Hughes v The Royal London Mutual Insurance Society Ltd

For the purposes of the definition of “transfer credits” in the Pension Schemes Act 1993, “earner” bears its general statutory meaning. It does not require the member to earn remuneration from an employer connected with the occupational pension scheme.

A court may supply omitted statutory words only in the exceptional circumstances identified in [2000] 1 WLR 586. It must be abundantly sure of the statutory purpose, the drafting error and the substance of the provision Parliament would have enacted. Where those conditions are not met, the court must apply the enacted language.

Ms Hughes appealed under section 151 of the Pension Schemes Act 1993 against the Pensions Ombudsman’s dismissal of her complaint against Royal London.

She was a member of a personal pension scheme and sought to use the cash equivalent of her accrued rights to acquire transfer credits in an occupational pension scheme. Royal London refused, and the Ombudsman held that she was not an “earner” because her earnings did not come from an employer connected with the occupational scheme.

The appeal concerned the construction of “transfer credits” and, alternatively, the exercise of Royal London’s discretionary transfer power.

1. Appeal allowed on the statutory entitlement issue. The court did not determine the alternative challenge to Royal London’s discretion because the first ground gave Ms Hughes the result she sought.

2. Section 181(1) of the Pension Schemes Act 1993 defines “transfer credits” as rights allowed to an earner under the rules of an occupational pension scheme. The phrase “under the rules” governs “rights”, not “earner”. The provision therefore requires the relevant member to be an earner, but does not require that person to be an earner in relation to a scheme employer.

3. The Ombudsman’s interpretation would have required words to be read into the statutory definition. The applicable approach was that stated in Inco Europe Ltd v First Choice Distribution [2000] 1 WLR 586: words may be added, omitted or substituted only in a plain case of drafting error, where the court is abundantly sure of the statutory purpose, the inadvertent failure to give effect to it, and the substance of the provision Parliament would have enacted.

4. Having considered the statutory schemes of the Pension Schemes Act 1993 and the Social Security Contributions and Benefits Act 1992, the court was not abundantly sure of any of those three matters. It was therefore not permissible to read additional words into “transfer credits”.

5. “Earner” consequently had its general meaning under sections 3, 4 and 112 of the Social Security Contributions and Benefits Act 1992. As Ms Hughes was accepted to have earnings from another source, she was an earner and entitled to require Royal London to use the cash equivalent of her personal pension rights to acquire transfer credits in the occupational scheme.

The Pensions Ombudsman dismissed Ms Hughes’s complaint on 30 June 2015. Permission to appeal to the High Court was granted by Mann J under section 151 of the Pension Schemes Act 1993. The High Court allowed the appeal on the first ground.