The High Court has today given judgment in Merchant Navy Ratings Pension Fund Trustees Ltd v. Stena Line Ltd and Others1. The case gives important guidance on two issues relating to occupational pension schemes:
- what the well-known phrase "acting in the best interests of the beneficiaries" means in the context of pension trustee duties; and
- whether a scheme which has ceased to have any active members, but which provides enhanced revaluation for a category of deferred members is "open" or "frozen" under the employer debt legislation.
Mayer Brown acted for the trustees of the Fund. Acting in the best interests of the beneficiaries After a detailed analysis of the relevant trust law principles, Mrs Justice Asplin held that "acting in the best interests of the beneficiaries" should not be regarded as a standalone trustee duty, but must instead be considered in the context of the purpose of the scheme and the benefits it had been established to provide. The purpose of a pension scheme is to pay members the benefits due under the scheme rules. As long as the primary purpose of securing those benefits is furthered and the employer covenant is sufficient to fulfil that purpose, it is reasonable for trustees to take into account the employers' interests when exercising their powers. It was therefore legitimate in this case for a trustee of an industry-wide scheme to take into account the relative burdens placed upon employers when deciding upon the design of a new deficit contribution regime.
Open or frozen
Whether or not a scheme is open or frozen under the employer debt legislation depends on whether accrual of benefits in the scheme is continuing. Mrs Justice Asplin held that as the accrual of benefits had ceased, the scheme was therefore frozen, even though certain members continued to benefit from enhanced revaluation. This may also have implications for schemes which have ceased accrual of pensionable service, but where existing pensionable service remains linked to final pensionable salary.