The trustees of the British Airways pension scheme (Airways Pension Scheme Trustee) have won their case to award its 26,000 members with additional payments.

BA disputed the new power created by the trustees which allowed them to make discretionary increases on top of inflation rises and consequently giving members a 0.2% payment in 2013, costing BA £12m.

Confirming that the trustees acted appropriately provides a reminder of the principles of the law on trustee making.

  • The scope of a power is dependent on the construction of the trust deed and rules.
  • The purpose of a pension scheme is normally to be considered at a high level of generality.
  • It was not appropriate to use a general concept such as the purpose of the scheme, to imply a requirement for employer consent.
  • A decision by trustees to exercise a fiduciary power is not voidable, unless made in breach of their duty as trustees. They must weigh up relevant considerations, ignore irrelevant considerations, and not act perversely or irrationally.
  • The duty of trustees to act in the best financial interests of members is limited to the exercise of investment powers.
  • The views of the sponsoring employer, and the funding position of the scheme, are “highly relevant” factors when trustees are exercising their powers. But this does not preclude a scheme in deficit awarding discretionary benefits.

BA has appealed so watch this space!