British Vita UnLtd v British Vita Pension Fund Trustees Ltd & Anor

Part 3 of the Pensions Act 2004 and the Scheme Funding Regulations did not create an exclusive code which displaced a scheme’s contribution rules. Before the first Part 3 schedule of contributions came into force, there was no conflict between those provisions and a rule allowing trustees to demand higher contributions. The statutory funding objective required sufficient and appropriate assets to cover technical provisions, but did not prevent funding at a higher level. A scheme rule requiring trustees to have regard to members in service and related benefits did not impose mandatory pro rata apportionment among participating employers. Trustees could consider other relevant factors and, where the principal employer failed to express an opinion after a proper opportunity, proceed on their own informed assessment.

The claimant was the principal employer of two defined benefit occupational pension schemes. Their rules permitted the trustees to determine contributions, subject to actuarial advice, and required the trustees to have regard to members employed by each participating employer and benefits related to that service.

After the claimant’s acquisition by private equity owners, the trustees made lump-sum demands based on a gilt-based funding assessment and allocated the entire demands to the claimant. The claimant sought declarations that the demands were invalid because Part 3 of the Pensions Act 2004 and the Occupational Pension Schemes (Scheme Funding) Regulations 2005 had overridden the contribution rules, and because the rules required pro rata allocation.

1. Statutory funding regime. The claim for declaratory relief was refused. Part 3 of the Pensions Act 2004 and the Scheme Funding Regulations did not invalidate the demands, which were made before a Part 3 schedule of contributions was in force or required to be prepared.
2. The statutory funding objective in section 222 required sufficient and appropriate assets to cover technical provisions. It did not require a scheme to fund only to that level or prevent a higher funding objective. The IORP Directive was neutral on whether domestic law could preserve contribution rules producing greater technical provisions or asset cover.
3. Section 306 operated only where there was a conflict between the legislation and the scheme rules. Before a schedule of contributions was in force, the legislation did not state that only scheduled contributions could be recovered. The scheme contribution rules therefore continued to operate. The transitional provisions and savings in Schedule 4 did not alter that conclusion.
4. The court expressly left open whether Part 3 and the Regulations could override a scheme contribution rule after a schedule of contributions had come into force. That issue had not been argued and might require consideration of the Pensions Regulator’s position.
5. Construction of Rule 12. The requirement to have regard to members in service with a participating employer and to benefits related to that service did not require a mandatory pro rata apportionment of contributions. The trustees were entitled to consider other relevant matters. The meaning of “such service” was preferably understood as service with the relevant employer, including liabilities attributable to past service, but the result did not depend on resolving that issue.
6. The trustees had taken actuarial and financial advice, had invited the claimant’s opinion on apportionment, and had given it adequate opportunities to respond. The claimant’s failure to provide an opinion did not change the nature of the power. The trustees were entitled to proceed on their own assessment of the relevant benefits and liabilities. Whether the trustees had acted unreasonably was reserved for possible Part 7 proceedings.