There have always been “pensions”, they are part of our existence. When the first people in the world started to get old, a pension was the first thing their younger friends and family got to hear about as it was the first thing on the minds of their elders - even though the word used to describe a “pension” may have been a sign or a grunt.
In the beginning, a pension was attained by another person or persons agreeing to hunt in order to provide the food which the older person(s) was / were no longer quick enough to catch. Later on, a pension was the benefit that the family or, if one was unlucky, the workhouse (the expression “as cold as charity” may well have been designed for the workhouse) provided when one literally worked and then dropped. Later still, retired military men (there were no military women at the time Pensions News (PN) is talking about) were pensioned off with the gift of a pubic house (hence the number of public houses with military names – “the Volunteer”, “the Crooked Billet”, “the Duke of Wellington” and so on), the income from which was supposed to provide an income in retirement after a career of fighting for king / queen and country. Later still, funds were established to provide said income in retirement and those funds were invested with a view to yielding more money so that it was not the case that, for every groat one put into a pension scheme, one received a groat in retirement. Rules and processes developed from there to where we are now. Whatever the benefit and howsoever it was provided, there were certain rules which needed to apply and which had to be adhered to so that, if one wanted to change the rules of a particular scheme, a particular procedure had to be applied or else all the old bets were off (as in “shove”).
PN has been spoilt for choice in terms of choosing subject matter for today’s edition but has taken his usual (he hopes) slightly alternative slant on things. PN has already (in previous editions) written about the decision, taken a year ago now, to change the United Kingdom’s (UK’s) role within the European Union (EU) by leaving the EU altogether. Second there was the decision, made in the United States of America, to change the way that country was run by removing what was regarded as the “established order” and by putting Mr Donald Trump and his “order” in the White House. PN has not really commented on this change and will refrain from doing so now as that would see him metaphorically limping along behind the rest of the world’s political commentators. Thirdly, there was the decision by the current prime minister (Mrs Theresa May) to hold a general election and the people’s decision not to change the Government but instead to give the existing Government a warning that it (meaning the Government) was not about to be given carte blanche (PN does see the irony in employing a French term in this context) in negotiating a way out of the EU by an electorate which seemed determined not to be told what to do – by anyone. In France, the public decided not to change the so-called established order by replacing it with another, more extreme, order. Rather, it decided to change the established order by giving control to a political party which very few people had heard of until earlier this year and which nobody at all (including in France) had heard of five years ago.
PN hopes that you, the reader, have picked up on a theme in the above. In each of the examples given, change of some sort was considered and, generally, accepted. Also, in each of the examples given, change was effected or not (as the case may be) in a particular way; through a referendum, an election based on the principle of “first past the post” or an election based on a more proportional principle of representation. Irrespective as to whether one agrees with the process through which change was implemented, that process was followed and, whether one likes the outcome or not, that outcome was the conclusion of, so far as we can tell, a lawful process properly followed.
So it is with pension schemes; in many occupational pension schemes, a change to the rules of that scheme can often be effected only through (a) using a particular form of words in a particular type of document (usually – but not always – a deed), (b) a particular sequence of events or (c) by addressing or involving a particular group of persons. Scheme powers of amendment are not often the same so; there is no “standard” formula which applies to all schemes (PN is deliberately ignoring legislative powers where no scheme power exists). This means that any attempt to make the change through some other way is unlikely to be legally effective meaning that before making a change, the scheme’s power of amendment must be studied. As if to illustrate this somewhat academic point in a more colourful manner, the writers of “Blackadder Goes Forth” showed us the way in 1989. In one particular episode (“Corporal Punishment”, episode 2 of series IV), the troops, commanded by Captain Edmund Blackadder, are waiting for orders to advance on enemy positions. After one or two unsuccessful attempts by High Command to order an advance, a telegram arrives at which Blackadder’s Lieutenant, played in the BBC TV series by Mr Hugh Laurie, suggests that the message his superior officer has been passed is a telegram ordering an advance. Captain Blackadder (played by Mr Rowan Atkinson) states:
Blackadder: “umm, yes, I’m afraid not George. It is a telegram, it is ordering an advance, but it seems to be addressed to a ‘Cat-pain Black-udder’. Do you know a ‘Cat-pain Black-udder‘ George?”
George: “well it rings a bell but I ….”
Blackadder: “nope, me neither”.
PN will concede that, in his experience, problems do not quite happen like that in a pension scheme context although PN knows of at least two pension lawyers who are probably emitting hollow laughs as they read this (not including himself). The reader will, however, take the point; if the formal governing documents of a pension scheme state that a change can only be made to the rules through a written document after the trustees communicate the change through the medium of dance and the scheme employer signals its agreement by getting two directors or a director and the company secretary to sing all the verses of the US national anthem with their fingers in their ears, then any process other than this one will fail to effect a change. So; there could be a document in writing and the trustees could communicate the change and the employer’s directors might take notice however if the written change is communicated by smoke signal and answered through poetry, the change will not be legally binding.
There have been several pension cases, the outcomes of which have revolved around the above principles. PN would recite them to you and include a couple of examples of his very own but (a) you, the reader, may already be asleep and (b) the cases of PN’s own are not in the public domain so it would be imprudent of him to put them there without his clients’ written consent.
PN acknowledges that the reader may be wondering about PN’s illustration. Surely, he / she may be thinking, if all the parties want to change but the trustees sing all three (yes, three (3)) verses of “Happy Birthday to you” and the employer’s representatives cover their eyes (as opposed to their ears), a change will be deemed to have happened. Well; not according to several decided cases, the decisions in which have been confirmed by the Court of Appeal. The consequences of some such decisions have involved the equivalent of trying to get a scrambled egg back into its reassembled eggshell but the principal is clear; if the incorrect words / procedure is/ are employed then the change does not work. To allow the change on the basis that there was an intention to change would be tantamount to saying that it was fine to effect that change in clear breach of the scheme rules (in the same way, Captain Blackadder could not advance as the order was not, it seems, addressed to him). The mirror image of this conclusion is true; if correctly following a particular process produces, let’s say, an unintended or unwanted consequence then the fact that one might not like the consequence does not mean that the result can be disregarded. On this basis, PN reluctantly finds himself in previously unchartered territory; having a little sympathy (please note that PN is being literal when he says “a little sympathy”) with the Prime Minister and he accepts that she probably had little option but to reject what seemed to be an invitation from the current French President to re-think the UK’s decision to leave the EU. Common sense, logic, economics and other things might suggest that there is a lot to be said in favour of a rethink but, unless someone can prove that the referendum or the election (as applicable) was the consequence of an incorrect application of the process of change, we, like the trustees of several occupational pension schemes, are stuck with the outcome. In this respect, PN has a message for those who regard the outcome of the EU referendum (or the US election, the UK election and / or the French presidential election for that matter) as something which has to be reversed; one could do worse than retain a couple of pension lawyers to check to see whether the electorate really did have its fingers in its ears at the applicable time.
Until next time……..