Danks & Ors v Qinetiq Holdings Ltd & Anor

Under a pension scheme rule providing for increases by reference to RPI or any other suitable cost-of-living index selected by the trustees, members have no subsisting right to increases at RPI until each increase is calculated. Similarly, a deferred member has no accrued right to revaluation at RPI until the single revaluation is undertaken when benefits come into payment. A later selection of CPI therefore does not constitute a detrimental modification under sections 67 to 67I of the Pensions Act 1995. The scheme may also permit different indices for different purposes or periods where that construction is consistent with commercial sense and workable administration.

The claimant trustees sought directions concerning their proposed replacement of RPI by CPI under the 2010 deed and rules of the QinetiQ Pension Scheme. The questions concerned whether the change would adversely affect subsisting rights under sections 67 to 67I of the Pensions Act 1995, whether different indices could be used for different purposes or periods, and whether Mr Pocock should represent the relevant class of members under rule 19.7(2) of the Civil Procedure Rules 1998.

The dispute required construction of the rules governing pension increases in payment, revaluation of deferred pensions, and the definition of “Index”.

1. Sections 67 to 67I. A change from RPI to CPI would not be a detrimental modification of subsisting rights merely because CPI was generally less favourable. The question depended on the rights created by the scheme rules.
2. Pensions in payment. Rules 36 and 49 gave a pensioner an entitlement to the pension calculated under the relevant benefit rule, subject to the scheme’s power to adjust future increases by reference to RPI or another suitable index selected by the trustees. The member acquired a right to the increase at the applicable rate only when the annual increase was calculated. A future change to CPI therefore did not retrospectively modify an existing entitlement. The reasoning in Aon Trust Corporation v KPMG [2006] 1 WLR 97 did not require a different result, since that case concerned a pension calculated once and for all when it came into payment.
3. Deferred pensions. Rule 50.1 created an entitlement to retirement benefits, while rule 49.4 provided for one revaluation when the deferred pension became payable or was transferred. Until that calculation occurred, the member had no accrued right to revaluation at RPI. The trustees could therefore use the index prevailing when the revaluation was undertaken, including a hybrid of indices for different periods.
4. Different indices. “Index” could refer to RPI for some purposes or periods and CPI for others. Reading the definition as requiring one index for all purposes would make the scheme cumbersome and unworkable. The commercially sensible construction permitted the trustees to select and alter indices by purpose or period, subject to the proper exercise of their fiduciary power.
5. Representation order. Mr Pocock’s interest was identical to that of the members he was appointed to represent. Isolated objections did not justify refusing the order. The court accordingly answered the questions in the Claim Form as set out above and appointed Mr Pocock under rule 19.7(2). Costs were reserved for further argument.