P L Atkinson v the Trustees of the Unijet Group Plc Final Salary Scheme and TUI Travel plc ( 76135/2)

Mr P Atkinson (PA) was a pilot who went on long-term sick leave, losing his pilot’s licence on grounds of long-term unfitness to fly. He applied for an enhanced ill-health pension from the Unijet Scheme. This was payable if a pilot left service before normal retirement date because of loss of licence caused by Incapacity. Under the rules, the company decided whether a pilot was suffering from Incapacity, with the definition requiring the pilot to be incapable of carrying on his occupation because of physical or mental impairment.

The company declined PA’s application on the basis that he was well enough to carry out “ground-based duties related to the occupation of a pilot”. After negotiation, the company terminated PA’s employment and provided him with a substantial lump sum, which was described in the compromise agreement as being “compensation for loss of employment and/or office and in respect of any loss of pension contributions” and was in full and final settlement of all claims against the company.  

The agreement also stated that: “nothing in this Agreement shall preclude PA from pursuing his rights against the Company…in respect of any accrued pension rights”. The company and the trustees agreed separately to provide PA with an early retirement pension (not on an enhanced basis).

PA complained to the Pensions Ombudsman about the company’s refusal to award him an enhanced ill-health pension. The company argued that the scheme rules should be considered against the background of its HR procedure, which recognised that the occupation of a pilot did not solely encompass flying. The company also argued that an enhanced ill-health pension was a contingent right, not an accrued right and, as PA had signed an agreement in full and final settlement of all claims, he could not now pursue his complaint against the company.

The Pensions Ombudsman concluded that he could hear PA’s claim as the compromise agreement had expressly excluded accrued pension rights from its ambit. In the Ombudsman’s view, an enhanced ill-health pension could be an accrued right if it were payable in circumstances set down in the rules, rather than at someone’s discretion.

The Pensions Ombudsman decided there was no conclusion that the company could have reached other than that PA had left service because of loss of licence caused by Incapacity. He upheld PA’s complaint, deciding that PA should receive an enhanced ill-health early retirement pension, backdated to the date of leaving service. This was on the condition that PA paid back the monies received under the compromise agreement.


This is one of those rare occasions when the Ombudsman intervenes, substituting his own decision for that of the decision-maker (rather than requiring the original decision to be reconsidered). It illustrates that it is safer for compromise agreements to deal expressly with the intended pension benefits payable from the employer’s scheme (whether or not pensions is the subject of the dispute), rather than using pensions terminology that can be more broadly interpreted than the parties intend.