Hearn & Ors v Dobson & Anor

Part 3 of the Pensions Act 2004 applies to a multi-employer pension scheme as a single scheme where the scheme does not satisfy the statutory conditions for treating sections as separate schemes. A separate fund created under scheme rules is not necessarily a separate scheme under paragraph 1 of Schedule 2 to the Occupational Pension Schemes (Scheme Funding) Regulations 2005. The relevant question includes whether there is more than one employer when the statutory scheme divisions arise. An employer which no longer employs active members is not an employer for this purpose, subject to the statutory deeming provision for frozen schemes. Assets and liabilities attributable to a separate fund must therefore be included in the funding assessment for the single scheme where paragraph 1 does not apply.

The claim concerned the Construction Confederation Staff Pension Scheme, a multi-employer final salary scheme governed by rules providing for separate funds when an employer withdrew. HBF, HBM and CECA had given notice terminating their liabilities, while CC remained connected with the scheme. The trustees had not yet created the separate funds when the proceedings were brought, but sought directions in advance.

The central issue was whether a separate fund created under Rule M2 would be treated as a separate scheme under paragraph 1 of Schedule 2 to the Occupational Pension Schemes (Scheme Funding) Regulations 2005, so that assets and liabilities attributable to that fund would be excluded from the funding assessment for the remaining employers.

1. The answer to the claim-form question was yes. Assets and liabilities attributable to the HBF and HBM separate funds were to be included when determining contribution rates under Part 3 of the Pensions Act 2004 for the employer or employers other than HBF and HBM.
2. Paragraph 1 of Schedule 2 to the Occupational Pension Schemes (Scheme Funding) Regulations 2005 applies where a multi-employer scheme is divided into sections and conditions A and B are met. The reference to a scheme in paragraph 1(1)(a) was to the Construction Confederation Staff Pension Scheme. The separate funds would constitute sections, but the scheme would have only one employer when those funds were created.
3. The definition of employer in section 124 of the Pensions Act 1995 was relevant but not decisive. Paragraph 3(1) of Schedule 2 provided the necessary context. It showed that an employer which ceased to employ active members ceased to be an employer for paragraph 1, subject to the deeming rule for the person who was employer immediately before the freezing event. CECA had ceased to be an employer on 27 February 2006 and would not be an employer when the funds were created. Accordingly, paragraph 1 did not apply.
4. The consequence was that Part 3 applied on the basis that the pension scheme remained a single scheme. The judge added that, if condition B had been decisive, Rule M5.5 would have fallen within paragraph 1(7), but Rule M5.8 would have left too large a gap in the required ring fence. The trustees could also include in the Share of Fund rights potentially arising under section 228 of the 2004 Act, insofar as they related to identified beneficiaries.