Allied Domecq (Holdings) Ltd v Allied Domecq First Pension Trust Ltd & Ors

Where pension scheme rules provide that the actuary determines the collective contribution rate without employer consent, the statutory protections for schemes of that kind apply across the scheme. A rule may separate the actuary’s determination of the collective rate from the later apportionment of contributions between employers and agreement of the payment period. Employer involvement in those ancillary matters does not prevent the rate from being determined by the actuary without employer agreement. The court should prefer a practical construction of pension scheme rules which enables the funding mechanism to operate effectively.

The claimant, the principal company of two multi-employer pension schemes, sought declarations concerning the construction of the Occupational Pension Schemes (Scheme Funding) Regulations 2005 and the schemes’ contribution rules. The schemes were in deficit and their rules contained both a general contribution provision and a deficiency-restoration provision. The central issue was whether the actuary determined the collective contribution rates without the employer’s agreement, so that regulations 5(3)(b) and 8(2)(e), and paragraph 9(5) of Schedule 2, applied.

1. The court declared that regulations 5(3)(b) and 8(2)(e), and paragraph 9(5) of Schedule 2 to the Occupational Pension Schemes (Scheme Funding) Regulations 2005, applied to both schemes.

2. The claimant accepted that the relevant provisions concerned collective contribution rates, rather than the apportionment of contributions between individual employers. Rule 12.1 therefore fell within paragraph 9(5), because the actuary determined the collective rate and the arrangements for apportionment and payment did not alter that conclusion.

3. Rule 18.7.5 was construed as having two parts. The words before the semicolon required the participating companies collectively to pay an amount, certified by the actuary, sufficient in the actuary’s opinion to restore solvency. Those words concerned determination of the collective contribution rate. The words after the semicolon dealt with apportionment between employers and the period within which payment was to be made.

4. The reference to agreement with the Principal Company did not make employer consent necessary for determination of the collective rate. In a multi-employer scheme, the statutory expression concerned whether the rates could be determined without the agreement of any employer. The Principal Company was itself an employer and represented the participating companies for the relevant purpose.

5. The court considered that the practical construction was preferable. It was unlikely that the rules intended the deficiency-restoration mechanism to depend on agreement which might produce deadlock, particularly where the general contribution rule used an actuarial mechanism.

6. The court also concluded that, had the claimant’s construction of rule 18.7.5 been accepted, the further arguments would not have made the statutory provisions applicable.