Ascham Homes Ltd v Auguste

For Regulation 19 of the Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations 2007, “business efficiency” means an operative reason connected with a more efficient structure, system or deployment of resources. It is distinct from dissatisfaction with the individual post-holder’s performance. Business efficiency need not be the exclusive reason for termination, but it must be the plainly preponderant reason. The likely improvement in efficiency resulting from removing an underperforming employee does not itself make the termination one on business-efficiency grounds. Regulation 19 is exceptional and must be restrictively construed. Business survival or continuity of funding is not, without more, business efficiency.

Ascham Homes Limited appealed under section 151(4) of the Pension Schemes Act 1993 against the Deputy Pensions Ombudsman’s Final Determination dated 30 December 2014. The Deputy Ombudsman had found that Ascham improperly refused Hassett Auguste an immediate unreduced pension under Regulation 19 of the Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations 2007, and directed that the pension be put into payment.

Mr Auguste had left after the Council, Ascham’s sole source of funding, lost confidence in him and required his replacement as a condition of continued funding. The central issue was whether that termination was on grounds of business efficiency, or instead arose principally from concerns about his personal performance and the Council’s lack of confidence in him.

The appeal was allowed and Ascham’s decision refusing an unreduced early pension was restored.

1. The employing authority need not expressly invoke Regulation 19 at the time of termination. It must, however, consider the true grounds for requiring the member to leave and the resulting pension entitlement. Its determination may be set aside if perverse.
2. “Business efficiency” connotes a change in the way the business is conducted, intended to secure more efficient deployment of resources. It concerns systemic or structural improvement, rather than the personal or subjective characteristics or performance of the post-holder. A concurrent personal factor does not automatically exclude Regulation 19, but business efficiency must be the plainly preponderant reason.
3. Regulation 19 is exceptional when read with Regulations 29 and 30. It confers substantial benefits beyond the ordinary deferred or actuarially reduced pension and should therefore be restrictively construed and applied. Business survival, continuity of funding, or the fact that removal may lead to more efficient functioning does not, without more, establish business-efficiency grounds.
4. The Deputy Ombudsman confused the consequence of Mr Auguste’s removal with the reason for it. The evidence showed that the Council’s lack of confidence arose from concerns about his performance and that he was replaced without any systemic or structural change. The Board was entitled to conclude that the primary reason was not business efficiency and had not acted perversely.
5. The court did not need to determine the compromise-agreement issue, since the appeal succeeded on the Regulation 19 grounds.

• High Court (Chancery Division): appeal from the Deputy Pensions Ombudsman’s Final Determination dated 30 December 2014. Appeal allowed and Ascham’s decision restored.
• Deputy Pensions Ombudsman: upheld the complaint and directed Ascham to put the unreduced pension into payment, with interest.