Urenco UK Ltd.v Urenco UK Pension Trustee Company Ltd & Anor

Under Part 4 of Schedule 8 to the Energy Act 2004, the comparison required to determine whether a receiving pension scheme is appropriate is made against the nuclear scheme’s benefits as provided by its rules at the transfer date, ignoring its power of amendment. The receiving scheme’s power of amendment is taken into account when the comparison is made. Future-service benefits for protected employees cannot therefore be reduced below the statutory comparison level. An increase in member contributions may be equally detrimental and is subject to the same protection. Contractual undertakings and arrangements made to secure broad comparability may independently prevent detrimental changes. Where undertakings are expressed as permanent and were relied upon for certification, they cannot be varied unilaterally through the scheme’s amendment power.

Urenco sought declarations concerning proposed changes to the Urenco UK Limited Pension Scheme. The changes would increase member contributions from 7.5 per cent to 9.5 per cent and reduce the maximum pension-increase rate from 5 per cent to 2.5 per cent, subject to RPI.

The second defendant represented employees transferred from Sellafield Ltd to Urenco in 2008. Before the transfer they participated in the Combined Pension Scheme. The claim concerned whether Part 4 of Schedule 8 to the Energy Act 2004, the sale and purchase agreement, a GAD certificate of broad comparability and related undertakings restricted the scheme’s amendment power.

1. The proposed changes were impermissible as regards the transferred employees. The statutory protection and the contractual arrangements prevented detrimental variation of their future-service benefits.

2. The “no less favourable” assessment under paragraph 11 of Part 4 of Schedule 8 to the Energy Act 2004 is made at the relevant transfer time. For a first-generation transfer, the nuclear scheme is assessed by reference to its provisions in force immediately before the transfer. Its power of amendment is ignored. The receiving scheme’s amendment power is taken into account.

3. The receiving scheme must provide future-service benefits, together with relevant employment benefits under paragraph 11(6)(a), which are no less favourable than the benefits under the nuclear scheme at the transfer date. The assessment compares the schemes’ benefits as they stand, while the likelihood and constraints of future amendment may be considered in deciding whether the statutory test is satisfied.

4. The prohibition extends to increases in member contributions where they are detrimental in substance. The initial 7.5 per cent contribution rate could be justified by the special allowance protecting take-home pay. A subsequent increase to 9.5 per cent was not permissible under the statutory and contractual arrangements.

5. Even if the statutory construction were wrong, clause 6.3 of the SPA required benefits broadly equivalent to those certified against the CPS at 1 October 2008. The certificate concerned the package of benefits as assessed without treating the CPS amendment power as reducing that package. The scheme could not therefore be amended to reduce future-service benefits.

6. The undertakings were permanent in effect. Paragraph 9 required compensation for any relevant contribution increase, subject to the proper treatment of later pay increases. The undertakings concerning retirement age, pensionable remuneration and RPI increases were likewise not subject to unilateral variation through the scheme’s amendment power.

7. The court’s conclusion was that, so far as the transferred employees were concerned, the scheme amendment power could not be exercised to vary their future-service benefits detrimentally.