IBM United Kingdom Pensions Trust Ltd v IBM United Kingdom Holdings Ltd & Ors

Rectification of a pension scheme instrument requires an objectively established intention held by the relevant trustee and employer at execution, and a mistake causing the instrument not to reflect that intention. In a trustee amendment case, the relevant intention is not necessarily a consensus communicated between the parties. Internal evidence may establish the objective intentions of the trustee and employer separately.

A scheme may be rectified to confer flexible retirement on active members even where the parties intended deferred pensions to become payable only at a later age. The statutory preservation requirements may then impose separate consequences, but they do not prevent rectification. Amendments changing the preservation age apply to the whole deferred pension unless Parliament provides a temporal limitation.

The claimant trustee sought rectification of the 1983 trust deed and rules establishing the C Plan within the IBM Pension Plan, and of subsequent replacement deeds. It alleged that the documents mistakenly required employer consent for retirement between ages 60 and 63, although the intended benefit was an unreduced pension at any age in that range without consent.

A related issue concerned deferred members and whether their pensions were intended to become payable unreduced from age 60 or only at age 63. IBM counterclaimed that contractual terms in employee handbooks restricted retirement before age 63 to cases where the employer consented. The court also considered the statutory preservation requirements and the effect of later pension legislation.

1. Rectification principles. The requirements stated in Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101, as reformulated in Daventry DC v Daventry District Housing Ltd [2012] 1 WLR 1333, were accepted. The relevant common intention had to exist at execution, be objectively established, and have been omitted from the instrument by mistake.
2. In a pension amendment requiring trustee action and employer consent, the inquiry is directed separately to the objectively established intentions of the trustee and employer. A communicated consensus between them is unnecessary. Internal board and committee material may be relevant evidence.
3. The evidence established that Holdings and the Trust Company intended active C Plan members to retire between ages 60 and 63 without employer consent and without actuarial reduction. The consent requirement in the 1983 deed and rules was therefore rectified. The same conclusion applied to the 1990 deed and later replacement deeds, which were intended to carry forward the substantive C Plan rights.
4. The parties intended deferred pensions to be payable without reduction only at age 63. That intention did not prevent rectification of the active-member provisions. The preservation requirements were not overriding and could impose separate statutory consequences, but they did not defeat rectification.
5. The amendments made by the Pensions Act 2004 to the preservation requirements had no temporal limitation. Compliance was assessed under the amended provisions, so a scheme was compliant if short-service benefits became payable no later than age 65 where normal pension age was 65 or below.
6. The contractual counterclaim failed. The handbooks and pension booklets were descriptive and expressly subordinated to the trust deed and rules. They did not create a contractual restriction requiring consent for retirement between ages 60 and 63. Section 91 of the Pensions Act 1995 did not prevent an original contract with a new joiner from defining future pension rights.
7. The current rules required actuarial reduction on early payment of deferred benefits. The wording was mandatory and could not be construed as requiring payment without reduction merely to achieve compliance with earlier preservation requirements. Issues concerning possible duties under Clauses 12 and 13 and IBM’s implied pension duties were left unresolved.