the absence of the PPF, would otherwise be wholly indefensible uses of pension scheme resources. Collectively such schemes pose a very significant threat to the PPF.”