The Deputy Pensions Ombudsman ("DPO") held that a compromise agreement in this case waived any claim to an unreduced pension and did not contravene section 91(1) of the Pensions Act 1995.


Dr White worked for Thames Water and applied for voluntary redundancy in April 2013.  He subsequently received a compromise agreement in May which he discussed with his line manager, particularly the clause confirming he had no further rights to an unreduced pension (which was consistent with Q&A documents on the employer's intranet). He also took legal advice and proposed several changes regarding his entitlement to an unreduced pension and the reason for his departure. These were rejected by Thames Water and the compromise agreement that was signed stated that Dr White's employment was being terminated by mutual agreement and that Dr White irrevocably confirmed that he has no right to and would not seek any right to claim, an unreduced early retirement pension.

The Scheme rules state that a member is entitled to unreduced early retirement benefits if he is aged 50 or more and the employer certifies he has ceased to be employed by the employer because of redundancy or in the interests of the efficient exercise of the employer's functions.

Dr White complained that the compromise agreement was contrary to section 91(1) of the Pensions Act 1995 which states that entitlements or future rights to a pension under an occupational pension scheme cannot be commuted or surrendered (other than in certain prescribed circumstances).  He argued that Thames Water should certify that he ceased to be employed because of redundancy which would then enable payment of the unreduced pension.  He considered it a matter of fact that he had taken voluntary redundancy as part of a business efficiency initiative and that it was not a matter of consent or discretion by Thames Water.

Thames Water argued that it was not obliged to issue an employer certificate: his employment did not cease due to redundancy and it was made clear to him that his employment would continue normally if he chose not to cease employment on the terms offered.  

The parties disagreed on the relevance of the Court of Appeal's decision in the IMG v German[2010] EWCA Civ 1349 case which considered the application of section 91(1) of the Pensions Act 1995 when using compromise agreements to resolve pre-existing disputes about pension rights.  Dr White argued that there was no pre-existing dispute about his pension entitlement and that IMG v German was not relevant whilst Thames Water contended that IMG v German held that section 91(1) does not prevent a compromise agreement from having effect where it involves a bona fide settlement of disputed rights under a scheme.


The DPO agreed with Thames Water that Dr White had validly waived any claim to an unreduced pension.  

Dr White had a prospective or putative right to an unreduced pension only if (a) he was aged over 50 (which he was); (b) his employment ceased due to redundancy or in the interests of efficiency; and (c) Thames Water certified that he left employment for one of those reasons.  As regards the reason for his departure, both Thames Water and the compromise agreement state that he left by mutual consent, not due to redundancy or efficiency. The DPO noted that case law has held voluntary redundancy to equate to retirement with consent although she did not refer to the case law in question.  Further, as there was fundamental disagreement as to whether Dr White was entitled to an unreduced pension, certification was not going to be given. The DPO therefore found that Dr White did not have an accrued right to an unreduced pension at the time of termination for s91(1) of the Pensions Act 1995 to apply.  As such, the waiver of this right did not fall within the carve-out for accrued pension rights in the compromise agreement. 

The DPO's key finding was that Dr White's claim instead amounted to a disputed right or entitlement which was capable of being compromised by agreement without being invalidated by section 91(1) Pensions Act 1995.  The DPO referred to IMG and the recent case of IBM v Dalgleish [2015] EWHC 389 (Ch) which she cited as being authority for the proposition that a requirement for an employer's consent meant that there was no accrued right and compromise was available.  The dispute regarding the entitlement to an unreduced pension was pre-existing at the time of compromise as Dr White considered Thames Water's position (as set out on the intranet notice) to be wrong and attempted to negotiate revisions to the subsequent compromise agreement after his application.

The compromise agreement clearly set out that any right to an unreduced pension was waived. With the assistance of a solicitor, Dr White proposed changes which were rejected by Thames Water. Having taken legal advice and contacted the Pensions Advisory Service, Dr White decided to sign the agreement in "full knowledge" of the facts.


This case helps to provide some indication of what might constitute a pre-existing dispute in determining whether the IMG v German threshold is met and therefore whether a compromise agreement validly waives pension rights. It is debatable (as the DPO acknowledged) whether Dr White left service due to redundancy (which is, for employment law purposes, a question of fact). However, it was determined that the parties' disagreement on this point, together with negotiations on the compromise agreement, amounted to a pre-existing dispute capable of being compromised, and so which fell outside s91(1) of the Pensions Act 1995.