IMG Pension Plan HR Trustees Ltd v German & Anor

A pension-scheme amendment power cannot be used indirectly to remove a restriction which protects accrued or prospective member benefits. A conversion from final salary to money purchase benefits is permissible only if the monetary value of benefits accrued by pre-amendment service is preserved by an underpin. A genuinely retrospective amendment cannot rewrite the period before execution. Employee application forms and explanatory material will not ordinarily create a contract or estoppel surrendering protected pension rights where the governing deed and rules prevail and the implications were not clearly explained. A compromise waiving pension rights is a surrender within section 91 of the Pensions Act 1995 and is unenforceable.

The claimant, the present professional trustee of the IMG Pension Plan, sought declarations under CPR Part 64 concerning the purported conversion in 1992 of a final salary occupational pension scheme into a money purchase scheme. The issues included the operative amendment power, the effect of its fetter, retrospective operation, the effect of employee applications and explanatory materials, the validity of trustee decision-making, and the enforceability of later compromise agreements.

The defendants represented existing members and the employers. The court also considered agreements under which individual members purported to waive pension rights. The central questions were whether accrued final salary rights had been validly converted and whether they could subsequently be displaced by contract, estoppel or compromise.

1. Amendment power. Clause 7(i) of the 1977 Deed, rather than rule 27 of the 1981 Rules, was the operative amendment power. The 1977 Deed was definitive and was supplemented, not replaced, by the Rules. Rule 27 could not validly be introduced by using clause 7(i) to remove the protection against reducing benefits already secured by contributions. The purported amendment was therefore invalid in its entirety.

2. Fetter and conversion. The fetter protected future and contingent final salary benefits accrued by service up to the amendment date. It did not prohibit conversion in form from final salary to money purchase, but the conversion was effective only subject to an underpin preserving the future monetary value of the relevant proportion of final pensionable pay. Actuarial transfer values and special contributions calculated on the basis used by the employers did not satisfy that requirement.

3. Retrospective effect. The 1992 Deed could not validly operate from 1 January 1992 when executed on 3 March 1992 so as to treat the intervening accrual as money purchase accrual. That would rewrite history and was also barred by the fetter. The relevant protection ran to service up to 3 March 1992.

4. Extrinsic materials. The application forms, memoranda and presentations did not create a binding contract, estoppel by representation or estoppel by convention overriding the governing trust documents. The documents presented the change as a fait accompli, directed members to the booklet and did not clearly explain the surrender or calculation of final salary rights. The members therefore did not give sufficiently informed consent.

5. Trustee decision-making. The New Trustees had rubber-stamped a decision already made by IMG, but this was not equitable non est factum or a total failure to exercise the power. IMG had considered the conversion and obtained professional advice. The decision was potentially flawed because the fetter had not been considered, but it was not invalid on the grounds advanced.

6. Compromise agreements. Section 91(1)(a) of the Pensions Act 1995 encompasses an agreement waiving pension rights which would otherwise exist, even where there was a bona fide dispute about their existence. The statutory exceptions did not include compromises. The compromises were therefore unenforceable. Alternatively, the agreements with Mr A and Mr D were sufficiently clear to waive rights connected with the 1992 reorganisation.

First-instance determination in the High Court (Chancery Division). No appellate history is stated in the judgment.