Railways Pension Trustee Company Limited v ATOS IT Services UK Limited & Anor

Pension scheme provisions are construed primarily from their language, read in the context of the scheme as a whole. Practical consequences and purpose may be considered where the language permits. A shortfall rule requiring a deficit to be addressed through specified mechanisms does not necessarily require complete elimination if those mechanisms cannot achieve it. An actuary’s obligation to determine contributions or benefit reductions may require professional judgment, including assessment of collectability; it is not necessarily a fiduciary discretion. A statutory protection requiring sufficient contributions may operate as a freestanding balance-of-cost obligation. A prohibition on preventing participation may cover conduct causing members to opt out, without requiring deliberate intent or unlawfulness.

The Trustee sought declarations concerning the interpretation of Rule 21 of the Atos Section Rules and Articles 5 and 7 of the Railway Pensions (Protection and Designation of Schemes) Order. The dispute concerned how a deficit in the Atos Section of the Railways Pension Scheme was to be repaired, including the role of increased contributions, benefit reductions and the statutory protection for protected persons.

The Chancellor of the High Court answered the Trustee’s questions in its favour in [2022] EWHC 3236 (Ch). The employers appealed, arguing that Rule 21 required the shortfall to be eliminated through compulsory actuarial calculations, that Article 7 operated only after all Rule 21 mechanisms had been exhausted, and that Article 5 required intentional or unlawful prevention of participation. The central issues were the proper construction of Rule 21 and the interaction between that rule and Articles 5 and 7.

1. Appeal dismissed. The Court of Appeal agreed with the Chancellor’s conclusions, subject to clarifying that the actuary was required to exercise professional judgment rather than a fiduciary discretion.
2. Rule 21. Pension scheme provisions were to be construed with substantial weight given to their language, read in the context of the scheme as a whole. Practical consequences and purposive construction remained relevant where the language permitted. The pre-enactment departmental letter was entitled to little or no weight, and Rule 45(5) of the BRPS provided little assistance because it used different wording.
3. Rule 21 was not an exhaustive code for eliminating a shortfall. The words requiring the shortfall to be made good had to be read with the mechanisms in sub-rules (i) to (iv). They meant what could be achieved by those mechanisms, rather than necessarily requiring full elimination. The express reference in sub-rule (i) to meeting liabilities in full contrasted with the wording of sub-rules (ii) and (iv), while the cap and the reference to a remaining shortfall showed that the contribution stage might be insufficient.
4. The word “determine” had the same meaning throughout Rule 21. It required the actuary to use professional expertise, relevant assumptions, methodology and guidance. The exercise could include assumptions about mortality, membership, opt-out, payroll and whether contributions were likely to be collected. Describing this as a discretion was misleading, since the actuary was not acting as a fiduciary.
5. Article 7. Article 7 of the Railway Pensions (Protection and Designation of Schemes) Order imposed a freestanding funding obligation in addition to the scheme rules. It operated through the existing duty to contribute and required sufficient provision for accrued and accruing rights after relevant matters, including scheme resources and employee contributions, had been considered. Its most natural point of operation was after Rule 21(1)(ii), when contributions had been increased, rather than after the benefit-reduction stage in Rule 21(1)(iv).
6. Article 5. Article 5(a) protected continued participation throughout the period of protected status. Once employer conduct caused protected employees to opt out, there was no basis for adding a requirement of deliberate subjective intention or unlawfulness. Article 5(b) supported that continuing-participation construction.

The appeal was dismissed. Lord Justice Bean and Sir Launcelot Henderson agreed with Lady Justice Asplin.

1. Court of Appeal (Civil Division) — The appeal was dismissed on 9 February 2024: [2024] EWCA Civ 98.
2. High Court, Business and Property Courts, Business List: Pensions (ChD) — The Chancellor of the High Court determined the Part 8 questions in the Trustee’s favour in [2022] EWHC 3236 (Ch); the Court of Appeal upheld that decision.