In this case2, a company had offered certain pensioner members of its pension scheme the opportunity to participate in a pension increase exchange exercise (i.e. to exchange future increases to their pensions in return for a one-off uplift to their pension.) The complainant was a pensioner who was not included in this exercise, and so brought an action against both the trustees of the scheme and the employer.

The scheme’s pensioner liabilities had been secured as part of a buy in in 2013, and were then bought out fully in 2015, after the PIE exercise had taken place. Much of the complainant’s case was focused on the alleged influence of the insurer in the PIE exercise and improper actions of the trustees who he also alleged had decided to make the offer. The Deputy Pensions Ombudsman (‘DPO’), upholding a previous adjudicator’s decision on this, found, on the facts, and amongst other things, that it was the company that had carried out the exercise and that it was within the company’s discretion to decide which members may be included – indeed she said she had no reason to doubt the company’s assertion that it had made the decision in light of its own commercial interests in securing the cheapest buy out. The DPO also found that the trustees were not wrong to execute a deed allowing the PIE exercise to take place – they had merely been facilitating this and had done nothing to exclude the complainant from the exercise.

The decision, although on its own facts, is not dissimilar to other exercises of this kind and gives some comfort to employers who might be considering undertaking one, particularly where a selective group is contemplated. Care should still be taken in such exercises both by trustees and employers to ensure that any applicable legal requirements are satisfied and that the process is properly documented. We have advised on these and other liability reduction exercises for many employer and trustee clients, so please feel free to contact any member of the Pensions Team, if you wish to know more.