3i PLC v John Decesare & Ors

A pension scheme amendment fetter protecting accrued rights or interests in respect of benefits already provided ordinarily protects past service benefits, not the ability to accrue benefits from future service. The words must be construed in their contractual and pension-scheme context, with close attention to the language used and without importing a general commercial-exigency principle. A final salary link is an accrued benefit relating to past service, but a future service link is distinct. Where the fetter is confined to past service benefits, amendments closing the scheme to future accrual are permitted, provided protected past benefits are preserved.

3i plc sought declarations concerning the proper construction of the power of amendment in the 3i Group Pension Plan rules. The issue arose after the trustees began winding up the Plan and needed to determine whether a surplus could be distributed to 3i.

The Closure Deed dated 22 February 2010 treated active members as having left service, excluded employment after 5 April 2011 from the definition of service, and preserved a final salary link for accrued service. The representative member contended that the amendment fetter protected an interest in continuing future accrual. The central issue was whether the fetter prohibited amendments terminating or reducing future benefit accrual.

1. The claim succeeded. The court declared that the Closure Deed was a permitted exercise of the power of amendment.

2. Pension scheme documents are construed by ordinary principles, taking account of natural and ordinary meaning, the document’s purpose and provisions, relevant background known to the parties, and common sense. Because pension schemes are long-term instruments conferring rights on non-parties, textual analysis carries particular weight. The court must avoid both undue technicality and hindsight.

3. The Plan’s non-uniform accrual structure did not mean that past benefits depended on actual future service. At each point in pensionable service, the member had accrued the benefit corresponding to completed service. Future service produced an additional benefit but did not alter the past accrued benefit.

4. The final salary link was an accrued benefit relating to past pensionable service. The Closure Deed expressly preserved that link. A final salary link and a future service link were conceptually distinct.

5. The fetter protected pensions already in payment and the accrued rights or interests of members and others in respect of benefits already provided under the Plan. The word “accrued” qualified both “rights” and “interests”. The composite wording was directed to past service benefits and did not protect future service accrual.

6. The different wording of the fetters considered in other pension cases, including the BBC litigation, did not determine the construction of this fetter. Its meaning turned on its own language and context. The closure amendments therefore did not diminish protected past benefits and were valid.