Universities Superannuation Scheme Ltd v Simpson & Ors

For statutory preservation purposes, a scheme’s normal pension age is determined by the earliest age at which the particular member is entitled to receive benefits under the relevant terms of employment. A scheme cannot adopt a uniform age for administrative convenience where members have different contractual retirement ages. Preserved benefits must be calculated on a basis no less favourable than the corresponding long-service benefits. Accordingly, where a deferred member’s preserved pension is brought into payment at or after that member’s contractual retirement age, but before the scheme’s general normal retirement age, the trustee may not impose an actuarial reduction. The same principle applies to cash equivalent transfer values. An informal response from a regulatory body does not modify statutory preservation requirements unless it constitutes a valid determination under the legislation.

The claimant, sole trustee of a large occupational pension scheme, sought directions on the proper calculation of preserved benefits for members who left pensionable service before retirement. Some members were contractually entitled to retire on pension at an age below the scheme’s defined normal retirement age, generally 65.

The trustee had applied a uniform normal pension age, historically 65 for male members, when calculating preserved benefits brought into payment before the scheme’s normal retirement age. The defendants contended that the relevant age depended on each member’s contractual retirement rights. The court also considered whether correspondence from the Occupational Pensions Board had sanctioned the trustee’s practice.

1. Statutory meaning of normal pension age. Under Pension Schemes Act 1993, section 180(1)(b), the relevant age is the earliest age at which the particular member is entitled to receive benefits on retirement from employment to which the scheme applies. The references to “the member” and “his retirement” require the age to be determined by the member’s own terms of employment. The phrase does not establish one uniform age for all members of a scheme.
2. Preserved benefits. The preservation provisions require short-service benefits to correspond with the benefits that would have been payable as long-service benefits. Sections 71, 72 and 74 prevent a former member from being treated less favourably for the relevant purpose. Since a member who remained in service could retire at the contractual retirement age without actuarial reduction, the equivalent preserved benefit could not be reduced when brought into payment on or after that age.
3. Application to the scheme. The trustee’s “one size fits all” approach was inconsistent with the statutory provisions and the scheme rules. For a member entitled under the relevant employment terms to retire at an age of at least 60 but below the scheme’s normal retirement age, the trustee could not apply an actuarial reduction when preserved benefits were brought into payment at or after the contractual retirement date. Cash equivalent transfer values had to be calculated on the same basis.
4. Occupational Pensions Board correspondence. The Board’s letter did not amount to a determination under section 134. It neither specified a modification of the statutory requirements nor determined that a provision did not apply. Nothing in the correspondence therefore sanctioned or validated the trustee’s practice.
5. The court recognised that its ruling might create administrative difficulties, but left directions on those matters until the principal issue had been determined.