Bainbridge v Quarters Trustees Ltd

A hybrid pension scheme may contain a single fund supporting both defined benefit and money purchase benefits. The existence of a money purchase section does not, without more, create a separate fund or individually allocated assets. The governing trust deed and rules must be construed as a whole. Accounting treatment, member statements, explanatory booklets and general statutory definitions cannot displace their clear meaning. A notional retirement fund may be used to calculate the amount of a member’s benefit without requiring equivalent assets to be ring-fenced. Express provisions for a separate voluntary-contributions sub-fund may reinforce the conclusion that other scheme assets form one fund.

Mr Bainbridge appealed against a determination of the Deputy Pensions Ombudsman rejecting his complaint concerning the winding-up of the Sunley Turriff Pension Scheme. The Scheme contained Final Salary and Money Purchase Sections and was in deficit.

Mr Bainbridge contended that the assets supporting money purchase benefits formed a separate fund, available only for those benefits. Quarters, the trustee, contended that the Definitive Trust Deed and Rules created one Fund, to be applied under the winding-up priorities without distinguishing between the two sections. The central issue was the proper construction of the Scheme documentation and whether statutory provisions, accounts, booklets or member statements required a different result.

1. Appeal dismissed. The Deputy Pensions Ombudsman was correct to adopt the Single Fund Construction.
2. The Definitive Trust Deed and Rules, read as a whole, created one Fund. Clause 4.1 referred to “the Fund”, which was a defined term. The provision that the singular included the plural could not convert that definition into a power to create several Funds.
3. The documentation showed that, where a separate fund was intended, it said so expressly. Rule 2.2.4 created a separate sub-fund for voluntary contributions, but Clause 13 expressly subjected that sub-fund to the winding-up provisions. This strongly indicated that the remaining scheme liabilities were to be met from one Fund, irrespective of whether benefits arose under the Final Salary or Money Purchase Section.
4. The reference in the Money Purchase Rules to using a member’s Retirement Fund did not require a separately identified asset fund. “Retirement Fund” was defined as a notional amount. The Rules could operate by applying an equivalent amount from the Fund as a whole.
5. The statutory definitions and accounting provisions relied upon did not compel a different construction. The Scheme was a hybrid scheme, and benefits under its Money Purchase Section could still be money purchase benefits even though the Scheme assets were held in one Fund. The accounts, administration and benefit statements were irrelevant to construction, although potentially relevant to misrepresentation or estoppel.
6. The MPS Booklet gave the impression of individually allocated funds, but its health warning made the formal Trust Deed and Rules prevail in the event of inconsistency. Applying Steria Ltd v Hutchison [2006] PLR 291, the booklet could not override the governing documentation. The issue of possible estoppel or reliance on the Scheme accounts had not been determined by the Ombudsman.
7. No term could be implied requiring the Money Purchase assets to be ring-fenced. The Scheme operated effectively under the Single Fund Construction, and the requirements for implication of terms were not satisfied.

• High Court (Chancery Division): appeal from the Deputy Pensions Ombudsman dismissed. The court upheld the determination dated 9 August 2007 adopting the Single Fund Construction.