In an interesting case (Power v Open Text  EWHC 3064), the High Court was asked to consider whether trustees have any obligation to make post-A-Day improvements to scheme benefits - it looked at trustee obligations to consider benefit improvements and the purpose of a power of amendment. It concluded that the primary obligation to decide on the level of benefits lay with the employer, not the trustees and that the trustee’s obligations did not in this case extend to proposing benefit improvements.
Mr H was an employee of Open Text - he died in service in July 2007. He was a member of a trust based group life assurance scheme of which Open Text was the trustee. Mr H was a high earner and the death benefits paid out to his partner, Ms P, were subject to the earnings cap. Ms P claimed that, as Mr H had died after 6 April 2006, she should have received uncapped benefits.
The Scheme had not been amended post A-Day and all pre-A-Day limits continued to apply. Ms P claimed that the trustees were in breach of duty in not amending the scheme to allow post A-Day relaxations. The basis of Ms P’s claim was that the trustees owed a duty to members and potential beneficiaries to regularly consider whether the scheme rules could or ought to be amended. She argued that had the trustees properly consider the effect of A-Day, they would have concluded that the earnings cap should be lifted and Mr H’s death would have resulted in a much larger pay out. In its defence, the trustee accepted that it was under an obligation to consider exercising it’s amendment power periodically - but argued that there was no duty to put forward an amendment which would increase the costs on the employer.
The court held that the intention behind the scheme was that it should be the employer who decides the appropriate level of cover (subject to its duty of good faith), not the trustee. It was held that the power of amendment was ancillary to the trustee’s primary obligation to administer and manage the scheme in accordance with the Rules: it was there to enable the trustees to better manage the scheme, it did not give rise to additional obligations such as considering whether the level of cover was appropriate. It was held that Open Text had not acted unreasonably or in breach of duty in what it had done. Ms P’s claim failed.