The PNPF Trust Company Ltd v Taylor & Ors

The court held that a pension scheme trustee’s power to amend its rules may extend to imposing substantially greater contribution obligations, including deficit-repair obligations, on both employed and self-employed competent harbour authorities. The scope of the power is determined objectively by construing the scheme instruments as a whole. The power’s scope is distinct from the propriety of its exercise.

A self-employed competent harbour authority, and a self-employed pilot, are not an “employer” for the purposes of Pensions Act 1995 section 75 or Part 3 of the Pensions Act 2004. The statutory debt regime nevertheless takes account of all scheme assets and liabilities. An employment cessation event depends on whether the employer ceases to employ persons in the description of employment to which the scheme relates, not merely whether it ceases to employ active members.

The claimant trustee sought declarations concerning the powers available to repair a substantial deficit in the Pilots’ National Pension Fund. The issues concerned the construction and amendment of the 1988 Rules, the effect of standard deeds of accession, statutory employer debts under section 75 of the Pensions Act 1995, and the scheme-specific funding regime under Part 3 of the Pensions Act 2004.

The dispute involved employed and self-employed pilots, active and formerly active competent harbour authorities, and the validity and operation of Rules 13(4) and 14(4). The central questions were whether additional contribution obligations could be imposed, which bodies were statutory employers, when employment cessation events occurred, and how the statutory funding regime interacted with the scheme rules.

1. Amendment powers. Rule 9(1)(a) was sufficiently wide to permit amendments requiring Active ECHAs to pay more than 1.5 times active employee contributions, imposing balance-of-cost obligations, and imposing contributions on Active or Formerly Active SCHAs and ECHAs. The same conclusion applied to contributions relating to transferred-in service. The power’s scope was not restricted by an implied term based on reasonable expectations or by the principle in Hole v Garnsey [1930] AC 472. Those principles were aspects of the construction exercise and did not justify restricting the clear words of the power.
2. Deeds of accession. The standard covenant required compliance with the Rules insofar as they related to Members employed or authorised by the relevant CHA. It could extend to former employees or formerly authorised pilots where the provision related to liabilities arising from their period of employment or authorisation. The deeds did not confine the obligations to administrative matters.
3. Validity of amendments. The introduction of Rules 13(4) and 14(4) was within the scope of Rule 9(1)(a). Whether a future exercise of the power was proper remained a separate question. Rule 13(4) had been properly introduced on the evidence.
4. Statutory employers. An SCHA was not an “employer” for section 75 of the Pensions Act 1995 or Part 3 of the Pensions Act 2004. A self-employed Member was likewise not an employer. The statutory language did not justify treating a person using self-employed services as an employer without clearer words. All scheme assets and liabilities nevertheless fell within the section 75 valuation, including liabilities attributable to self-employed service.
5. Employment cessation events. Regulation 6(4) of the Employer Debt Regulations was not confined to cessation of employment of active Members. The relevant inquiry was whether the employer continued to employ a person eligible to join the scheme, with or without trustee consent. Continued employment of a deferred or pensioner Member who was not eligible to rejoin was insufficient.
6. Scheme funding. The statutory funding regime could require contributions greater than those recoverable under the existing Rules where necessary to satisfy the statutory funding objective. Without employer consent, however, the trustee could not use paragraph 9 of Schedule 2 to impose contributions beyond the limits of its rule-based power, including the applicable shared-cost ratio and absolute cap. Issues concerning contributions after a schedule imposed by the Pensions Regulator were left unresolved.

First-instance decision of the High Court (Chancery Division). The judgment determined the trustee’s questions and issues by declarations and guidance.