Pollock v Reed

For a bulk transfer of occupational pension rights without members’ consent, the actuarial comparison required by regulation 12 of the Occupational Pension Schemes (Preservation of Benefit) Regulations 1991 concerns the respective packages of rights and transfer credits under the scheme rules. The actuary must decide whether the receiving-scheme transfer credits are broadly no less favourable than the rights transferred. Relative funding, employer covenant strength and the practical likelihood of payment are not factors within that certification exercise. The same approach applies where the transferring scheme is being wound up. Winding-up legislation may reduce benefits paid because assets are insufficient, but it does not reduce the underlying accrued rights which must be compared. The trustees retain responsibility for deciding whether to make the transfer and may consider benefit security when exercising their fiduciary powers.

The trustees of the Halcrow Pension Scheme sought declarations concerning a proposed bulk transfer of the scheme’s assets and liabilities to a new occupational pension scheme, HPS2, without members’ consent. The transaction offered more secure funding but narrower headline benefits in some respects. The principal issue was whether the scheme actuary, when certifying under regulation 12 and Schedule 3 of the Occupational Pension Schemes (Preservation of Benefit) Regulations 1991, could take account of the relative security and likely payment of benefits. A further issue concerned whether the answer differed because HPS was to be wound up. The court also considered, for completeness, whether the trustees’ decision-making process warranted the court’s blessing.

1. Construction of the actuarial certificate. The court held that regulation 12(3), read with Schedule 3 and section 73 of the Pension Schemes Act 1993, requires comparison of the respective packages of headline rights and transfer credits under the transferring and receiving schemes. The expressions “rights” and “transfer credits” refer to rights under the scheme rules, including rights to benefits and relevant options. They do not include the separate question whether the benefits are likely to be paid.
2. The words “opinion” and “broadly no less favourable” require professional actuarial judgment in comparing differently structured benefit packages. They do not confer an unrestricted discretion to take account of relative funding, employer covenant strength or benefit security. The different wording of paragraph 2 of Schedule 3, dealing with discretionary benefits, reinforced that conclusion.
3. The conclusion was not altered by the statutory history, consultation material, explanatory material or actuarial guidance. The express security requirement introduced in 1997 was a separate and narrowly framed requirement and was removed in 1999. The court therefore rejected the proposed implication that security remained part of the general “broadly no less favourable” test.
4. Winding up. The same construction applies where the transferring scheme is in winding up. Sections 73 and 74 of the Pensions Act 1995 establish priorities and mechanisms for applying assets and discharging liabilities. They do not diminish the underlying accrued rights merely because benefits actually paid may be reduced. The scheme rules had the same practical effect.
5. Trustees’ decision. The actuary’s certificate is a statutory precondition, not an authorisation or recommendation to transfer. The trustees remain responsible for exercising their powers and may consider relative security when deciding whether to proceed. Applying the test in Public Trustee v Cooper and Merchant Navy Ratings Pension Fund Trustees Ltd v Chambers, the court concluded that the trustees had considered the relevant matters, taken proper professional advice and reached a decision which a reasonable body of trustees could have reached. Had the legal issues been decided differently, the court would have approved the transaction.
6. Issues 1(a) and 1(b) were answered in favour of the first defendant and the Pensions Regulator. Issue 2 was not argued. The transaction was not pursued, and the court reserved further submissions on the duration and extent of confidentiality.

First-instance decision. No appellate history was stated in the judgment.