EWHC 2926 (Ch)
The High Court judgment in Foster Wheeler Ltd v Hanley, handed down on 28 November 2008, could have serious implications for many schemes.
The main question in this case was whether a member with part of his pension accrued by reference to a Normal Retirement Age (NRA) of 60, and part of the pension accrued by reference to an NRA of 65, both before and after equalisation following the Barber ruling, could take all of his pension from age 60. The judge held that, under the early retirement provisions of the Foster Wheeler Pension Plan (the Plan), a “split pension” regime should not be imposed and the member was entitled to take the whole of his pension from age 60. This was despite the fact that the Plan’s early retirement rule required employer consent.
The second question was whether that part of the pension accrued by reference to an NRA of 65 after equalisation could be reduced for early payment. The judge decided that the Plan’s early retirement provisions did not allow reduction for early receipt in relation to the period between the retiring member’s 60th and 65th birthdays.
The additional liabilities for the Plan are estimated to be in the region of £18 - 30 million and, recognising the significance of this decision for Foster Wheeler and the funding implications for other schemes, the judge granted permission for the employer to appeal.
For further detail see our client stop press produced earlier this month.
Comment: in the wake of this judgment, there may be serious issues for schemes which allow early retirement with employer consent and without reduction, as the decision effectively allows Barber rights to override consent requirements.
Although the decision is likely to be appealed, employers and trustees may wish to consider as soon as possible amendments to scheme rules in respect of any provisions relating to unreduced early retirement pensions before age 65.