G4S Plc v G4S Trusteees Ltd

In a final salary occupational pension scheme, closure to future accrual normally ends members’ pensionable service even where a final salary link is preserved. Post-closure employment may increase the cash value of benefits already earned, but it does not qualify members for further pension or other benefits. The final salary component identifies the value of accrued service; it does not itself constitute further accrual. Such members are therefore not active members for the purposes of the Occupational Pension Schemes (Employer Debt) Regulations 2005, and the scheme is frozen.

G4S plc brought a Part 8 claim concerning two sections of the G4S Pension Scheme. The sections had closed to future accrual, but members who remained employed retained a final salary link under the scheme rules. The issue was whether those members remained in “pensionable service” under section 124(1) of the Pensions Act 1995, and therefore remained active members for the purposes of the Occupational Pension Schemes (Employer Debt) Regulations 2005.

The answer determined whether an employer’s cessation of employment could trigger a section 75 debt. The trustee was neutral, while a representative member argued that the sections remained open.

1. Declaration. The Relevant Sections became frozen schemes with effect from the Cessation Date. Members whose accrual had ceased were not in pensionable service and were not active members.
2. Statutory definition. Section 124(1) of the Pensions Act 1995 contains two separate limbs: the member must be in service in a description or category of employment to which the scheme relates, and that service must qualify the member for pension or other benefits. It was unnecessary to determine the full scope of the first limb because the second limb was not satisfied.
3. Final salary schemes. In an ordinary final salary scheme, each year of pensionable service earns a fraction of the member’s eventual final salary. If accrual stops, subsequent employment does not earn further pension. It merely identifies or quantifies the pension already earned by reference to the eventual final salary. The final salary and service components of the formula therefore perform different functions.
4. Statutory context. Section 51 of the Pensions Act 1995 strongly supported that conclusion. Where accrual ceased before the statutory dividing date but the final salary link continued, the whole pension remained attributable to the earlier pensionable service. It would be incoherent to treat the same salary-related increase as attributable to earlier service for section 51 while treating later service as qualifying the member for that increase.
5. The preservation provisions in the Pension Schemes Act 1993, statutory revaluation, transfer values, section 67 of the Pensions Act 1995, and practical consequences under the employer debt regime did not justify a different construction. Any apparent anomalies or drafting difficulties were insufficient to displace the ordinary meaning of pensionable service.
6. The court agreed on the central point with Asplin J’s reasoning in Merchant Navy Ratings Pension Fund Trustees Ltd v Stena Line Ltd [2015] EWHC 448 (Ch), although it did not adopt every aspect of that judgment’s analysis.