Mondaq Business Briefing -Herbert SmithUnited Kingdom - Amendment To The Pension Increase Rule - Did it Apply to GMPs?

(From Mondaq.com)

In May this year the court considered in Hearn & ors v Younger & ors whether a resolution by the trustees to improve the rate of pension increases under the scheme, with the approval of the company, from 3% to 5%, without expressly stating that the improved rate of increase applied only to excess over GMP, had the effect of amending the rules to allow guaranteed annual increases on the whole of the pension, including the GMP element, after State Pension Age.

The court also considered whether the trustees and the company were bound to amend the rules to allow for the increase to GMPs as a result of representations made to scheme members in the scheme booklet and other communications.

The Judge, having considered all the evidence, concluded that the trustees and company had not amended the rules of the scheme to guarantee pension increases of 5% on the whole of a member's pension including the GMP element. The evidence put before the court indicated that the trustees' decision concerned pension increases on pensions in excess of the GMP element only.

The Judge also concluded that none of the documents put before the court contained a clear and unambiguous representation that the fund would guarantee the level of pension increases on the whole of the pension including the GMP element.

Comment

The case shows the importance of ensuring the accuracy of statements made in scheme booklets and other employee communications. Having said that, it also shows the difficulty for scheme members in bringing claims based on statements made in scheme booklets, in view of the member's need to establish reliance on the statement and financial loss as a result of that reliance.