Langdell v Abbey Life Assurance Company Ltd

For the purposes of IR12, a reduction in pension benefits following foreclosure is lifted only to the extent that the scheme trustees recover money from the employer under rights acquired after foreclosure. Recovery by an insurer from policy security discharges the insurer’s loan to the trustees but is not recovery by the trustees from the employer. The two recoveries must be kept analytically distinct. Where the employer has made no repayment to the trustees, the corresponding restriction on the member’s tax-free retirement lump sum remains.

Dr Langdell appealed from a determination of the Deputy Pensions Ombudsman concerning benefits under the Softek International Ltd Directors’ and Executives’ Retirement Plan. The Ombudsman upheld complaints of maladministration but rejected his challenge to the calculation of his tax-free lump sum.

The calculation deducted £8,863, representing the amount Abbey Life had taken from the policy in 1991 after Softek defaulted on a loan arrangement. Permission to appeal was refused. Dr Langdell then sought reconsideration, relying on a previously undisclosed letter and contending that the policy payment had discharged both the loan to the trustees and the back-to-back loan to Softek.

1. Application refused. The court declined to reconsider its refusal of permission to appeal. Although the court’s jurisdiction to recall a judgment after the order had been sealed was uncertain, the application was considered on its merits.
2. The loan arrangements comprised two separate loans. Abbey Life lent money to the scheme trustees against security over the policies. The trustees then lent the money to Softek. Abbey Life’s enforcement of its security discharged the trustees’ liability to Abbey Life, but did not establish that the trustees had recovered money from Softek.
3. On the proper construction of IR12 para 16.75, the reference to amounts recovered by the scheme trustees concerned recovery from the employer. It did not include recovery by the insurer from policy security. Para 16.85 confirmed that construction by referring expressly to amounts recovered by the trustees from the employer.
4. The later letter did not alter that conclusion. Its reference to applying money in the Sterling Account to discharge the loan referred to the Abbey Life loan agreement, not the separate loan between Softek and the trustees. The documentation could not sensibly create security over the policies for the trustees’ loan to Softek.
5. There was no evidence that the trustees had recovered any money from Softek. Accordingly, the restriction on the tax-free lump sum was not lifted, and the deduction of £8,863 remained justified.

• Deputy Pensions Ombudsman: The determination dated 10 September 2014 upheld certain maladministration complaints and awarded £500 compensation, but rejected the complaint concerning calculation of the tax-free lump sum.
• High Court (Chancery Division): Permission to appeal was refused. The subsequent application to reconsider that refusal was refused.