CMG PENSION TRUSTEES LIMITED v CGI IT UK LIMITED

A pension-scheme rule providing that an unclaimed benefit is retained for the purposes of the scheme may operate as a forfeiture clause, even without using the word forfeiture. The rule may extinguish unpaid shortfalls in lump sums and pension instalments after six years, whether or not the beneficiary is missing or aware of the underpayment. A claim requires an express or implied assertion of the right to the specific unpaid benefit, made after it falls due and within six years, unless continuing. Completing a retirement-option form is insufficient where it does not assert entitlement to the shortfall. Recoupment of overpayments requires a competent-court order where the total or deduction rate is disputed; a declaration is sufficient, but the Pensions Ombudsman is not a competent court for that purpose.

The Trustee sought the determination of nine questions concerning the construction and effect of Rule 5.11 of the CMG UK Pension Scheme. The Scheme had been administered using incorrect normal-retirement ages and accrual rates, resulting in underpaid lump sums and pension instalments. The parties agreed that claims should be treated as made on 1 October 2019, and that post-1 October 2013 arrears were not forfeit.

The central issues were whether Rule 5.11 was a forfeiture provision; whether it applied to shortfalls caused by administrative or drafting errors; what constituted a claim; the effect of retirement-option forms; the appropriate interest rate; and the statutory requirements for recouping mistaken overpayments under the Pensions Act 1995.

1. Construction of Rule 5.11. Rule 5.11 was a forfeiture clause. The words requiring an unclaimed benefit to be retained for the purposes of the Scheme extinguished the entitlement after six years. The rule applied generally, not merely to missing beneficiaries or orphaned funds. The statutory background, the rule’s interaction with Schedule II, and the earlier versions of the rule supported that construction (paras [91]–[98], [161]).
2. Shortfalls. “Benefit” included the unpaid element of a lump sum or periodic pension payment. Accordingly, unclaimed shortfalls arising from the Equalisation Issue or Accrual Rate Issue were extinguished six years after the relevant payment fell due. Forfeiture of a lump-sum shortfall did not alter future pension instalments (paras [112]–[125], [162]–[165]).
3. Claims. A claim required an express or implied assertion of a right or entitlement to the unpaid benefit or instalment. It had to be made after the benefit fell due and within six years, unless it operated as a continuing claim. Knowledge of the entitlement was not essential, although it could assist in interpreting the communication (paras [133]–[137], [166]).
4. Retirement-option forms. The forms requested the benefits calculated by the administrator but did not assert entitlement to any later-discovered shortfall. They therefore did not constitute claims for the purposes of Rule 5.11 (paras [138]–[140], [167]).
5. Implied limitation. No term should be implied requiring notice of the underpayment or actual knowledge before forfeiture. Rule 5.11 was intelligible and workable without such a term, and necessity was not established (paras [114]–[120], [144], [169]).
6. Interest. Interest was payable at 1% above base rate (paras [141]–[143], [167]).
7. Recoupment. Under section 91(6) of the Pensions Act 1995, a dispute about either the total overpayment or the rate of deduction required an order from a competent court. A declaration that the Trustee was entitled to recoup a specified sum at a specified rate was sufficient. The Pensions Ombudsman was not a competent court for this purpose (paras [145]–[160], [170]–[172]).