Cripps v Trustee Solutions Ltd

For statutory winding-up priorities, “entitlement to payment” may exist where a pension is already in payment or the member has a right to demand immediate payment. The expression is not confined to payments already made.

Where equality law requires different normal retirement dates for different periods of pensionable service, scheme rules and revenue requirements must be modified only so far as necessary. Benefits accrued outside the Barber window remain governed by their applicable normal retirement date. A member who has reached age 60 may therefore obtain paragraph (b) priority for benefits in payment or demandable at that date, but not for benefits governed by an age-65 normal retirement date which has not been reached.

The Scheme was a final-salary occupational pension scheme with a normal retirement date of 65 for men and 60 for women. Its employer entered liquidation and the Scheme subsequently went into winding up in substantial deficit. The trustees sought directions on the validity of a rule amendment, estoppel and the statutory priorities for applying the Scheme’s assets.

Lewison J held that the amendment was invalid and that no estoppel arose, and declared that certain male members aged 60 to 64 fell within section 73(3)(b) of the Pensions Act 1995, including benefits accrued by service governed by an age-65 normal retirement date. His decision is reported at [2006] PLR 177. The amendment and estoppel issues were not appealed. The central issue was whether the paragraph (b) priority applied to the whole pension or only to benefits arising from the Barber window.

Sir Peter Gibson gave the leading judgment. Lord Justice Tuckey and Lord Justice Ward agreed. The appeal was allowed on the section 73 issue and the judge’s declaration was replaced.

1. Meaning of entitlement. The phrase “entitlement to payment” in section 73(3)(b) of the Pensions Act 1995 is not confined to a pension already being paid. It includes a benefit whose payment the member has a right to demand immediately. The distinction between entitlement and accrued right, discussed in Barclays Bank v Holmes [2000] PLR 339 and Aon Trust Corporation v KPMG [2006] 1 WLR 97, supplied typical examples rather than an exhaustive definition. The provisions of the Pensions Act 1993 concerning preservation of benefits supported that construction. Possibility (a), under which no entitlement had arisen, was rejected.
2. Effect of equality law. Barber v Guardian Royal Exchange [1991] 1 QB 344 and Coloroll Pensions Trustees Ltd v Russell [1995] ICR 179 required male members to receive the same normal retirement date as female members for service within the Barber window. The Scheme rules and revenue requirements had to be modified only to the extent necessary to give effect to that requirement. Barber was not retrospective, so the rules continued to govern service outside the window. Different tranches of pension could therefore accrue by reference to different normal retirement dates.
3. Application of section 73(3)(b). The paragraph (b) priority covered benefits in payment or benefits which the member could demand immediately. It did not extend to benefits accrued outside the Barber window where the member had not reached the age-65 normal retirement date applicable to those benefits. The judge’s wider conclusion, possibility (c), would distort the statutory priorities by giving priority to benefits earned over periods when payment was not yet demandable. Possibility (b) was accepted, making it unnecessary to decide the alternative European-law route.
4. The substituted declaration was that members who had the right to retire at age 60 for any part of their service and were aged between 60 and 64 when winding up commenced fell within section 73(3)(b), but not in respect of pension or other benefits accrued by service to which an age-65 normal retirement date applied.

• Court of Appeal (Civil Division): Allowed the appeal on the construction of section 73 and substituted a narrower declaration.
• Chancery Division: Lewison J held that the rule amendment was invalid, no estoppel arose, and members with a right to retire at age 60 fell within section 73(3)(b) even in respect of benefits governed by an age-65 normal retirement date. The decision is reported at [2006] PLR 177.