Devon and Somerset Fire and Rescue Authority v Lee Howell & Anor

The court was asked to determine whether the transitional "entitlement condition" in paragraph 22(4)(a) of Schedule 36 to the Finance Act 2004 (the requirement that, on 5 April 2006, a member had an "actual or prospective right" to benefits from an age of less than 55) was satisfied in respect of a Chief Fire Officer under the Firemen's Pension Scheme Order 1992 (FPSO) where entitlement to an early pension was conditional on the permission of the fire and rescue authority.

The judge held that an "actual" right denotes an immediate, unconditional entitlement and that a "prospective" right does not extend to rights which will only arise if a third party exercises a discretion or gives consent or permission. Applying those principles, the conditional entitlement in FPSO rule B1 (which requires permission of the fire and rescue authority before a chief fire officer can give a notice of retirement that would trigger an early pension) did not amount to an "actual or prospective" right for the purposes of paragraph 22(4)(a). Consequently the entitlement condition was not met and any pension payment under the Scheme to the defendant before age 55 would be an unauthorised payment under the Finance Act 2004.

Background and parties. The claimant is Devon and Somerset Fire and Rescue Authority (the Fire Authority). The first defendant is Mr Lee Howell, a chief fire officer who sought to take pension benefits before age 55. The second defendant is HM Revenue & Customs. The matter was trialled under Part 8 seeking declarations about the application of transitional provisions in the Finance Act 2004 to the Firefighters' Pension Scheme (as set out in the Firemen's Pension Scheme Order 1992 (FPSO)).

Nature of the claim / relief sought.

• The claimant sought a declaration as to whether the "entitlement condition" in paragraph 22(4)(a), Schedule 36, Finance Act 2004 applied so that the member (Mr Howell) had a protected pension age allowing payment before the revised normal minimum pension age without triggering unauthorised payments tax charges.

Issues framed by the court.

• Whether, on 5 April 2006, Mr Howell had an "actual or prospective right" under the Scheme to any benefit from an age of less than 55 (the entitlement condition in paragraph 22(4)(a) of Schedule 36 FA 2004).
• Ancillaryly whether the "retirement condition" in paragraph 22(7) was met (the court declined to decide this point fully because the matter raised issues of fact and future contingencies which were not fully argued at trial).
• Questions about the claimant's trustee status and whether the court should give directions about making payments were raised but the court confined itself to the central legal issue of statutory construction concerning paragraph 22(4)(a).

Reasoning and decision. The judge conducted a purposive statutory construction. He concluded that:

• An "actual" right requires an immediate, unconditional entitlement to payment.
• A "prospective" right covers future rights and contingencies that are within the member's control or natural occurrences (for example attaining an age), but does not extend to rights which will only come into existence if a third party exercises a discretion or gives consent/permission.
• The Explanatory Notes to the Finance Bill and the ministerial statement in Parliament supported the interpretation that rights contingent on trustee or employer consent are excluded from the entitlement condition.
• Applying that construction to FPSO rule B1, a chief fire officer (such as Mr Howell) did not have an "actual or prospective" right on 5 April 2006 to an early pension where the right depended on the permission of the fire and rescue authority to give notice of retirement.

Consequences and procedural outcome. The court held that the entitlement condition in paragraph 22(4)(a) was not met for Mr Howell and therefore any pension payment under the Scheme to him before age 55 would be an unauthorised payment under the Finance Act 2004. The court declined to decide the retirement condition under paragraph 22(7) on the present material and made procedural directions for any consequential steps.

The judgment also notes the parties' disagreement over factual pleadings and that HMRC had published guidance and manuals which the parties had discussed, but the court confined itself to the legal construction question before it.

The claim for a declaration that the entitlement condition in paragraph 22(4)(a) of Schedule 36 Finance Act 2004 was satisfied in respect of Mr Howell is dismissed. The court held that to be an "actual" right a member must have an immediate unconditional entitlement; a "prospective" right does not include a right which will only come into being if a third party exercises a discretion or gives consent or permission. Because the FPSO rule B1 early-pension entitlement for a chief fire officer depended on permission of the fire and rescue authority, Mr Howell did not have an "actual or prospective" right on 5 April 2006 and the entitlement condition was not met; any pension payment to him before age 55 would therefore be an unauthorised payment under the Finance Act 2004.