Spirit (Legacy) Pension Trustee Limited v Isabella Fisher Alexis

In construing pension scheme rules, significant weight is given to the words chosen by the draftsman. Purposive construction, business common sense and reasonable and practical effect may assist in choosing between rival meanings, but cannot create an ambiguity or override the language used. A reference to legislation may be static or ambulatory; there is no presumption either way. Where statutory wording is used as convenient shorthand for a factual condition, a dynamic meaning is less likely if it would make benefits vary unpredictably with future legislation. The reference to state pension age in this case was therefore static and did not extend to later increases in pensionable age.

The Trustee appealed, with permission from Richards J, against a decision of the Pensions Ombudsman dated 12 June 2024. The Ombudsman had upheld Mrs Alexis’s complaint and concluded that the bridging pension payable under Rule 5.5 of the 2001 Scheme Rules continued until her state pension age of 66.

The Trustee contended that the rule referred to the legislation as it stood when the rules were made, so that the supplement ended at age 65. The central issue was whether the reference to paragraph 1 of Part I of Schedule 4 to the Pensions Act 1995 was static or dynamic.

1. The appeal was allowed and paragraph 50 of the Ombudsman’s Decision was set aside. On the proper construction of Rule 5.5, Mrs Alexis’s state pension age for the purpose of the supplement was 65, not 66.

2. There was no presumption that a reference in a deed or contract to legislation referred either to the legislation as originally enacted or to the legislation as amended from time to time. The issue was determined by construing the words of incorporation in their context.

3. The rules of a pension scheme required close textual analysis. Purposive construction and considerations of reasonable and practical effect could assist in choosing between rival interpretations, as could business common sense, but those considerations could not create an ambiguity or operate as autonomous and overriding principles.

4. The reference in Rule 5.5 performed a limited, non-normative function. It supplied convenient shorthand for the factual condition determining entitlement to a scheme benefit. The parenthetical description of the statutory rules as being for the equalisation of pensionable ages indicated that the reference did not encompass later legislative increases in state pension age generally.

5. The Scheme’s long-term nature, possible gap between the supplement and state pension, administrative practice, Rule 6.2, the scheme booklet and the Interpretation Act 1978 did not justify a dynamic construction. No order for costs was made between the parties pursuant to the earlier order.

• High Court (Chancery Division): appeal allowed against the Pensions Ombudsman’s Decision dated 12 June 2024; paragraph 50 of the Decision was set aside.
• Pensions Ombudsman: complaint upheld on the basis that the supplement continued until age 66.